[owenk]

Hello,
I am thinking about setting up an LLC to manage RealEstate. Specifically my Mom owns and operates a business in a building she currently shares a mortgage on. She wants to re-fi and bring my wife and I in on the mortgage. Her business would then pay rent to the LLC that would hold the mortgage.
My questions are:
1. When setting up the LLC we would have 2 parties, my mom and me/wife. How could we structure the shares to make it fair when it comes do decisions? Would it be best to bring in a 1% owner to break the ties?
2. If bringing in a third party besides friends/family it's hard to find someone, any suggestions?
3. Any other help/suggestions in this process are helpful.

Thank You
Kris

[jumper666jr]

Originally Posted by owenk

Hello,
I am thinking about setting up an LLC to manage RealEstate. Specifically my Mom owns and operates a business in a building she currently shares a mortgage on. She wants to re-fi and bring my wife and I in on the mortgage. Her business would then pay rent to the LLC that would hold the mortgage.
My questions are:
1. When setting up the LLC we would have 2 parties, my mom and me/wife. How could we structure the shares to make it fair when it comes do decisions? Would it be best to bring in a 1% owner to break the ties?
2. If bringing in a third party besides friends/family it's hard to find someone, any suggestions?
3. Any other help/suggestions in this process are helpful.

Thank You
Kris

NO other owner. please do not. will 1% determine the decision? see how much power he gets? then 50-50 can be a real blockage.

[GuyBBY]

Kris,

There is no need to bring in a separate owner for equity.

What you are probably talking about is "Ma, we want to sell our share and think it is worth $xx".. or other situations that would come up along those lines.

What you can do, is work with a lawyer (or on your own in the research but then def. finalize with a lawyer) to determine those situations in advance and how to handle them, and how it will reflect in the contract.

For example, if you want to sell- is there a time period in which each party needs to give notice? How will you value your piece of the property? You could say "upon a party's decision to sell that party will pay for the appraisal services of 3 independent non-bias real estate firms and the value of the party's share will be assessed by..."

I am not a lawyer, and hopefully some that are on here will chime in to help. But there is no reason to give out equity that you can never get back as easily as it is doled out.

Best,

G

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1. There are actually no shares when dealing with an LLC, just ownership or membership interest. Why not just write into your operating agreement that, in the event of a split decision, X will break the tie?

[GuyBBY]

Sorry, I misspoke re: the "shares" vs. "membership interest"

I guess X would be ok if that person is truly unbiased. That's why I suggested an outside non-bias professional service that the parties agree to and therefore they will be getting proper market value assessment and not concerned if X has some other motive or interest.

I know it sucks to think of family making deals against family but if Kris wants to get $100,000 for his interest, but the mom wants to give him $80,000...what if x gets a cut of the 80k from the mom, there goes the "independant party" theory all together. Again, I know this has a chance of slim to none, but all too much esp. in LLCs you hear of how friends/family end in quarrels and things due to materialistic and personal needs.

G

[jasaunders]

Your plan is irrelevant if I understand your first post. You want to form a new LLC and then get a mortgage for this LLC for a building. No bank is going to give a mortgage to a new LLC.

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Originally Posted by jasaunders

Your plan is irrelevant if I understand your first post. You want to form a new LLC and then get a mortgage for this LLC for a building. No bank is going to give a mortgage to a new LLC.

Josh is right. You're going to have to sign on personally, even with the LLC. Still, this shouldn't deter you from using an LLC, as there are other advantages to it.

[owenk]

Thanks everyone for your ideas/help.

1.So josh/jen you're saying that a bank won't do a loan with a new LLC?

2. So are you saying I'd have to get on the loan personally with my mom then put the loan/property under the LLC?

3. On the set up for third party/X person. I do worry about future problems as I love my mom and respect her (has her own mortgage business for the past 11 years), however we work differently at times. Therefore I worry that we wouldn't be able to work every angle/contigent idea into a contract/LLC agreement.. any additional thoughts on this?

4. Anyone else involved in RealEstate LLC's?

Thanks again!!

[JLeezer]

Originally Posted by owenk

3. On the set up for third party/X person. I do worry about future problems as I love my mom and respect her (has her own mortgage business for the past 11 years), however we work differently at times. Therefore I worry that we wouldn't be able to work every angle/contigent idea into a contract/LLC agreement.. any additional thoughts on this?

The way I see it, you basically have two options:

a) Do not do business with your mother if you are different enough that it will cause such problems

-- or --

b) One of you has a 51% interest in the LLC and the other has a 49% interest...from the start.

Either option, you'll avoid the problems associated with a 50/50 split and having an outsider basically ruling your family's business with a minute 1% interest.