Owner Refuses to Carry for LLC

[Micki M.]

I have a single member LLC, created to hold my investment properties. I'm trying to buy a property where the owner will carry the financing (they want the cash flow) but they are uncomfortable with me purchasing and holding title under the LLC. Their lawyer has supposedly advised against this as well. I don't know if he's a real estate lawyer, and have not gotten an explanation of their concerns.

I want to hold it in the LLC because I want the rental income etc flowing through that "business". But the liability is still mine since it is a pass-through.

They mentioned putting a due on sale clause in the docs in case I quit claim it but I also don't see them being savvy enough to check, and I'll likely refi into a renovation loan soon too so I could time that.

Does anyone have input as whether they are at risk, or advice on how I should respond?

Key words: Denver commercial owner carry

[Bill Gulley]

It's a commercial space????

I'd be calling that attorney and asking him asking him just who does he think his client will be selling a commercial property to? I'd ask him if he ever held a commercial property in his personal name or if this greenhorn never did, does he have a landlord for his office that is in the owner's personal name?

There is no extreme brain damage in foreclosing on a corporate name, perhaps he doesn't know the procedure. I've jacked up a few attorneys practicing outside their area of expertise which is what this sounds like.

The attorney is narrowing the market by suggesting to sell and finance only to an individual, perhaps they are not aware of what a personal guarantee is. Is the attorney even aware of what is customary in such properties?

But, before you jump the attorney's stuff, is your deal reasonable, is the down sufficient, do you have credit issues or is the deal pretty clean and common? If there are issues, fall back and play the game especially if it's rather short term.

And I agree, your single member LLC will likely provide any limited liability as you may perceive it, get insurance and manage your activities well to limit risks. LLCs are only about 20 years old now, most small investors use to own personally, there are no new liabilities or risk exposures today than 20 years ago! No big deal.

BTW, in doing deals I always ask if they have an attorney. Regardless of their response I inform them that if they seek advice to ensure they deal with an attorney who specializes in RE, don't go to your trip and fall attorney or your divorce attorney! I let them know that I don't have time to deal with some attorney that doesn't know real estate, as it always ends up trying to educate them in RE while they feel like they must find some issue to justify charging them their fees. I don't mind dealing with any RE attorney, but I don't deal with those who don't specialize in RE. Suggest you get that understood up front! I sometimes tell them of my story where a seller called a relative who was an attorney, they ended up selling for less to someone else! :)