All Forum Posts by: Chris K.

@Soh Tanaka

Participation theory/doctrine basically refers to the concept that if the member does the wrongdoing, that member cannot hide behind the LLC for protection. It's a different concept to hold someone liable than piercing the veil.

Here's an extreme example from Pennsylvania: a single-member LLC is in the business of selling commercial equipment on behalf of others. The LLC sells that equipment and collects the cash. The LLC, however, never pays the cash to the other party (if I recall, the entity used it to pay another operating expense of the company). In that scenario, the Third Circuit has held that not only can the plaintiff sue the LLC but can also the sole member as well. Piercing the veil is irrelevant since the sole member --- by virtue of being the sole member --- actively participated in the decision to not pay the plaintiff.

Obviously, terrible facts for the defendant. But situations like the above can certainly happen to real estate investors (e.g. dispute with the contractor, a dispute with a tenant, etc.). If you are the only member of an LLC, it obviously makes it somewhat difficult to argue that you are not responsible for the actions of the LLC. After all, who is responsible for the wrongdoing of the LLC if the sole member is not responsible?

I would never say that single-member LLCs are useless. But there is always a limit to how much it can protect you. I'm just curious where Wyoming drew the lines there. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Steffany Boldrini

There's too many variables to estimate what the closing costs should be. It also depends on what you are calling "closing costs." I've seen everything from 3% to 15%. From the deals I've been involved in, I would say the average is somewhere between 6% to 10%. 

I don't have data on this. But due to realty transfer taxes, my guess is that Pennsylvania already has higher closing costs percentage than most other states. 

For the agent part, you'll have to see what you signed with them. 

For the transfer fee, the custom is 50/50 split. But again, all that is negotiable. It depends on what you signed (or what they are asking you to sign).

If you don't have experience in PA, I would get a lawyer and/or your own broker to have them guide you through the process. That especially true since it sounds like you are looking to buy a self-storage facility/business. While obviously the main asset is the real estate, you'll want to do your due diligence on the business side as well. Things like Bulk Sale Clearance Certificate can come bite you later if you don't account for it. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

Does Wyoming recognize "participation theory" or "participation doctrine" as a basis for liability? That's generally the number one issue I see when investors try to rely on single-member LLCs for asset protection. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@William C.

Note and a mortgage. Have an attorney handle it and have a title company record it for you. You don't want to be the drafter and take short cuts as there is a possibility that the court system may view this transaction as a consumer-to-lender transaction. You don't want to take shortcuts with notes and mortgages as it can have serious consequences for everyone involved. 

As a former banking lawyer, I've seen people who do this for a living make fatal mistakes. And the problem is that due to the length of these documents, sometimes you don't realize the mistake for over a decade. 

Maybe it's me being paranoid. But I've seen mortgages being declared invalid due to dumb mistakes. Now in the grand scheme of things, those mistakes don't matter to banks with millions, billions, and trillions in assets. But it will most likely matter a lot for most investors.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@David Smith

There's a lot to it. But the biggest initial hurdle is that you need a broker license --- not just a salesperson license. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Kevin M.

Per my attorney friends, this is happening everywhere in Pennsylvania. From what I gather, the power to do so stems from the Pennsylvania Supreme Court's power to declare a statewide judicial emergency. Here's the link to the announcement. 

Note that as a practical matter, many of the courts are shutting down virtually all court activities. The primary focus for court activities at the moment appears to be actions involving the incarcerated due to obvious constitutional concerns. 

It's a drastic remedy. But we are also dealing with a crazy situation. I would be prepared for this to drag on.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Jonah Wilson

You will generally need to pay the realty transfer tax based on the last sale price or the assessed value. Quitclaim deeds generally do not qualify as a correctional or confirmatory deed. Those are for situation where there is some kind of "scrivener" error (i.e. typos). 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Bryan Smith

Try asking @Marc Winter or @Adam Guiffrida for contacts. Scranton used to have more burdensome licensing requirements compared to other municipalities. Not sure if that is still true. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Francis Nguyen

Basically what @Sheldon Zimmerman said. They designed the eviction process to get the underlying dispute resolved fairly quickly through the magistrate. For ejectment actions, you need to start at the Court of Common Please like most other civil complaints. 

The main difference between the two actions is whether there is a landlord-tenant relationship between the parties. Squatters generally do not. So historically you had to bring an ejectment action. I have heard people sometimes get an eviction action to remove a squatter at the magistrate level. But while nice for the landlord, it's probably incorrect as a matter of law. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Dan Mackin

As an elder millennial: 

1. I'm a lawyer and I also own a construction company. I try to leverage that to work on syndication projects and also BRRRR-type projects. I also manage some investment properties for my family back in Korea.

2. Around 8 years as an active investor. I was forced to take over a lot of the family business matters when my father passed away. 

3. In no particular order: (a) passive investing is not really passive investing if you don't have the right asset; (b) find good partners and people to work with; (c) learn how to delegate better; and (d) don't buy avocado toasts. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.