Real estate LLC purchasing properties

[Johnlard]

Great forum. I am in a recently formed 2-member LLC focused on cash flow real estate. Because banks will not loan to LLCs (at least initially) we will be purchasing properties in the name of one member and then deeding the property to the LLC. The banks require that the funds used to purchase the property come from the individual's personal account (eg not the LLC).

Therefore, we plan on transferring funds from LLC to individual account to purchase the properties. How should this be accounted for in our books?

Thank you!

John

 

[kirby]

Plan works ... Until you try to legally record the deed in the name of the llc. Because property has a bank lien on it that has to be cleared first. That is: lien has to be paid off.

 

[The Finance Writer]

kirby is maybe correct -- actually, he's probably correct. Check your copy of the Deed of Trust given by the one member to the lender. If it has a "due on transfer" clause, the entire mortgage balance is due upon transfer to the LLC.

The lender does not sound like a commercial banking operation. Was this borrowing for a residential property? If so, did the member claim in the mortage application that the property was for personal use? If so, this is a federal crime.