All Forum Posts by: Jason Braud

Thanks for the advice @Natalie Kolodij and @Basit Siddiqi.

Have a tax question. Starting a new real estate LLC where one partner brings majority of upfront capital to the venture for down payment on first property. In a bid to keep the ownership in the LLC at 50/50, would like to structure some of the down payment funds contributed as a loan to the LLC. The only tricky part I see with this is the IRS potentially treating interest payments on the loan as dividends due to the ratio of the personal loan value to total equity in the LLC.

Is this something to worry about? Or would this not be a problem since the LLC would own the property, with the equity in the property and additional capital contributions outweighing the value of the personal loan?

Example

Sales Price: $400,000

Down Payment: $100k

Partner 1 Capital Contribution: $15k

Partner 2 Capital Contribution: $15k

Partner 2 Personal Loan: $80k

*LLC Now has a $400k property with $100k equity, $10k in bank account, $80k liability on personal loan, $300k liability on commercial loan.

Investment Info:

Large multi-family (5+ units) buy & hold investment in Baton Rouge.

Purchase price: $640,000
Cash invested: $2,500

3 x 4-plexes together, 2 br/2 bath. Unoccupied at purchase. Close to LSU. Purchase price $560k. Commercial loan for $640k for purchase cost and upfront repairs. First year interest only. 5.5% fixed for 3 years. 20 year term. Avg rents $875. Repairs completed and 100% occupancy in 6 months. Titles to 3 other investment homes owned free and clear as collateral / down payment. Only "cash invested" was taking out a flood insurance policy on one of the investment homes used for collateral.

What made you interested in investing in this type of deal?

Started investing Baton Rouge area purchasing 7 SFRs in 1 year for buy and hold. All cash deals. Wanted to scale up in year 2.

How did you find this deal and how did you negotiate it?

Zillow. Seller was distressed. Poor management had all units vacant and in poor condition. Last sold for $1.2M. Appraisal came in below our accepted offer price. Renegotiated even lower.

How did you finance this deal?

Portfolio lendor. Lots of phone calls to local/regional banks.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Calvin Clement with Pennant Real Estate.

Investment Info:

Large multi-family (5+ units) buy & hold investment in Baton Rouge.

Purchase price: $640,000
Cash invested: $2,500

3 x 4-plexes together. 2 br/2 bath. Unoccupied at purchase. Close to LSU. Purchase price $560k. Commercial loan for $640k for purchase cost and upfront repairs. First year interest only. 5.5% fixed for 3 years. 20 year term. Avg rents $875. Repairs completed and 100% occupancy in 6 months. Titles to 3 other investment homes owned free and clear as collateral / down payment. Only "cash invested" was taking out a flood insurance policy on one of the investment homes used for collateral. And $20k for upfront repairs on top of commercial loan value.

What made you interested in investing in this type of deal?

Started investing Baton Rouge area purchasing 7 SFRs in 1 year for buy and hold. All cash deals. Wanted to scale up in year 2.

How did you find this deal and how did you negotiate it?

Zillow. Seller was distressed. Poor management had all units vacant and in poor condition. Last sold for $1.2M. Appraisal came in below our accepted offer price. Renegotiated even lower.

How did you finance this deal?

Portfolio lendor. Lots of phone calls to local/regional banks.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Calvin Clement with Pennant Real Estate.