All Forum Posts by: John Akolt

There are 100s of options.  All start with hiring an attorney who understands real estate, partnership and tax law.  1. You can obtain a loan from them at a set rate with a right to convert the note into a share of the property 2. They can purchase the property and you can get a share of the profits upon the sale or rental.   3. You can enter into a limited partnership.  As the general partner you are entitled to a payment for services (market price). The limited partners receive the next payments (usually 8-12%) and any remaining profits go to you or are split 50/50 etc.  The option chosen and how the amounts are split will depend on the end goals--property flip, rental and the partners' finances (who gets the capital gains, depreciation, etc).  

Look at the loan again--most are based on intent at the time of purchase.  Not an actual requirement to live there a year.  

To set up an llc file articles of organization with the state--usually a 1-2 page document--and pay a fee.  Then pay an annual fee.  The operating agreement (and bylaws) is the document that sets the rules of the llc (keep in your files only).  If it is owned by just you and you will not have any employees (likely) then it will likely be a disregarded entity--no need to file a separate tax return or obtain an EIN.  

Since you own the property already you will have to quit claim the property to the llc.  If you have a loan the bank will have to approve it--some won't do it.  Get an attorney until you understand the process (it is straightforward if you do it correctly but the cost to correct errors may not be)

The llc will protect your other assets if something occurs within the llc that you didn't personally do--slip and fall, etc. You still need insurance so the property itself is not at risk.  It may be cheaper to get a large umbrella policy--depends on the state and costs.  An llc can also make things more difficult--you will need an attorney to go to court for an llc but not if you own in your own name, etc.  

Better get a good attorney and CPA. The LLC agreement must be very clear to allocate amounts, responsibilities and interests. How will the management by partner be treated for taxes, living in unit treated as rent or right of ownership? Whose name will be on the loan? What happens with non payment of rent or mortgage? Laws are not so simple to allow you to just take back interest for non-payment (foreclosure and/or evictions laws can be very expensive and complex to enforce) CPA must be qualified to actually account for it correctly--most won't.

For only $20K you'll wish you just owned the whole property.