Why I Use Limited Liability Companies For Real Estate Acquisitions
Author: Herbert J. Stratherbr
Source: ezinearticles.combr
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Whenever I sign a purchase agreement for real estate, I always try to use a Limited Liability Company and these are the reasons why:
First, it limits your exposure in the event you default and get sued for specific performance. You should always try to limit your liability by signing without recourse and by excluding specific performance language in the buyers default paragraph located in the purchase agreement. Simply cross out the part that allows specific performance exposure or, better yet, never include it. If you have been following me, you already know never to use forms. Create your own purchase agreement or use mine.
Second, It gives you fluidity and the ability to assign your interest in the deal without having to assign the purchase agreement. Most banks will not allow you to flip the property by assigning the purchase agreement to a third party. If you purchase in a newly created LLC, you can simply assign your interest in the LLC rather than the purchase agreement. You might even do it in stages by assigning a partial assignment first, then the balance immediately after closing. The assignment can even be escrowed with the title company.
The third and most important reason is that it allows you to purchase without putting up a dime and as a reward it allows for easy syndication. How is this done? This is a $64 million dollar question...
So, how can you legally buy real estate with no money down? If you can answer this question you are probably already rich, however you still might like my clever approach.
Since I have closed more than $2 billion in real estate deals single handedly, I could tell you nine different legal ways to do this without being a candidate for the big house (jail)! Today, I will tell you one way to do this using a Limited Liability Company. I believe deal structures should be simple and I hope this is simple enough.
This would apply mostly to commercial transactions, since most single family homes and 2 family flats are not held in Limited Liability Companies. There are two assumptions I am using (1) the real estate asset is held in a LLC and (2) you can finance the transaction or know someone who can finance the transaction. Simply done - just join the LLC with your own LLC then let your LLC refinance.
Let me restate the structure:
You form an LLC. Let your LLC join the existing LLC. Purchase just 1-5% of the membership interest in the existing LLC. (Note: you should not have to pay for the 1-5% since you can unwind the transaction if it does not eventually close). Import whatever financial power you need to join you then refinance.
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pHerbert (Herb) J. Strather, author of Getting Rich Is Easy and Survive and Thrive in a Recession, is a real estate expert who has purchased, brokered and developed more than 3 million square feet of real estate, (mostly in Detroit), totaling more than $2 billion in deal;.including Woodbridge Estates, a 46 acre, $100 million mixed use residential community, and the elegantly appointed, Hotel St. Regis in Detroit. Strather is one of the originators of the casino industry in Detroit and is the former Chairman of Motor City Casino which he syndicated high risk capital of $3,350,000 and returned more than $160,000,000 to his investors./ppa target=_new href=http://www.stratheracademy.com rel=nofollowhttp://www.stratheracademy.com/a/pbr
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