All Forum Posts by: Greg Scott

Given the angled ceiling, it probably isn't.  You should be able to tell for sure by going into the attic space and seeing if any beams rest on that wall.

On the other hand, that building looks fully-rehabbed and the kitchen large-enough.  I'm not sure it makes sense to remove that wall.  What are you hoping to accomplish?

Chris:

It seems you and I think alike on this front.  I know probably 100+ multifamily operators and almost all use in-state LLCs (in whichever state they have the property.)

The only story I ever heard of someone benefiting from an out-of-state LLC was a friend who created and LLC in Alaska. An attorney was threatening a suit and gave up once he learned it was an Alaska entity. Clearly it was more bluster than substance. So, he probably saved the cost of paying for his attorney to write a letter to the opposing counsel.

On the other hand, I have heard of people getting in trouble with the government for not properly registering their foreign LLC in the state where the property resides.

Congrats!

I'd agree with your accountant.  The $225,000 depreciation was effectively a loss you got to take in the years before the sale.

To reduce your taxes this year, buy another property and take bonus depreciation.

You can buy-out your investors one at a time.  That will take a long time.

There is a reason most buy-and-hold syndicators sell after a few years.  It allows you to more easily unlock the capital and re-deploy it. If you did that, after a couple of deals, you can go buy your own property outright with no investors.

A syndication is actually the perfect vehicle for a buy-and-hold strategy, and a 5-8 year hold is, by definition, a buy-and-hold strategy.  It would also work for a buy-and-hold-forever strategy, but you would have a hard time attracting investors because nobody wants to be captive forever.

Your main issue is not the investment vehicle.  Your main problem would be finding a way to allow passive investors to exit. 

The strategy you propose would be one.  However, I don't find that particularly attractive offer. All you are providing is the cashflow and then giving them their money back.  They would be getting a 5-10% cash-on-cash return with all the risk associated with equity.  As a passive investor, I would never buy into that deal.

More realistically, your partners are going to want to be bought out at fair market value of the equity.  If you've done a good job, that may mean you would need to pay them 2x to 3x their original investment to buy them out. 

City building people have their own agenda.  I give it a 50/50 chance you don't need to do that.

Ask them to cite the code that requires each side of the duplex have water / sewer then look up that code.  If that were the law, they should have been built that way originally.  See if you might be grandfathered.   If need be, check with a local attorney that specializes in building issues.

Unless you know some sort of Jedi mind trick, your best bet is probably cash for keys.

Food for thought.  On all of our multifamily purchases, we've had multiple attorneys.

- An SEC attorney to create the PPM paperwork

- An attorney hired by our SEC attorney to create our local state LLCs

- A local contracts attorney to assist with the PSA.

- In the states where we bought, title insurance and related activities are handled by Title Companies, but if South Carolina is an attorney-closing state, you would need one of those too.

- And, occasionally, we've had to bring in another attorney for some specialized issue.

Transferring a property out of your name to your LLC is a common occurrence.

Doing it to inflate the value and then take a phantom loss is simply tax fraud.