All Forum Posts by: Patrick K.

I have a bank account for each LLC that I have. I then keep a ledger through quicken associated with each of the different properties I own. What are you expecting your accountant to do? 100% of your books or just taxes? I maybe spend1-2 hours a month keeping track of my books for my 12 doors across 4 properties, I would encourage anyone who wants to keep better control of their finances at the beginning of their investing journey to use the accountant as a consultant on how to do their books, but then track their books on their own.

 Hi Patrick,

I'm not going to address the question directly because I have no idea Mr. Green means exactly, maybe you could call him and ask (???)

What I will do is give you an illustrative story, and maybe you can bring your knowledge up a little.

Big Apartments LLC - a manager managed LLC with two members.

Member #1 is You (Patrick), the Manager (and also a Member), you have put $500 into the LLC and own 50 Membership Units (a 50% owner).

Member #2 is your brother in-law (lets call him Richard Smith) he is not the manager (although he could be a co-manager but is not because that's the way you two want it).

Richard has also put $500 into the LLC and own 50 Membership Units (a 50% owner).

You two guys are 50/50 owners of Big Apartments LLC, evidenced by your Membership Certificates (which look a little like old fashioned stock certificates but are not stock shares).

The company has $1,000 in the kitty and since Richard won at Poker last night he's flush with cash, $1,000.

You and Richard agree that he can lend the LLC $1,000 (that's in addition to his already put in $500).

Since this is only a loan it does not effect his ownership percentage of the company. He is still a 50% owner.

So you guys have $2,000 in the kitty now, but that's not enough to do a deal. You need $1,000 more for that.

So your Uncle Max from Empire City believes you guys have tiger by the tail as far as making money goes and lends the LLC $1,000.

Uncle Max is not a owner of the LLC just a lender to it. Your and Richards ownership percentage does not change. It's still 50/50.

So you buy a fixer for $6,000 with $3,000 down and borrow the needed $3,000 plus the $1,000 fixup money from a bank (total $4,000 borrowed from a bank).

The LLC takes ownership of the property (not you nor Richard own the property, you guys only own a percentage of the LLC each of an LLC that owns the property).

The Bank then is a lender to the LLC similar to the way Uncle Max is a lender, except the bank will be able to foreclose on the property, and Uncle Max may, or may not be able to (depending on how he set it up).

The bank is not an owner of the LLC or the property (unless they foreclose on the porperty and take it for non-payment of the loan by the LLC).

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In writing the LLC owner is refereed to as a Member (in many instances).

Partner is sometimes used loosely for LLC Member.

General Partner is sometimes used loosely for LLC Manager.

an Equity Partner (equity meaning a percentage owner of the LLC, might be what he means (???)

a Loan Partner (see above, but maybe Mr. Green means something different (???).
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The Partner and General Partner verbiage applies to Limited Partnerships which are rarely done these days.

The laws make LLC s preferred vehicle for many transactions.

But loosely used they do describe the way an LLC can be set up to operate.

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Now you have a little bit of information, and a little bit of information can be dangerous.

It's like you have heard there is good skiing at Aspen but have never skied.

Without the more knowledge of skiing if you just go out and jump on ski run you will probably crash pretty quickly and injure yourself.

[[[SO]]]

It's smart to always work with an attorney when setting up LLC's ....

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A Book to learn some of the very BASICS of this stuff:

https://store.nolo.com/products/your-limited-liability-company-lop.html

It is  smart to rely on a Attorney for this stuff!

Good Luck!

Answer is we dont have to  ..  we get full price.

And the deposit sits in escrow until it closes we dont get an advance..  that would be very foolish of a buyer to do that.

what your getting at is this.

Banks require pre sales to make new loans.. Like my bank will only give me 12 spec loans up front and for every pre sale they will give me another loan so if I want to build and sell 30 homes this year I can spec 12 but need to have at least 10 or more pre sold so i can keep my loans coming  .. this is why builders pre sale  its not a cash flow issue and not sure where they discount prices they may say its a discount but in reality its just what the market will pay at the time.

but its the reverse folks going into contract are finding that 6 to 10 months later the house is worth more than they contracted for and some builders are not honoring the sale or have a wiggle out and are raising the price all of the former are happening .. now with rates changing you may see some more motivation by builders to settle in on pricing and preselling.