The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: moneetalks on May 19, 2019, 07:57:07 PM
-
Scenario:
I own one rental property and half of another with a friend of mine.
He owns several other rental properties and has established an LLC that actually owns them.
I’m planning on establishing my own LLC as well.
My impression is that MY LLC and his would simply own half the shared property. And that we would have NO reason To establish a third llc that owns that particular property.
I hope my question is clear.
-
Hi David,
Sounds like a good plan, or alternatively (or simultaneously but probably overkill) you could consider increasing your liability insurance and possibly umbrella insurance to $1M or multimillion. Not very expensive annually believe it or not and it might give you additional protection that overflows beyond just that single property.
If you have a mortgage your lender might not be so easy about name change on the paperwork. I have heard that making this kind of change might be easier if you present to them that it is for estate planning purposes.
I recommend you get a tax CPA, attorney, insurance agent involved for their advice. Also discuss with the CPA & attorney regarding setting up the LLC as a pass-through entity vs as it’s own entity for the tax perspective.
I will say it is much more of a burden owning an income property with another property in a 50/50 situation when you go do your own separate real estate loan transactions. Reason is that the lender on a new property will likely look at your 50/50 property as that you individually have 100% of the obligation but only 50% of the revenue. Can totally screw up your ratios on getting to qualify. I am looking to sell a ocean view house now partly for that reason.
There’s the not so simple non-answer to your easy question :)
Best
Cliff
Sent from my iPhone using Tapatalk