How to structure partnership

Question

Hi BP,

I'm looking into purchasing a house with my brother in law in Mississippi, North of Oxford.  It was his brothers (he lives next door).  I live in Sacramento , CA.  We are thinking of putting it in an LLC. but aren't sure if that's the right structure with me being in Ca. and him in Miss.  Is this something we can set up in NV or one of those states that are great for LLC's?.  We'd eventually like to purchase more properties, possibly in other states.  Thanks.

Gordon Cuffe · Answer

@Jeff Caravalhoonce a person has 10 financed properties or more it gets tougher to get more conventional loans. If you put all 10 loans into in commercial loan then only one loan shows on your credit report and it is easier to get conventional financing again. If you want to get real fancy, you can start the s corp with the 10 rents going through it and pay yourself with a w2 and now you have more w2 income to help you qualify for conventional financing. Don't worry about that now , just buy the one house . Get the insurance . Then worry about the taxes or no taxes at tax time.

Susan Maneck · Answer

My mother lives on the California side. She would not need an LLC if she did not have a self-directed IRA. We don't have an umbrella liability policy if that is what you are asking because she only owns the one house within her IRA.

Jeff Caravalho · Answer

Thanks for your responses.

@Susan Maneck Does your mother live in Nevada or California side of Tahoe?  Would she need an LLC if she wasn't in a SDIRA?  Also do you have liability coverage for your 7 properties, as Gordon is saying?

@Gordon Cuffe Is 10 properties in your opinion the number it becomes worth it to put your properties in a LLC.  Why not just keep using liability coverage?

@Robert Rayford Great info. on Nevada LLC's.  I have a friend who has one and is pushing me to get one for investing here in Cali, ...might be an S-corp...but he loves Nevada.  We'll look into NV for sure.

@Tobias Falzone What if we go 50/50 joint tenants as Gordon is saying?  On a 15 year loan at 20% down, it's not going to cash flow much if at all, probably won't appreciate much.  Should I really be that concerned about taxable income on this one?

Either way we'll be talking to our attorneys and tax people on this one!

Thx again.

Gordon Cuffe · Answer

Just buy it and take title as joint tenants. You are 50/50 owners. It is much easier to get financing on it this way. You then purchase home insurance with liability coverage. You will not have to pay the 800 per year llc fee in ca also. When you own 10 homes then take out a commercial all in one loan and form a llc for all of them combined .

Susan Maneck · Answer

We looked at this in depth when my mother bought a house in Mississippi.  My mother lives in Lake Tahoe and we checked out doing an LLC California, Mississippi, and Nevada. Mississippi was definitely the cheaper way to go. I own seven properties here without an LLC , but my mother needed one because the property is held within a self-directed IRA.  I might add that the LLC also contains a mortgage in Nevada.

Robert Rayford · Answer

@Jeff Caravalho, Nevada is great for the set up of your LLC. What you want to form is a LLP . You would want to make sure that a Nv LLP will propect you in Miss. Here is a link you want to read.

https://www.thebalance.com/the-benefits-of-forming...

How to structure partnership

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