All Forum Posts by: Tim Joyce

My firm deals with real estate matters all the time. If you’d like to connect, shoot me a message.

I'll see you all there

Agreed with other posters. Having an attorney draft docs should help to include the contingencies you need in case things don’t turn out as initially expected.

One more thought from another forum post - *if the lender is ok with it* you could lease the property to your company and then the company subleases. I think that still might trigger some due on sale clauses, but it certainly might make them more comfy that you’ll still be personally on the hook for the loan.

That plan seems like it loses any benefits of the LLC. Because the mortgage is in your name, the tenants would be leasing from you (the LLC can’t lease out what it doesn’t own, unless you’re making it some kind of property management company). But the liability still stays with you as the owner. If the LLC held the property, and you owned the LLC, you still get all the income and tax treatment of a sole proprietor, but the liability bucks stood at the entity level. An injured tenant can only recover against the company. And an outside claimant against you has limited recourse against the property in that scenario too.

I’m not 100% on tax consequences here, but from a strictly legal standpoint you’ll want to be sure you know who makes final decisions about things. I’ve seen that expressed as an Officer title with various duties assigned solely to the officer. There can also be a dollar threshold above which the officer has to ask for member permission. Distributions can also be structured in a way that allows your money person some or a majority of the first cash flows, and there are creative ways to structure his input (eg loan to company vs equity). Finally, money partners, in my experience, often want to control whether and how the company can call for capital if things hit a snag. Depending on ownership percentage, a minority owner could wind up unable to contribute and then be forced to sell to the other member (that’ll be state law specific of course).

I agree with both Jay Patadia and Scott L’s points here. 1. It’s pretty easy to set up LLCs and transfer property via QC deed. (I have a WI law license, if you need help or have other legal questions there.) you’ll want to make sure BEFORE you do that though that the bank won’t balk and try to enforce a due on sale clause. (Again a lawyer can help you figure out if there even is one in your current financing.) 2. The pass through tax will get to you anyways, as a single member llc. Having the entity, though, should provide some asset protection that umbrella and landlord insurance policies don’t. So, I could make the argument that even though the tax implications would be a wash, you still might want the property in an entity (subject to lender approval, see #1 above).

Hey @Brian Wheeler and @Davit Gharibyan - I'm considering dipping toes into the wholesale game in the next year myself (located in NE MPLS). Would be interested in connecting about how you go about getting data, analyzing deals, etc., if you're still in that game. Ultimate goal, like Davit, is to get into buy & Hold.

Hey yall,

I'm a newbie here, so not sure if this is allowed (based on my quick read of the Rules, I think it is). I'm an attorney in Minneapolis for a small business firm that does this stuff all the time (i.e., set up LLCs and draft OAs). 

(If any admins or BP pros know that this kind of self-promotion is disallowed, I would be interested in hearing how people are allowed/not to connect for biz purposes here. If it matters, my overall goal is to learn about REI for my own purposes; thread just seemed too close to what I do on the daily not to say anything.)

@Jordan Moorhead Can you send link to the Meetup? I'm a newbie BP follower trying to learn more for my own REI future, and also a small biz / real estate attorney trying to gauge what needs for REI clients is. Plus I live and work in NE, so this seemed a really good opportunity to knock out several things with one stone!