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In a nutshell my dad had a business and had bought a industrial building which he had paid off. The building is worth over 1 million. Both my parents are both dead the business closed a few years ago. Everything they owned was put in a trust for their 4 kids. As of now everything but the building has been sold off and funds have been divided and an account held to pay insurance , property taxes and repairs on the building.. We have had the building rented for a couple years and because the trustee of the trust can nor be paid until the trust is closed we have decided to close the trust and form a partnership for the building. The building does generate a nice income .
The building is in So Calif and all of this is quite foreign to us so any suggestions on what type of partnership we should form or how much it will cost to form one? Would it be best to have a property management company take over the management as there has been a lot of tension among us dealing with the trust as the trustee did a poor job of telling the other 3 of us anything and we had to pry info out of him only to have him blow up at us....yup money does funny things to people,
Any advice on how to move forward would be greatly appreciated. Thanks
Is their a standardized, codified set of rules to govern a partnership or LLC? I don't mean the formation of one, but how the LLC is governed on a day to day business. I am interested in hearing any answers myself for this question.
I think having a property manager could be a good idea , but it depends on how much work is involved with the management. Since it's an industrial building and not residential there might be less work. It is on a long term lease/ lot's of time left on the current lease?
Also you mentioned it generates a nice income, but have you taken a look at what the rate of return would be if you bought the building at market price today?
Have you looked at highest and best use for the property? In certain cases sometimes the land value alone could be worth a lot more for a developer , but if it's zoned industrial you likely can't build condos on the land for example. There could be another better use for the property though..it's worth taking a look at.
In a nutshell my dad had a business and had bought a industrial building which he had paid off. The building is worth over 1 million. Both my parents are both dead the business closed a few years ago. Everything they owned was put in a trust for their 4 kids. As of now everything but the building has been sold off and funds have been divided and an account held to pay insurance , property taxes and repairs on the building.. We have had the building rented for a couple years and because the trustee of the trust can nor be paid until the trust is closed we have decided to close the trust and form a partnership for the building. The building does generate a nice income .
The building is in So Calif and all of this is quite foreign to us so any suggestions on what type of partnership we should form or how much it will cost to form one? Would it be best to have a property management company take over the management as there has been a lot of tension among us dealing with the trust as the trustee did a poor job of telling the other 3 of us anything and we had to pry info out of him only to have him blow up at us....yup money does funny things to people,
Any advice on how to move forward would be greatly appreciated. Thanks
I would say a LLC is the best way to do this partenership. This way the liability os on the property not the individual owners.
As for the tension.
Would there be the tension if the trustee wasnt in the picture.
Can all the siblings agree on what to do with the money and how to spend it.
Are any of them looking to be bought out.
Can the rest buy the one who wants out out?
What needs to be done who to pay what where how and when.
Are any of you business minded and can one person take the reins and have a controlling decision making capability.
Are any of the others willing to release the decision making capability to one person?
You simply cannot have 4 different people make decisons in such case. To come to a agreement would be insurmountable.
Can there be a situation where each person is responsible for certain things. granted again this is not a optimal sutuation because if one is lazy and drops the ball the rest will have to work harder
Your best bet is to get a PMC to manage the property
The building is in a commercial industrial park but sits in the middle of an area called little Saigon. My dad bought it before that area became that. There has been talk of that area being redeveloped so the value could shoot way up if it is.
Right now we have a 5 yr lease with the renters and there are about 3 years left. We had talked about selling it when the lease is up and dividing the money between the 4 of us but the big thing is we would either all be hit with big capitol gains taxes or have to invest in another property to rent for a few years then live in it for a few before we could sell it to avoid that.
To purchase a house for the share one would get from the sale in a market where the rent would be enough to generate the same amount as each share gets now could be difficult, or may take having a mortgage that the rent and then some would have to pay so keeping the industrial building seems to make the most sense right now.
I do not think there would be much work for the property management company but having some one local that could take care of issues when they did arise would be nice.As I said this is rather new territory for all of us.
I think that now that the house and investments are no longer in the picture leaving just the building it will be easier and less tense. But closing the trust so the trustee can have the money from managing that will also help.
Right now we have a 5 yr lease with the renters and there are about 3 years left. We had talked about selling it when the lease is up and dividing the money between the 4 of us but the big thing is we would either all be hit with big capitol gains taxes or have to invest in another property to rent for a few years then live in it for a few before we could sell it to avoid that.
I hope you don't mind my asking, but didn't the property have a stepped up basis after your remaining parent passed away? If so, I would have thought that minimized the capital gains taxes, unless it has appreciated since that date. I make no claims to be an expert on these matters, I'm just trying to figure these things out myself.
The building is in a commercial industrial park but sits in the middle of an area called little Saigon. My dad bought it before that area became that. There has been talk of that area being redeveloped so the value could shoot way up if it is.
Right now we have a 5 yr lease with the renters and there are about 3 years left. We had talked about selling it when the lease is up and dividing the money between the 4 of us but the big thing is we would either all be hit with big capitol gains taxes or have to invest in another property to rent for a few years then live in it for a few before we could sell it to avoid that.
To purchase a house for the share one would get from the sale in a market where the rent would be enough to generate the same amount as each share gets now could be difficult, or may take having a mortgage that the rent and then some would have to pay so keeping the industrial building seems to make the most sense right now.
I do not think there would be much work for the property management company but having some one local that could take care of issues when they did arise would be nice.As I said this is rather new territory for all of us.
I think that now that the house and investments are no longer in the picture leaving just the building it will be easier and less tense. But closing the trust so the trustee can have the money from managing that will also help.
Thanks for the info so far!
Little Saigon in Westminster? I know that area very well. I think you would be insane to sell. That area is very sought after by the Vietnamese community and business usually thrives there. Houses rent fast and properties are sold usually pretty quick.
The area is getting all sorts of work. There is a new housing project that starts in the 800,000s. Lots of renovation. The city hall was redone a few years back, the PD is very good and lots of businesses in the city.
I suggest you sit down with your siblings and find a good PMC that will take care of the property. Get a PMC that deals with commercial property. One of the best things to do is contact a lawyer. What I did was I had specific lease agreements that applied strictly to the properties I rented. This way there was no off the shelf boiler plate lease.
I think you are giving up a gold mine. Commercial property is literally money in the bank. If I had my choice I would take commercial over residential in a heartbeat.
I would think long and hard before selling to cash out. This could be a passive income stream for years to come and I think youre giving up a good chunk of future increase value and income.
Yup that is the place and the building sits right behind a little row of shops on Bolsa which is the main drag so I agree with all you have said and am all for not selling it anytime in the near future.
Yup that is the place and the building sits right behind a little row of shops on Bolsa which is the main drag so I agree with all you have said and am all for not selling it anytime in the near future.
Good. Hang on to it.
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