All Forum Posts by: Jim Douglas

Brian, thank you for your response. I should have mentioned that I will be speaking with an attorney, I am just trying to see what kind of input I can get from the community. I would like to feel somewhat educated on the subject before I meet with someone about it.

I am in the process of buying a peice of commercial real estate with my sister. My last post has the details if you are interested, but here is the short of it. My sister and I are buying a commercial property from our grandmother. We will be putting little to no money down, so she will be owner financing a 5yr balloon mortgage so we can build enough equity to refi in 5 years.
My question is regarding the purchasing of the property. Our father owns multiple commercial properties that my sister and i manage already. These properties are owned by a corperation. Our options are start a new LLC to purchase the property, or have our father partner to buy it in the name of the coorperation. Having the coorperation purchase the property would be favorable to the seller due to the equity held in the other properties and corporation itself. It would also take the debt away from our personal credit which may be an issue for both of us. The question then becomes inherating the cooperation or buldings when that time comes. I am concerned my father would have to pay gift taxes on the properties when he passes. Are there any ways to avoid this, ie. us becoming actual partners in the corp as apposed to employees? Thanks in advance. Hopefully this all makes some sense.

@Chris Winterhalter I am not sure about the personal guarantee. That is not a bad idea about the beneficiaries. I will look into it. Thanks for all of your help. Hopefully I can make this happen.

@Chris Winterhalter The property is a two unit retail building. The two of us have helped manage the property for about 15 years. The last five years has been solely the two of us. So we know every dime that comes in and goes out. The only accounting factor I do not have a great grasp on are the taxes involved. We do handle property taxes, but the property is a small part of a larger corporation, so as far as income taxes and what not I'm still learning.

As far as the loan we are looking at a 5 year balloon with a 15 yr amortization period. Like I said we are ok with the property not cash flowing initially. We are negotiating with my aunt who is the POA of the trust, but essentially the trust's realtor and tax attorney. This whole deal is solely based on the fact we are family. They would definitely be doing us a favor by doing an owner financed with possibly no money down and a 2-3% interest rate.

The trust wants out as soon as possible. My grandmother is almost a century old, so who knows how much longer she has. Once she is gone the trust will be divided into 5, hence the liquidation.

@Chris Winterhalter thanks for the reply.

I have not spoken with any banks. The LTV we would require would be VERY high. Possibly 95%, or even higher. This is why we are looking into owner financing. We would have almost no cash flow for the first 5 years, so having what funds we do have as reserves would be necessary.

Thanks for the reply @Grant Kemp Can you explain why the LLC would lose the ability to refi?

I like the idea of the 5 year ARM as well, however the trust wants out as soon as they can be. I thought the balloon would give them some comfort knowing they would be out. I will look into the ARM.

I have an opportunity to invest in a commercial property and need some help. This is the backstory. My grandmother's trust is attempting to liquefy all of her assets. One of which is a commercial building that I have helped manage over the years, along with my sister. My sister and I are wanting to partner to purchase the property.

We do not have the funds for a conventional loan, so we are preparing an offer to the trust. Our plan is to have the trust owner finance with a 5 year balloon mortgage. This would allow us to build enough equity to then refinance with a more conventional loan. This would also allow the trust to be out of the deal after five years. Does this sound logical? Any other ideas?

The other part of the equation is the partnership. Should my sister and I form an LLC? How would this affect our personal credit and borrowing power? Thanks for any help in advance.