Buying LLCs Instead of Property

[Shafi Noss]

Real estate has high transaction costs. Buying or selling an LLC has less transaction costs than buying and selling property. Aside from lower transaction costs and lack of full title insurance, what are the pros and cons of this technique?

[Derek Dombeck]

Cons.

If you buy an entity, you will get all the liabilities along with the assets. Be cautious there are not any pending lawsuits or judgements against the entity. Also, you will assume the Basis in any real estate holdings which could have future capital gains implications.

Pros.

This is a great way to take over an existing loan subject to that would be really hard for the lender to claim due on sale default. Often you can buy entities on favorable seller financing terms. And it gets around any title seasoning issues when using certain loan programs.

I once established a new LLC in order to aquire and quickly resell a house. I had my buyer lined up and we did plan on selling the LLC from day one, so I gave it a fitting name that would compliment my buyers parent company which was Brown Bear Construction. The new LLC they bought from me was Snooky Bear LLC.......LOL

Have fun with your friends when you can!