All Forum Posts by: Kelly B.

*in situations

We bought this building with a partner one year ago. We added a 3rd unit and rehabbed the building. I want to refinance and cash my partner out. The mortgage is 350k and the property will probably appraise for 850 to 900k.  The appraisal part is not concerning to me.

My husbands credit is around 780 and mine is around 740 so I am not concerned about that either.  My husband's income is around 170K.

The problem is that we took out a large line of credit on our home to rehab the investment property. Our debt to income seems too high to support us refinancing the and owning the entire building.?

We are running this building as a short time rental and I expect to make around $150k on rents but we are just starting up and I hear that the bank will not consider that income to lower our dti unless we have 2 years of this income.  Is there any way around this?. Because it short term rental building, we don't have leases.

Will banks ever think outside the box insulations like this? My mom can Loan me money, but not enough to buy my partners out.

If I cannot refinance, I am stuck with my horrible partners.

I would love to buy them out, which would solve everything. They decided they didn't want to take the deal they offered and we accepted but then they wouldn't give us a number. Just some talk about appraisals (I would do) and that they needed 6 to 12 months to determine the value of the building. She seems to be trying to get cash from every valuation possible.  Perhaps a stall tactic to make us squirm. Unfortunately it worked.

We are willing to give them a nice chunk of cash to walk away. The llc was registered less than year ago and the property sale closed June 14. They have contributed almost no labor and are invested about 80k less than us. It seems like they could pick a number and walk away.

On a practical level, I think they are in Europe and haven't made contact in weeks so it's frustrating. Lots of cash coming in in the next few months so it would be nice to have them gone.

I am the registered agent but it was formed as member managed.  Hindsight is 20/20.

We are all on the loan. Tenants in common. We have not transferred property to llc. We have heard that banks aren't calling loans for this as interest rates are so low. But that is no guarantee. So I'm not sure what we will or can do.

We are actually attorneys (we don't practice real estate or business law and are smart enough not to represent ourselves).  To add, these were not just business partners, We trusted these people to have our children if we died, so we trusted them to be acceptable partners. 

Although it appears that we should have demanded the operating agreement that we have them when we started (it was totally neutral and they had no reason not to sign but laziness) it is actually not the agreement I would find workable now. In fact, on a lot of issues, state law is better for is than the agreement we sent them months ago. If we agree to another operating agreement it will be much different.  

Our biggest obstacle is the buy out stuff. (And the property not in the llc). We will continue to try to buy them out. I was just trying to figure out the worst case scenario if they want to torture us.

We don't just need to "speak to a lawyer". This is nuanced. We have already consulted counsel for the buy out contract we proposed but the facts have changed. He was a real estate attorney.

 I suspect, as someone mentioned above, we need a very specialized attorney that practices business and real estate law as well as litigation.

Paying attorney will be money well spent if we have to go that route. But determining the legal issues is helpful for us right now.

Thanks for the advice.

Here are the ridiculous facts.

1) we bought a building with "friends" to be rehabbed and turned into a short term rental. We drafted an operating agreement  after I formed the llc. We discussed and they seemed ok with it but never signed. The property has not been transferred to the llc.

2) we all discussed I would run the construction project and would get paid for my time. The construction has been going on since last august. It is a 330K project. There has been no discussion about my payment.

3) they have done very little work, have been very bad at communicating and they stopped contributing so we had to actually borrow money to finish the last stage of project.

4) we drafted a buy out agreement and they countered and we accepted. They have since change their mind. They said that their accountant needs 6 to 12 months to "value" the business. She is trying to squeeze us hard. On a side note: they wont give us their accountants information and she is filing for the llc. Yep its crazy.

5) My husband I will be in my wages (whatever that should be and an extra 100k) The total investment (including the mortgage balance will be about 850K and our share will be 500k of that). I realize that we should be entitled to a bigger share of the profits as the Washington state regs indicate.

But here are my questions:

If they force a partition, would the judge consider all our extra costs and hours/contribution (its documented) and let us buy their share? Or will it be a forced sale. I don't want to lose this building.

Should we try to get this property into the llc to avoid this possibility? If we can strike a deal with them, we will want the property in our names to refiance so I am nervous about that. I realize that I will need their consent and I might be able to sell them on this for"liability" purposes.

We may be able to sell them on an operating agreement (which I feel disingenuous as I don't want to be partners) but I need to be made the sole manager.

Lots of issues here. Still hoping for a buy out but I am concerned.