Question About LLCs And Real Estate Investment
I'm about to make my first attempt at real estate investment, and it seems like my questions are endless. I'd appreciate it if anyone out there can offer advice and/or opinion.
Here's my situation:
I'm involved with 2 other partners, one of whom is my Aunt, the other is not a family member. (My Aunt has done this once before, the other partner and myself have not.) My Aunt has signed a contract on a pre-construction property for 1% of the selling price. From what I understand, we will need a mortgage in place upon completion of the construction, which should be in March. My Aunt believes we'll need 10% in order to secure the mortgage (this is what she needed in her previous venture). We plan to sell the property as soon as possible following construction, assuming that the market hasn't collapsed. If we can't sell, we'll rent (the property is beach front).
My worries and/or questions:
1. The partners agree that we need to make this a legal partnership. Right now, my Aunt is signing everything and we would all rather not have her name on the mortgage. My investigation leads me to think we should form an LLC. I'm still getting my arms around all the tax implications, but in terms of protecting us I think it's the way to go.
2. However, I'm afraid we'll have problems getting the loan with a brand-new LLC. Any suggestions?
3. Tax question - with an LLC, I've seen it mentioned that the partners will be required to pay quarterly self-employment tax. Is this correct? In our case, we're looking to make this one transaction, and then use the proceeds to continue buying and selling, potentially taking profits here and there.
Again, any help will be much appreciated.
Thanks,
KARL
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