All Forum Posts by: Wilson Liu

Quote from @Ashish Acharya:

No, that will trigger the disguise sale rules. He is not contributing, he is basically selling. 

This can be done correctly without the sale. You probably need to work with the tax advisor to properly structure this. 

Does it matter since the FMV won't change from the time he closes and when he contributes it to the LLC?  In other words, even if it's considered a sale, the gain and tax should be $0 to him right?  Would there be any additional closing cost except for the quit claim? We wouldn't need to get title insurance, etc again.

I own a real estate LLC with a partner. He just personally bought an investment property (closing today) and we're thinking about working on it together. Can he "contribute" the property as capital and then take a cash distribution out of the LLC? He used hard money to close and could just pay the loan off right away. Would we use a quit claim for $0? I assume if we use the LLC to buy it would create some tax bills.

Thanks for the quick replies so far. Are there any practical implications to putting the LLC interest into the trust? Changes in the way we would operate? Would it make it easier for transferring the assets upon death compare to leaving it out of trust?

Hey BP,

Relatively small time investor with 3 properties in an LLC that is member managed by a partner and me. I'm setting up a living revocable trust for my wife and I. She is not a member of the LLC (not for any financial reason, she just isn't involved in the business at all).

Can any legal or tax experts weigh in on whether to place my interest in the LLC into the trust?
If we expand more, we plan to form additional LLCs once the equity is greater than $500K.  Hassle to keep putting additional LLC interest into the trust? 

Thanks!

Hi BP,

A partner and I recently purchased our first property in an LLC and we just refinanced with a portfolio loan at 4% 5/1 ARM amortized over 20 years. That rate does eat into our cash flow a bit and I was wondering about alternatives that may offer lower rates similar to a primary residence mortgage.

Been hearing about M1 Finance's Borrow program. It's basically a margin loan that can act like a line of credit (similar to a HELOC). Right now the rate is 3.5% or 2% if you join M1 Plus ($125/year membership). You can borrow up to 35% of your portfolio value. Of course the downside risk is that your portfolio tanks and they call your loan.

Anybody looked into this or have used this in lieu of more conventional financing?

Regards,

Wilson

Hi BP,

Closed on my first property with a partner this month!   🎆

We're looking into setting up a business bank account for our two member LLC. There are many bonuses available for business checking accounts that get reported as interest income.

Questions:

Where do you report this interest income on taxes?

Is it considered passive income that can be offset with depreciation of the property or business expenses?

Appreciate any advice! 

Wilson

Thanks for the detailed post @David M.

Guess you have to bite the bullet and pay the higher interest rate and worse terms for commercial financing.  But the most important thing to us is separating from our personal assets in case of a lawsuit.

Thanks for the replies @Rachel H. and @Ujwal Velagapudi. I spoke to the realtor and she mentioned to just work on the LLC now and we can amend the contract to the LLC name prior to closing.

Would you recommend going with a local/regional bank/credit union to finance if the property is within the LLC? Or just find the best rate through a broker?

Also, should I create my business bank account with the bank that I have the mortgage with to "increase the relationship"?

Hi BP community,

So a partner and I are looking for our first deal but had a question around how we should proceed.  We have the funds to offer cash without any loans but would like to then refinance to pull out cash maybe 2-4 months after buying. 

We will be forming an LLC to hold the property for legal protection. However we probably won't do this until after closing so we're making offers in our personal names. Is there any issue with doing it this way or should we form the LLC so we can close within the LLC?

Also, should we refinance as a residential loan in our names and then place in the LLC with a quit claim deed or just refinance once it's within the LLC as a commercial loan? If we do the former, does it matter what type of mortgage company we go with (e.g. small local bank vs typical big bank or mortgage specific lenders)? If we intend to eventually get mortgages for future properties within the LLC, should we just go the same bank we plan to use in the future?

I hear lots of different opinions on whether banks usually call your loan when quit claiming.

Thanks! 

@Bob Okenwa

That's very helpful information.  I really appreciate it.

Any thoughts on more B to C+ neighborhoods? I'm trying to narrow things down because trying to explore the greater Phoenix metro area is becoming too much.