Purchasing an existing LLC with 4 SFRs already in it
9 Replies
Anna Catron
from Fort Worth, TX
posted over 1 year ago
A gentleman in my area is retiring and moving. He listed his LLC for sale. I've never seen this. Would a regular mortgage broker ever be able to help me finance this?
Also, would his LLC then go into our LLC?
Thanks so much! Any guidance would be helpful!
Warren Small
replied over 1 year ago
you can buy it at the corporate level , but there are more advantages buying at the property level with depreciation being better at the property level otherwise you will take over his depreciation schedule. Also, his loans will probably have to be paid off and you will refinance with his operating statement and not yours and that may be difficult.
Mike Burkett
Lender from Dallas, TX
replied over 1 year ago
@Anna Catron I'm neither an accountant or a lawyer. Check with both of them. There are both legal and accounting implications with buying the LLC versus the properties individually. Personally, I would have your LLC buy the properties from his LLC primarily to eliminate any potential contingent liability from his LLC. (You have no idea what kind of bad things his LLC has been up to over the years)
Tim Houzenga
from Morrison, Illinois
replied over 1 year ago
@Mike Burkett . Good point about assuming liability from sellers LLC past activities. Never even came to my mind. Actually going to talk to my lawyer next time we sit down since I will be looking to buy a smaller portfolio next year and may run into this situation.
Ronald Rohde
Attorney from Dallas, TX
replied over 1 year ago
Asset based purchase is preferably, but entity purchases are common as well. Risks from past conduct of LLC is the main drawback, but benefits include maintaining title and ownership if certain properties have favorable financing or grandfather zoning. We handle these often.
Anna Catron
from Fort Worth, TX
replied over 1 year ago
Wow, thx y'all! I'll dig through these responses.
Kelly Wright Kelly
from San Antonio, Texas
replied over 1 year ago
I agree with Mr. Rohde, buying the entire LLC would put you on the hook for any pre-sale liabilities whether known or unknown. It might be able to purchase some long tail insurance that would help alleviate this somewhat though
Michael Gansberg
Investor from New York City, New York
replied over 1 year ago
@Anna Catron - I'd go the property-level purchase route. Selling an LLC is too convenient a way to cover up past misdeeds. As some posters have suggested, you could try to insure against that, or research the LLC for debts other than at the property level...but what if the seller took out a loan(against the LLC) days before the closing? Sure, it'd be fraud- but that would be little consolation to you, as you'd have to go through the courts to collect. Make things simple- buy the properties, pass on the LLC.
Anna Catron
from Fort Worth, TX
replied over 1 year ago
Very good advice. He of course wants to avoid capital gains. Putting this in my back pocket.
Warren Small
replied over 1 year ago
He is still going to pay capital gains unless he exchanges. Maybe explain the deal more as to what the seller is trying to do.