All Forum Posts by: Mariah Jeffery

What are you looking to find out? I grew up in Orlando and have family there. I have briefly looked into buying a rental there (especially since I travel there 3-4 time per year and would love to write off my travel) but haven't pulled the trigger. All I can say is that cash flow seems to be decent in the area and the 2% rule is possible to achieve.

I've gotten a lot of great advice on my rental properties over the years and I have to thank the BP Community for that. Today I'm looking for advice on a different topic, but it's related to RE, corporations, and tax-minimization, so I'm hoping some of the gurus are here can help.

My husband is a minority shareholder in a family-owned C-corp. The corp. consists of approx. 600 acres of land, part of which is leased to a cattle rancher, another part of which is logged every 8-10 years. There is a house on the land. The corp. is not especially profitable; it generally brings in enough cash to pay the property taxes, insurance, maintain the house, and buy equipment (snow blowers, etc.) Occasionally the owners take a small distribution.

His mom and uncle each (along with their kids) own about 45% and 55%, respectively. They are not seeing eye-to-eye and want to split the corp., but the uncle (majority shareholder) will not agree to do the split unless my husband is a majority shareholder in the new, smaller corp. The reason is that MIL has a younger boyfriend, recently turned fiance, who no one (including MIL) wants to get the land that has been in the family for 150+ years.

We are exploring options to transfer enough shares into my husband's name so that he will become a majority shareholder ASAP. MIL is fine with this and wants my husband to be a majority shareholder so that she can be done dealing with her brother, and all she asks is for free rent (her brother charges her rent, which is paid to the corporation). She is willing and eager to do whatever is necessary to get the shares to my husband and expects no cash. However, our preliminary plan will involve buying some of the shares.

So far our plan is the following:
- Come up with a value for the shares that can be documented by something like "the average price per acre for land in County X time the # of acres, plus avg. cost per sq. ft. of the home, plus value of machinery. The value will purposely be biased low (but not ridiculously low to flag an audit), which MIL will be fully aware of, and we will all agree to it.
- MIL gifts shares to my husband, myself, and our daughter up to the max value of $13K each, this year and 2013. This will get our combined shares up to ~40%. The shares, for gift tax purposes, will be discounted 30% to reflect the fact that they are minority shares and not marketable.
- We enter into a contract with MIL to buy the additional shares needed at the discounted value on a 25 year note.
- We then split the big corporation into two smaller c-corps in January of 2013, after the gift shares have been transferred.

Does anyone see any holes in my plan?

Obviously we are involving an attorney and a CPA, but the first meeting we could get is over 2 weeks away and I wanted to see if anyone had any ideas in the mean time that I could use to do some research before the meeting or perhaps books I can read to educate myself on the topic. TIA!

I forgot to add, I have $425K borrowed through this credit union and they are charging me only $3K for the rate mod fee. No new title, appraisal, nothing. B/E is 6 months.

That's a great rate for a business loan! I ended up going back to the credit union that is the original lender and asking if there was anything the could do for me. They offered to do a rate mod with a variable rate of 5.25% fixed for 5 years, with the same 15-year amortization. I had about 12-13 years left on each of these and if I pay the same payment I was paying at the 6.75% interest rate, I'll be able to pay these off in about 10 years, so I'll only have to worry about one adjustment.

The really great part is that over half of my rentals will be paid off in 10 years, when I'll be 42. Early retirement maybe? :-)

That would definitely be the preferred method, but I like in Oregon and these properties are in South Dakota. :-)

Would I have avoided this problem if I had used a special warranty deed?

"But now Mariah I have a question, was the house with an existing loan in your name or the LLC...or someone else?"

The house with in an existing loan was titled in the LLC's name.

There is only $33K left on the loan. Would it be easier if I simply pay it off before refinancing? I was thinking about doing that anyway.

I'm not sure what I may have screwed up by using a quit claim deed instead of special warranty, but it's done now so I guess I know better for next time.

I should have mentioned that this is a cash-out refi. One property was purchased in cash and another has a small loan on it.

Thanks for the responses!

I sent in a quit claim deed to the county to transfer two properties from my LLC to my personal name so that I can refinance with conventional financing. The county took a month to send it back because they didn't like where the notary put the stamp. I corrected it and sent it back in, and they'll probably take another month to finally record it. When I complained, they said the "date of instrument" will still be the date that the document was originally notarized. Does anyone know if the lender, for the purpose of the 6-month seasoning period, will go by the "date of instrument" or the date when the deed was finally recorded? There will be a difference of about 2 months in my case. TIA.

I have two single-family investment properties that were purchased in the name of my LLC. One was purchased in cash and the other was purchased with a mortgage through a local credit union @ 6.75% for 15 years.

Given that rates are very low, I would like to get as much cash out of these two at ~4% and use it to pay down my debt at 6.75%. I understand I will need to transfer the properties into my personal name via quit claim deed. Are there banks that will allow me to bypass the requirement to wait 6 months? I talked to Aimloan and they said for a property that was originally purchased in my personal name and later transferred to the LLC, I could transfer it back to my personal name and immediately refinance. It sounds like every lender has their own requirements.