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Myself and my cousin purchased a condo apartment in CT and have been living in it for the last 6 months. We have decided to move out and lease the place because he got relocated and I own another house in the area. We are going to rent the place out: Should we create an LLC and have the renters send the rent payments there? Do we need to open a joint bank account and can it be under the LLC name? How will we ultimately pay taxes on the income from this property if payments are made to the LLC?
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An interested renter has expressed interest in a ren-to buy lease. We would be happy with getting 215k for the place if it sold today. Do people normally pay what a place is worth today in a lease to buy contract, or does the owner usually try to get a little more than market value if they think they are in an appreciating area?
1)Ask a lawyer, I say that because since you used to occupy the property you may have a problem setting up a corporate veil. The LLC is for protection of your other assets behind that veil of the LLC. If you are ever sued the opposing lawyer is going to try like heck to pierce the corporate veil. He does that by finding that you are not separate from your LLC. That is why your LLC should not be named John Smith LLC. It should be Blue Sky LLC That being said I generally believe that all your rentals should be placed into an LLC. The LLC can have you and your cousin as principles in it. It should have its own bank account. All rent should be paid to it, all mortgage payments should be paid from it and all repairs should be paid from it.
2)I ask for the appraised value today. I get a large option payment up front because they are not going to be able to convert anyway so the sale price is irrelevant. You need to get 2% to 6% of the strike price up front.
Is your experience that most people loose their deposits instead of buying the property when it is time to exercise the option?