San Antonio, TX · Member since 2010 · 93 posts · 32 votes
12y
@rafael vargas
Hey Raphael - congrats on the deal. From the numbers, this is a much larger deal than the typical SFR wholesale deals I come across in San Antonio so this advice may not work in your situation. However, if your sole goal is to keep the seller from seeing your profit, the easiest way is to close the deal at a title company that will provide two separate HUDs. Title companies have the option of printing out a Seller HUD, and a Buyer HUD. All the figures are the same on each and the bottom lines are the same as if they were printed as a fully disclosed HUD. The difference is that the Seller HUD only shows the seller's side of the transaction so they have no idea what you have to pay, or if you got a loan, what your loan fees were. The same is true for the buyer's side, you never see how much the seller makes. Therefore, if you tack on a 1/4 mil assignment fee, the seller just see's their bottom line and nothing else matters. Ask your title company if they will do that for you and you have an easy, no cost solution. Again, congrats on a deal like that. I'd be interested in knowing more about it just for the story.
Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes
12y
I thought about doing something similar at one time and asked my atty if I could sell the LLC just before closing, sort if like a double close. He said yes, I could.
I never did it but it is an arrow in my quill for situations like yours. Congrats on your deal.
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
You said you are making a six figure, and you don't want to pay at the tops $6K or $7K trans funding to make a clean deal. I see wholesalers here in Dallas try to take the whole pie and lose the deal, and then they wonder what went wrong. I wish you the best.
Investor · Madera, CA · Member since 2014 · 82 posts · 21 votes
12y
Joe Gore just a thought but often the message is lost in the delivery. I've noticed a few of your posts were helpful but curt and sometimes that doesn't translate well online.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
In short, you need an attorney if you're totally lost.
You enter the proposed and final sales terms in the minutes and note the buyer.
You need a financial statement and attest to it's accuracy (not required to be done by a CPA) just a representation.
You need a statement stating that there are no other liability or contingent liabilities.
You need a sale agreement, that shows the agreed purchase price, terms, representations and any guarantees made by the seller.
The sale agreement needs to list all assets held, description and valuations.
There is no title to an LLC, no stock certificates, you file the new owner as the new owner/manager and then you resign from management or do a statement of withdrawal and file it with the Sec of State.
At that point the new owner can change the Registered Representative with the state.
You'll need a closing statement showing the accountings of the transaction.
File tax reporting requirements based on the settlement statement.
Update the minutes along the way as tasks are accomplished and hand it over to the new owner.
Close any bank account or assign the accounts.
You'll need a copy of your transaction for your following year's tax returns, not submitted but is a source document.
Now, a reality check, most RE buyers don't understand corporate transfers and title matters, it is difficult to sell that way. The other issue is that a new owner is responsible for anything you did in the business, contingent liabilities, fines, unpaid fees, whatever the debt may be or could be, the new owner takes those on, most folks won't go there. This is an aspect left out by gurus, your buyer needs to be a more sophisticated business person than just a RE buyer, they will often see their attorney at which point the attorney advises them not to buy that way or they get involved doing due diligence complicating your marketing hopes.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
12y
So did you actually go to the trouble of forming the LLC and create a formal operating agreement?
If your area handles transfer taxes like the state of PA, a transfer tax is supposed to be paid on the real estate when a business is transferred. I don't know the rules for your area, just offering how the PA Dept of Revenue looks to collect transfer taxes (particularly when real estate transfers are done creatively to circumvent paying transfer tax).
A trans lender will not close A to B until your end buyer has 100% of their funds in escrow, and you must put there trans lender fee in escrow upfront, and their fee is due regards if C to D close or not.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Especially if he was truly an experienced business type.
You admit the buyer to the LLC, they are then entitled to audit the books and records of the company from it's inception. That takes place as well prior to anyone being admitted, you can't demand they join before they know what they are joining, they are entitled to perform due diligence as to their liability and contingent liabilities, that includes an "audit" of the books.
Folks have no clue when they are in over their head trying to hide material facts, the stuff the gurus don't teach you. Cooking the books can get you a stay in the big house. So can misrepresentations.
Yes, if you have a windfall coming you need to protect it by seeing a good attorney, good to hear that.
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
Pay and trans lender to help, you closed the deal. If it did cost you $25K to close the deal, you still made a good payday, and you can hold your head up high that knowing the buyer will never find out how much you made, but if you try to muddy the waters, then it could backfire on you, and you could walk away with nothing.
San Antonio, TX · Member since 2010 · 93 posts · 32 votes
12y
@rafael vargas
Hey Raphael - congrats on the deal. From the numbers, this is a much larger deal than the typical SFR wholesale deals I come across in San Antonio so this advice may not work in your situation. However, if your sole goal is to keep the seller from seeing your profit, the easiest way is to close the deal at a title company that will provide two separate HUDs. Title companies have the option of printing out a Seller HUD, and a Buyer HUD. All the figures are the same on each and the bottom lines are the same as if they were printed as a fully disclosed HUD. The difference is that the Seller HUD only shows the seller's side of the transaction so they have no idea what you have to pay, or if you got a loan, what your loan fees were. The same is true for the buyer's side, you never see how much the seller makes. Therefore, if you tack on a 1/4 mil assignment fee, the seller just see's their bottom line and nothing else matters. Ask your title company if they will do that for you and you have an easy, no cost solution. Again, congrats on a deal like that. I'd be interested in knowing more about it just for the story.
Escrow Officer · Yeadon, PA · Member since 2014 · 38 posts · 14 votes
12y
I would second Randal's suggestion. The separate HUD would fit perfectly if the title company is open to doing it. I operate out of PA, and it would be an easy solution as most title company software can accommodate that request.