Series LLC + 1031 exchange

[Lisa W.]

Hello All,

Here's my situation:

1st unit - no mortgage

2nd unit - has a mortgage

3rd unit - looking to buy and use as a primary resident for a few years

Questions:

1) can I 1031 x/c the 1st unit to pay off the mortgage of the 2nd unit?

2) I'm wanting to start a Series LLC: putting the 1st unit under the Series LLC isn't a problem (since the mortgage is paid off), but, I'm told, if I want to put the 2nd unit under the LLC then I either 1. have to pay off the mortgage first or, 2. refinance it under the LLC, in which the interest rate will increase because it's an LLC.

3) I'll be joining the military and am looking to purchase units as I move (hence 3rd unit). I understand getting a personal loan (especially VA loan) will have lower interest rates compared to an LLC. I heard on the BP podcast about a hack by getting a personal loan first and then transferring the unit to the LLC, but I've asked about that before hearing the podcast which is where question #2 came about - needing to pay off the mortgage first or refinancing under the LLC.

- 3rd unit ... since I'll be living in it myself, I know there's then no need to put it under the LLC until later when I move and decide to still keep it, but if it was possible, I might rent out a room. I'm sure renter's insurance should be enough to cover any liabilities on that end, right?

** Side note: all units are/will be in different States. 

Any ideas, or combination of ideas, will be greatly appreciated!!

Thank you!!

[Bill B.]

There is the same 180 day time limit, it’s much more expensive, and you have to front the money to purchase property #2. Talk to an expert like @Dave Foster for more details. 

You would both be sued. It's going to be pretty obvious usually that you made the decision, or allowed the situation to exist that caused the harm. Imagine a slip and fall on an icy sidewalk, you should have had that fixed, a gas line explosion, you allowed the situation to exist and should have had to inspected. Let's imagine you are the first small LLC owner in history to perfectly separate your finances and signatures, etc etc. Yes, your LLC's valid, but you're going to be sued personally at the same time.

Plus the umbrella kicks in when you're in a car accident and get sued. When you get sued you're going to lose the LLC you own, so you lose the property for a bad car accident. There's just no upside to the LLC, no privacy, no asset protection, no tax advantage. Just extra costs and complications. And with a 90-99% chance you will never use the umbrella or the LLC, why bother.