All Forum Posts by: Daniel Rutherford

I recently completed a renovation to a property which increased it's appraised value significantly.  I've recorded the original purchase of the property as well as the improvements in Quickbooks.  However, since QB sees my fixed asset still valued at the original purchase price it makes it look like I have negative equity, and my financial statements are out of whack.  How do you show the increase in value to the property in Quickbooks?

Does anyone know of a free resource for common legal templates such as a loan agreement?  I am just looking for something fairly boilerplate that doesn't require a subscription to a legal site.

Hey guys, this one is making feel pretty dumb. I am trying to enter all the information from my HUD-1 sheet into Quickbooks. I've watched a couple videos on other people doing it, and it's just not clicking. There are a lot of entries on the sheet, and I have no idea what they all need to be assigned to. Is it easiest to just do a big journal entry on this one?

Any help is appreciated!

Hey all, I wasn't sure where exactly to post this question.  Let me know if it should go elsewhere.

I closed on a 3-unit MFH on 12/3/2018 which had existing tenants (which was one of the selling factors).  The deal was done through a local auction company which sold the property as-is with the buyer playing all closing costs.  Not a huge deal since I feel I got the property at a good price.

At the closing the seller provided the prorated rent roll for December in the form of a credit to the closing costs instead of a check.  This also wasn't a big deal since the numbers wash out in the end.  My question is regarding how to deal with this from an accounting angle.  Obviously it is considered rental income either way, but there is a difference between my ledger and business bank account for this amount.  Should I add an entry to my ledger to account for this since it was "spent" on closing costs?  Does this impact reportable income?

Sorry if this is a silly question, but I figured it's one I'll only have to ask once.

@Jason D. Only a judge can pierce the LLC, but I understand what you're saying. That's what I meant by "prove useless". Again, it boils down to how well the LLC is operated. In many cases people just set the LLC up themselves without legal help or they use a template on LegalZoom. If the LLC is not set up correctly or operated incorrectly the veil could easily be pierced. You're correct that a multi-member LLC doesn't get pierced as often.

Regarding the debt guaranty, it's not all that different from the LLC holding the note and you personally guaranteeing the debt. Many banks make LLCs have those arrangements, especially if the LLC doesn't have much history with that bank. Me personally being a liable party on the debt doesn't imply mismanagement of funds. In this case the LLC owns the property, and the LLC pays the debt.

I guess another way to think of it is let's say I hypothetically buy a house from someone with a Subject-To agreement. He deeds the home over to me, and I take over his existing mortgage payments. It's an a fairly common arrangement when it's necessary. That doesn't mean that I'm co-mingling funds with this seller just because his name stays on the note. Similarly, my LLC funds wouldn't be co-mingling with my personal funds.

The only legal implication I can see with being the guarantor on the loan is that I do not have protection from that specific liability. I am personally on the hook for that debt regardless if I have an LLC or not, and that is completely fine with me.

@Costin I. That's definitely advice everyone should take.  Title companies affiliated with ALTA all follow the same rules which allow QCs into LLCs wholly owned by the named insured.  I completely agree that people should do their homework before proceeding with them, though.  I have checked the box of speaking with my title insurer.

@Jason D.

@Jason D. I have worked with a real estate attorney with my LLC and quit claim process. These are things I wouldn't attempt myself because it's not my field of expertise. I will run this question by him, but I think the answer is that closing in my own name permits me to use personal funds since it does not involve the LLC. Once the deed is transferred funds cannot be co-mingled.

There's really no reason to advise against a single member LLC. In certain cases they may prove useless, but there are no negatives to having one. The important thing, as you both have echoed, is that the LLC should not be a person's sole means of asset protection. Umbrella policies are an important tool as well.

@Costin I. I am absolutely taking every form of risk mitigation possible. I am properly insured on the property. I disagree that an LLC complicates things, but that's water under the bridge anyway since the LLC already exists.

My question is probably more appropriate for a lawyer, but I was hoping someone that has been in my same situation may have some guidance on how they proceeded. I did not mean for this to be a discussion on the value of LLC protection.

Regarding the quitclaim deed issue: I don't believe the title insurance would be invalidated because I would be the named insured and would wholly own the LLC which is the grantee of the quitclaim deed. Typically title insurance is only impacted if you are quitclaiming between two unrelated private parties. The title insurance would still protect me from liens and encumbrances since the named insured would not change.

Thank you for your response!

@Jason D. I appreciate your response. The funds would be paid by me either way since I own the entity. If you know of something specifically preventing me from using the LLC to pay the down payment I'd be curious as to what that is. Going forward as I grow my business only LLC money will be used to buy properties.

I own a single member LLC. I disagree that single member LLCs don't offer much asset protection. Rather, they are commonly mismanaged with the funding which allows judges to easily pierce the veil. If money is not co-mingled then there would be no justification to pierce the veil. I've spoken with several lawyers on this, but I know everyone's mileage varies on this topic.

I don't see why having my name on the debt note would imply co-mingling of funds. I can pay against the note from my LLC bank account where my business funds reside. The debt holder is simply the person liable in the event of a default. I don't have an expectation that my LLC gets me off the hook when it comes to not paying the mortgage. Even for some who get mortgages in the name of an LLC, the banks require a personal guaranty from the natural person(s) who owns the LLC.

Buying in my own name is not a strategy as much as it's a necessity to secure a Fannie/Freddie loan. Perhaps you could call it a strategy insofar as wanting to secure a low interest rates with a satisfactory amortization. Maybe once my LLC is established with more history commercial lenders will give me more favorable terms. For now, quitclaims are my approach.

I am closing soon on a property that I am financing. My plan is to do a quitclaim deed after closing to get it in my LLC's name. Obviously one thing I want to be sure of from a legal standpoint is making sure I am treating LLC funds as separate from my personal funds to protect my liability down the road. That leads to my questions.

1. I will be providing funds at the closing. Should I funnel that into my LLC bank account first even though I will not be closing as the entity? I don't want any appearance that I'm using non-business funds to make purchases.

2. If the answer to #1 is yes, would it be recommended that I get utilities in the LLC's name? I would probably be asked to provide a personal guaranty, but that's fine with me.

Any guidance on this is appreciated.  Perhaps I'm overthinking things, but I want to make sure I'm being careful.

No.

Disregarded entity or not you'll give a judge a reason to pierce your LLC and hold you personally liable for any claims against that LLC.

Why have the LLC?