Using an LLC for Real Estate Investing: The Ultimate Guide

[@doyle-s6m]

Can you avoid California property tax reassessment when tranferring a property with a mortgage into an LLC? Trying to get our ducks in alignment before scheduling a meeting with you to form and LLC for existing beach house property. Wife and I have both read your book and our 3 adult kids are being given copies of your book.

[@CunninghamLegal]

If the transfer is a “proportional interest transfer”, then there should be no reassessment. This means that the transferors of the property to the LLC must be EXACTLY the same as the “members” or “shareholders” of the LLC. This will be discussed at your meeting with us! www.cunninghamlegal.com/california-law-offices/contact/

[@ynphomesolutions9809]

Is it best to keep your investment properties in your llc's then move them into your living trust at your passing? If so whats the process to do this?

[@CunninghamLegal]

It all depends on the intended outcome. Will you keep the properties or not? If you are planning on selling the properties of the first death it may make sense, however this route should only be explored with the detailed information of the properties to avoid any negative tax implications. Book a consultation with one of our business attorneys and we will be able to define a strategy once we have reviewed all the pertinent information: www.cunninghamlegal.com/california-law-offices/contact/

[@TheKangoeroe]

Is depreciation still ok to apply on real estate investements within a LLC if you are from West Europe? Understand that this is a flow-through entity so tax rules are based on where I live

[@CunninghamLegal]

This can be a complex question and depends on the tax treaty that exists with the US and your country. If real property is subject to depreciation is not optional and can be used to mitigate US and applicable state taxation. Apart from that, we cannot comment on how your country treats this issue without further information. We would be happy to assist you in this matter and you can reach out to us to schedule a time to meet by Zoom: www.cunninghamlegal.com/california-law-offices/contact/

[@mcmickey3344]

How to structure llc if moving a property that two people own together (ie. Spouses)? Any need for operating agreement? Can this be a diy job on the state website

[@CunninghamLegal]

This is directly from the California Assessor’s Handbook and should not be considered legal advice. www.boe.ca.gov/proptaxes/pdf/ah401.pdf “In general, a transfer of any interest in real property between a corporation, partnership, LLC, or other entity and a shareholder, partner, or any other person (including another entity) is a change in ownership, unless the ownership interests are identical before and after the transfer. (For more details on this exclusion, see proportional ownership interest transfer exclusion below.). California Section 61(j); Rule 462.180(a). “Any transfer of real property between an individual or individuals and an entity, or between legal entities, that results solely in a change in the method of holding title to the real property, and in which the proportional ownership interests of the transferors and transferees in each and every piece of real property transferred remain the same after the transfer, is excluded from a change in ownership. [Section 62(a)(2). Reorganizations of affiliated corporations are governed by section 64(b).] This is known as the proportional ownership interest transfer exclusion. [Section 62(a)(1).] “Example 6-10. D and B, equal co-tenants, transfer their real property to Corporation X and each take back 50 percent of the single class of voting stock. No change in ownership occurs, since the proportional ownership interests remain the same before and after the transfer. However, if D and B each take back 49 percent of the voting stock and C receives 2 percent of the voting stock, there will be a change in ownership of the entire property since the proportional ownership interests did not remain the same before and after the transfer.” What happens in the real world is people who record a deed submit the Preliminary Change in Ownership Report and check the appropriate box. Thereafter, the Assessor will at some point ask for the Operating Agreement and/or the Schedule of Members. If the Schedule of Members doesn’t reflect a proportional interest transfer the entire interest transferred will be reassessed. There are lots of other things that can happen and it tends to vary by county. Setting up an LLC is not complicated, the hard part is making sure the property is appropriately conveyed to the LLC without reassessment if avoiding reassessment is the goal.

[@mcmickey3344]

@@CunninghamLegal Thanks, do you have an operating agreement template or resources for generating one that work well for rental properties for single member LLCs and another template for joint member llcs?

[@CunninghamLegal]

We prepare operating agreements and corporate documents for our clients based on the specific facts of their case. Having a customized operating agreement is crucial-it's not just about legal formalities, it's about crafting a roadmap that accounts for your business's unique needs and goals, helping operations run smoothly and reducing the possibility of disputes among members. You can contact us if this is something you require and we can help you draft one: www.cunninghamlegal.com/california-law-offices/contact/

[@roadracerron3145]

What if your original owner with llc 100% but you refinance and bank makes you put it in your name temporarily then you put it back in your llc. Do you lose your original owner status if you die down the road and want to give to kids can you still avoid prop 13 re assessment?

[@CunninghamLegal]

You raise an interesting question. Item J on the Preliminary Change in Ownership Report can be checked if “This transaction is recorded only as a requirement for financing purposes or to create, terminate, or reconvey a security interest (e.g., cosigner). If YES, please explain:” This seems to indicate that such an action is not a change in ownership. So it would appear to to be a problem but please do not rely on this post as anything close to legal advice! You or CunninghamLegal could write to the Board of Equalization and get an answer. I did not find the answer in quickly looking at the California Assessor’s Handbook. Again, this is NOT legal advice.