Investor · Vancouver, BC · Member since 2013 · 27 posts · 4 votes
Hi,
Wondering if someone has some good insight to this. I am thinking of purchasing a large apartment complex that has been owned and operated by the same family for over 30 years. The properties have no mortgages.
Initially I was going to use my company to buy the buildings but now I am thinking if there is an advantage to buying the shares of their company instead. With over 30+ years I am sure the company will have good credit history. Perhaps I can use that to my advantage on my next acquistion. Of course, I will need to make sure that they are current on taxes and there are no liens or judgements.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
11y
Other than the unknown risks you eluded to, one problem jumps out at me. If you buy the entity that owns the property....the property has already been depreciated to $00.00, or close to it, which will be Your basis, which eliminates any depreciation on the "purchase price" and 100% capital gains tax on any future sales price. Doesn't seem attractive, unless I'm way off. Just noticed the BC, this would be for US.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
11y
Other than the unknown risks you eluded to, one problem jumps out at me. If you buy the entity that owns the property....the property has already been depreciated to $00.00, or close to it, which will be Your basis, which eliminates any depreciation on the "purchase price" and 100% capital gains tax on any future sales price. Doesn't seem attractive, unless I'm way off. Just noticed the BC, this would be for US.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
11y
Hi @Eugene Mar. Another possible pitfall with buying an existing business is the angry customer/vendor/tenant that just hasn't gotten around to suing or acting on it yet. With 30 years of history their could also be an heir, relative, ex or whomever that could try and claim an interest.
@Wayne Brooks brings up a great point about seeking a tax pro as well!
In one of my LLCs I and my wife are each 48% 'owners'. We did that so we could sell a couple of our apt buildings over 3 calendar years and avoid the excise transfer taxes here in WA, which you don't have to pay if 50% is not sold in one given year. Are there transfer taxes there in BC to consider? Just another thought. Please keep us posted!
Investor · Vancouver, BC · Member since 2013 · 27 posts · 4 votes
11y
Thanks Wayne!
Yes, you are correct about the depreciation which is very important. The building I am purchasing is in Missouri so I can definitely use the depreciation expense.
I think that alone is worth not purchasing the LLC.