How should a partner and I purchase 2 rental properties at different prices for our LLC?
A partner and I are going to set up an LLC to run 2 rental properties we’re looking into purchasing. We can get mortgages with no money down and no closing costs, but the two properties are priced differently ($140,000 and $180,000). How can we go about making the purchase and them bringing them under the umbrella of the LLC?
I know we can purchase them separately and then quit-claim them to the LLC, but then one of the partners is going to be responsible for a higher loan amount then the other. We would like to maintain a 50-50 share in the LLC. Also, if we quit-claim them, how probable is it that the lender will exercise the “due on sale” clause?
It’s my understanding that the terms of the loans will be much better if we purchase them individually, instead of the LLC making the purchase. Especially since it will not have any equity yet.
I’m looking for some other scenarios that would allow us to keep everything split down the middle. Thanks for the help!
Set up 2 separate single entity LLCs, one for each property and have both of you own 50% membership interest of each LLCs. This way, you can have two separate loans and you both will guarantee both loans. You buy the properties under LLC #1 and LLC # 2 under two separate contracts.
Also, it is easier in the event you want to sell one of the property down the road and not the other and you don’t have to fool with quit-claim anything. Furthermore, in the event one investment turns sour, it does not affect the other one. You have to keep two sets of books though. My partners and I have many LLCs this way investing in office buildings.
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