Buying The LLC Which Owns The Property
Can someone help me understand this process? I know it is done alot to avoid transaction costs. If I buy a property for cash, but I am actually buying the LLC which owns the property, what issues do I need to consider? What docs should I be asking for from the seller before closing? And when I go to flip it to someone else, if they need to finance it, do I then need to take the property out of the LLC?
Thanks for any and all advice!
Robin :-?
I would recommend going through the same steps as always. Get a title search, expose any liens etc.. Get the wood destroying organism reports and everything done. Saving transaction costs will seem like a waste of time if you don't conduct the same due dilligence as usual and as a result end up with a costly mistake.
Jeff
The safest thing to do would be to form your own LLC and then have your LLC buy the assets of the old LLC. And make sure you require that the old LLC be dissolved once a deed is done. Make sure you actually see the Sec of State letter confirming the old LLC is dissolved. Title insurance would be a good idea to make sure the old LLC actually has good title.
Thanks guys for the advice. Once I go to sell it after rehab, will it be problematic having it owned by the LLC if the new buyer has to get financing?
Again - thanks for your input.
The lenders main concerns are not who or what currently owns the property. They are more along the lines of;
Is the applicant (buyer) credit worthy?
Is the property worth more than the amount financed?
Will we be the first position lien holder?
Things like that.
Good luck,
Jeff
Thanks again. I'll work through this one and let you know how it goes!
Many lenders won't lend to a corporation unless it has its own proven track record of making a profit. IF you don't already have a profitable LLC, you may need to buy the property in your own name and then transfer it to your LLC. You also can form your own LLC quite easily. Nolo Press has a terrific book with all the forms you might need, or some online companies can do it for you for less than an accountant or attorney.
I was a bit afraid of doing it myself, so I actually found an accountant who did mine last year for $400. Didn't even get a corporate book. I put all the papers in a folder, drove it down to my safe deposit box, and that's that!
On the way to then bank, I looked at the papers and they are ridiculously simple. The accountant basically filed a one page form. So now I bought the book and will use the forms in the book next time.
MarleneM :-o