All Forum Posts by: Scott R.
Scott R. has started 1 posts and replied 4 times.
Post: Hitting obstacles, need creative solutions to purchase an office!
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- Votes 1
Thanks everybody!
Post: Buying a building for my business -- independent entity?
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- Votes 1
Quote from @Brandon Palmer:
Hi folks. My wife and I are starting up a new business with an target open date of Jan 2023. We are considering renting a space to use but also have an option to purchase a building which looks like it will fit our needs as well.
I'm looking at 2 options and could use some opinions:
1) The business buys the building and just pays what ever debt service is required
2) we setup a new LLC which buys the building. The business LLC then pays rent to the property LLC.
We would be the sole owners of both LLCs either way so I suspect the tax / deductions wouldn't really matter. It may be worth us having the building ownership in a separate LLC for lawsuit protection reasons.
A further consideration is that we could eventually be in a position to sell the business and having the building in a separate LLC would allow us to keep that as an independent revenue line.
Thoughts folks?
Thanks all!
I'm in Seattle, considering the same option. Will be curious to see what you choose. I'm leaning toward having my business LLC pay rent to the building LLC.
Post: Hitting obstacles, need creative solutions to purchase an office!
- Posts 4
- Votes 1
Hi BP -
Long time listener/reader, first time poster. Need some help!
I found a building to purchase an office building in PNW for my small business. Price tag: 2.8M. My banker at WF requires 10% down (I have that). I'm qualified for the loan. With 10% down, my payment would be 14K per month.
I own a rental house in Seattle that I purchased in 2011 for 389K. It is currently worth 1.2M, give or take, on a 15 year note at 2.875%. Mortgage is $2400, rent is $3500, cashflow is $750 after property mgt fees. I owe about 220K own the house, so 900K-1M equity before agent fees and capital gains.
I would LOVE to move the equity in the rental house to support my down payment on the building. I take calculated risks, but I'm not a gambler and value my sanity. Putting an extra 900K down on the building would reduce the monthly payment from 14K to 10K, which is much more palatable for me in terms running my business comfortably on a month to month basis for the next 25 years.
I'm running into a barrier: my banker indicated that any money I use for a down payment has to "season" for 6 months in order to qualify for an SBA loan, which means I cannot sell or refinance either my rental or primary home without sitting on the money for 6 months. Also, I cannot refinance the SBA loan for 36 months.
There must be a way around this? Can I 1031 exchange the rental? Surely someone has encountered this before and navigated the situation. I'm actually trying to take a more conservative approach, reduce my risk, and the bank is putting obstacles in my way to taking a safer route.
Much appreciated!
-S
Good questions Andrew and congrats on owning a Northgate property. That area seems poised to do very well with the light rail and all the development going on. No answers here but In a relatable circumstances, so want to follow this thread closely.