It looks like my siblings and I are about to be gifted a duplex. Both units are currently rented (total rent $825) on a month to month basis. The property has been for sale for over six years, price has been dropped from $139,000 to $98,000. It looks like its in good shape (online) and priced fairly, but it hasn't sold, so something is up.
It seems to me we need to potentially do the following:
First, get title to the property - should an LLC be setup to accept the property? What are some the costs we should look into (back taxes, assessments, repairs, gift tax, rehab costs)?
Once we have the property we'll need to decide what to do with it - liquidate (property is currently listed through June 2016, if property is transferred, is agreement with realtor still valid?) or keep renting (hire a property manager...siblings not interested in managing and I live in another state). Personally, if it makes sense financially I'd like to keep the property for cash flow, may have to buy out my siblings (2).
We are working with a lawyer, but would appreciate any insight as I imagine there's much we need to consider.
Yes. Get an LLC to take title in (all your real estate holdings should be in one type of entity or another depending on what you're doing with it).
If it's truly being "gifted", i.e., you're getting it "free". It will be a taxable event to you! There are gift taxes associated with this type of transfer. CHECK WITH YOUR ACCOUNTANT!
Get a property report and judgement report on the sellers to make sure there are no surprises on title.
Long and short, use a good lawyer, accountant and title co.
Thanks, appreciate the feedback!
I would hire an inspector before you accept the gift. This will give you an idea of the deferred maintenance and likely why it has not been selling. It only costs a few hundred dollars, money well spent.
With rent being so low, is this a low income property? If so, may be more difficult to find high quality property management.
Do you have access to the current financials from the gifter? I'd look on Craigslist for market rent in that area, have a sibling drive the neighborhood, calculate the estimated cash flow, and any other research I could think of. Depending on why they are gifting it and the tax implications, it may not be a beneficial gift.
Thanks for your suggestions, finding the cash flow after expenses will be minimal and that the property is overpriced. Rent is a little below others in the area. It is in a nice area. Working at getting financials from the gifter, but it seems records were not well kept. An inspection is definitely in order as there may be issues that need to be addressed!