All Forum Posts by: Dan Graves

First time commercial property owner here.  I'm getting ready to lease a property in the Sacramento area and one of the prospective lessee's has asked about a 5-year minimum lease.  I see the security part of this as a plus (no vacancy) and the fix rent cost a negative (unless that's written into the lease).  Are there typical longer term lease agreements that are used?  I'd appreciate any insight you guys might have.

Dan

Okay, I think what has confused me is that the last LLC I had was also a 50/50 partnership in a (very) small business but we rented our property so it was an expense. Since we'd be buying the property its handled like you explained. I think I'm starting to get some of this.

Okay, somewhat related to my original post...

My new soon-to-be-partner and I understand LLC's differently as far as how the tax part of it works. Here's the example... Its a 5 year term and the note will be held by the current owner. We will be putting 20% down, monthly payment will be $3,000/mo and the remainder paid at the end of 5 years. Our monthly income from the property will be a little more than $6,000/mo. Using an LLC, I thought that $3,000/mo "extra" could be put in the bank and accumulate up until we need to use it to pay off the note. He says we would get taxed on that money in the bank and I didn't think so until its disbursed as personal income that would get taxed via a K-1 (or whatever the business income form is).

Can someone explain this in layman's terms for me?  We have a CPA and an attorney that will be helping us but I like to have some kind of clue before meeting with them.

Dan

Thanks guys. This seems like its way more complicated than it needs to be. The property will be around $500k, which I feel is a little under valued. The cost of an LLC isn't an issue, he's just hung up on wanting to have his other properties all in one LLC together. I think I need to sit down in front of an attorney before making a decision.

Thanks Jonathan, that actually makes sense to me.  LOL  Do you know if it would be different for taxes?  The property has three buildings that will be rented/leased so there will be taxable income.

"Regarding alternative structures, more info needed...Best of luck! "

I don't have more info but I can ask the question a different way. Should I be concerned about being a 50/50 owner of a commercial property if my name is not listed on the LLC? Its my understanding that it would be a separate contract spelling out all the different scenarios that need to be covered as owners/landlords, exit options, disputes, etc. I would have the contract reviewed by an attorney but before it gets that far I was hoping to know if I should even consider this structure.

Hello everyone, I'm a newbie to commercial investment but have an opportunity that I may want to take advantage of. A trusted friend and I are talking about purchasing a commercial property as partners. My question is in regards to how LLC's are typically structured when there's more than one "owner" of the property. He already has an LLC and wants to add this property to it, but he wants to include me under contract stating the percentage of ownership, etc. I would not be listed as a co-owner of the LLC. I'm concerned more about other implications... taxes, etc. but I really don't understand much at all. I assumed we'd create a new LLC for this property alone and we'd both be co-owners. My simple mind needs to keep things logical to understand. 8-)

Dan

Sacramento, CA