Posted by JHyre in Ohio on July 11, 2002 at 17:34:39:
Get Bronchick’s course on how-to set up LLC’s, it’s approximately $150- a lot cheaper than the attorneys! Search under due on sale on the MNG- there’s lots of info there on using land trusts to get around that. You need a transfer tax form from your state to see if putting property into wholly-owned LLC or land trust is a taxable event for transfer tax purposes.
John Hyre
Do I Need An Entitiy For My Rentals? - Posted by L Hurley
Posted by L Hurley on July 10, 2002 at 03:43:52:
I am a recently divorced female who ended up stuck with 5 non-profitable rentals due to poor management. I am a traveling nurse. My ex-husband stayed at home and “managed” the properties while I went away to work to make the payments on all of these properties. He ended up not paying the mortgages for several months (14 times in all) even though I was sending home ample money to pay for them, and let the tenants destroy the property.
Because my name was on the mortgages, and I wanted to repair my credit, I talked him into Quit Claiming the properties over to me before our divorce.
I have hired someone to manage the properties in my absence and have been considering setting up business entities in the form of LLCs for each property. I owe way more than the properties are worth at this point, and hold two separate mortgages for the 5 properties. The loans are commercial loans.
What took me by surprise is while reading past postings, I found several messages that mentioned “Due On Sale” Clauses. A reputable Law firm is wanting to charge me an arm and a leg to set up LLCs for each individual property ($1,700 per property), and never mentioned a word about such a clause. And another posting mentioned having to pay taxes up front when each property is transfered to the LLC. Man, that would really be all I would need at this point!
Anyway, to end this up, and get to the point, in my situation, would I be better off to just keep chugging along as a sole proprietor? And HOW can I find out if I have a Due on Sale Clause? How would I know if I would be obligated to pay any kind of taxes on the transfer of the properties?
Thanks!