:banghead Recently myself and two other partners aquired a property. Are goal is to purchase two more. Each property loan will be in one partners name. Are plan is to hold and cash flow. We would like to deed each property into a 1/3,1/3,1/3 TIC afrer close without triggering due on sale. We would also like a k-1 satement for tax purposes. What is the best and least expensive way to hold for asset protection and bookeeping, etc. also we would like each property to have its own EIN number and would like to establish credit under each property. The other thing is when we sell we want to utilize a 1031, but it would be nice to have options, other then staying in and aquiring more property together. Each loan is an Investment type Property Loan…Your comments would be appreciated. :help
You have a partnership and property purchased with partnership funds should be owned by the partnership. Since you are all general partners, you are all on the hook personally for partnership debts. Using an LLC may insulate you from the actions of others, but it still leaves a hole with respect to your own actions. It’s best to have an attorney and CPA review your situation for the most appropriate approach for your situation.
If you want inexpensive and simple, an EIN for each property is not the way to go. There will be a tax return for each property and you won’t be able to simply shift cash from one property to the other unless you plan to have all the work undone if something goes wrong.
1031 rules can be complicated and you will need to have a discussion with a 1031 expert to determine the most appropriate way for you to hold property if 1031 is your exit strategy.
I know I need to talk to a CPA or Attorney, But the ones I keep getting reffered to dont seem to have the RE knowlede. they keep suggesting LLC. A couple things if you could comment.
Would you deed property into partnership and hold title that way, or leave it in the name of one sole partner and fall back on the partnership argreement for any problems, taxes, etc.
we could also deed 1/3,1/3.1/3 TIC Any Insurance Issues or Due on Sale Issues?
I believe in the idea of insurance, however if we deed into the partnership, insurance seems to be more expensive.
I am Also worried about triggerin due on sale, deeding into anything…also the ability to refinance if ever.
I like the idea of one EIN number, thanks for the tip.
If the sole partner is the only one on the title, he owns it and can do whatever he wants regardless of the partnership agreement. Also, his creditors can seize it as there is no charging order protection.
The DOSC is triggered if there is any change in ownership. That includes any type of entity except a trust where the owner is grantor, trustee, and beneficiary. Transferring the beneficial interest or changing the beneficiary triggers the DOSC.
Businesses pay more. It’s a cost of doing business.
Then buy in the name of the partnership/LLC or deed 1/3 each on purchase. Doing it after the sale will trigger the DOSC.
The problem with buying in the entity is that it is new with no established credit. We should be able to deed into the entity with lenders permission. Dont they just ask for a personal guaranty from the sole partner who has his name on the loan or is it all partners.
It is an Investment loan, I would imagine this is fairly typical, in the case of asset protection, taxes, etc. We dont want to defraud the lender that is not are intention, it just makes more sense for all of us debt to income wise to have seperate loans. Eventually some day with well performing assetts in the partnership portfolio, lenders might take us.
What is you thoughts on the best way to work with lender on this…we just closed friday or structuring in the future.
A local or regional lender will be more receptive to your situation than one of the national banks. I have had more luck dealing with a small business loan adviser at the bank than a loan officer.