Will transferring title triggering a city tax reappraisal?

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Will transferring title triggering a city tax reappraisal?

Alex J.
Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes

hey all.  I need the wisdom of this ever so intelligent website to answer some questions for me.  My real estate agent, lawyer, and estate planner do not have a good enough response for this so I was thinking of reaching out to the forums because I am sure I cant be the only person who has experience with this

I have a handful of properties in Los Angeles, South Los Angeles, as well as Houston Texas / Missouri City Texas  that are all currently under my/mywifes name under title

We are working on transferring these assets into an LLC for a few reasons, mainly to reduce liability and also restructure our ownership plan to hopefully scale up easier. I have a lot of equity built up in the properties - especially the Los Angeles deals, and I do not want to trigger a "reappraisal" so that my tax burden does not go up. I have setup LLCs just as a passthru entity for us however I dont know what will constitute a revaluation of price in Los Angeles. Texas I am less concerned about because its already market priced tax rates.

Anybody ever have experience in this? any guidance?  yees yes yes I know i know you guys are not my lawyer doctor wife brother mother dad and nobody is holding you to anything , im just speaking generally!  Legal disclaimers  and what not.

Thank you in advance! 

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KJ L.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 210 posts · 155 votes
7y

We own a duplex in Los Angeles with FHA financing under personal name and considered moving the property to an LLC but we were advised that a change in title and/or adding new construction will cause reassessment of property value for property tax UNLESS the property is moved to a trust. Based on prop 13, you can move properties in to trust without causing reassessment (consult with lawyer for the type of trust that is allowable to avoid tax increases under prop 13 rules). Also, if you have a residential mortgage on your property, you cannot safely move it into an LLC (could trigger due-on-sale clause) but you can move it into a trust without triggering that clause or negatively affecting your interest rates. Properties held in trusts can have residential mortgages while properties in LLCs can only get commercial loans.

If you need a name of a lawyer to establish trust or other RE holding entities, PM me. 

Hope this helps

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  • Jim Cummings
    Residential Real Estate Broker · College Station, TX · Member since 2013 · 1k+ posts · 969 votes
    7y

    @Alex J.

    Don't think a Change of Ownership will trigger a tax re-appraisal in Texas, as according to law everything is "re-appraised" every year for tax purposes. 

    0Reply
  • Alex J.
    OP
    Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes
    7y

    @Jim Cummings yes you are correct its assessed every year in Texas  based on market value.  But Los Angeles is based on your purchase price.  

    0Reply
  • Cody L.
    Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
    7y
    Originally posted by @Alex J.:

    hey all.  I need the wisdom of this ever so intelligent website to answer some questions for me.  My real estate agent, lawyer, and estate planner do not have a good enough response for this so I was thinking of reaching out to the forums because I am sure I cant be the only person who has experience with this

    I have a handful of properties in Los Angeles, South Los Angeles, as well as Houston Texas / Missouri City Texas  that are all currently under my/mywifes name under title

    We are working on transferring these assets into an LLC for a few reasons, mainly to reduce liability and also restructure our ownership plan to hopefully scale up easier. I have a lot of equity built up in the properties - especially the Los Angeles deals, and I do not want to trigger a "reappraisal" so that my tax burden does not go up. I have setup LLCs just as a passthru entity for us however I dont know what will constitute a revaluation of price in Los Angeles. Texas I am less concerned about because its already market priced tax rates.

    Anybody ever have experience in this? any guidance?  yees yes yes I know i know you guys are not my lawyer doctor wife brother mother dad and nobody is holding you to anything , im just speaking generally!  Legal disclaimers  and what not.

    Thank you in advance! 

     For Houston, no.

    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    7y

    I have not heard of a reappraisal in CA but I have heard of loans being called for transfer.  I have been told that typically they will let you revert the transfer back to avoid the call of the loan.  I have also heard of people who have successfully transferred the RE without getting their loan called.  Unfortunately the number of people I have heard do this is too small for me to provide an accurate predictor of the odds.

    I have not tried it because it seems like a fair amount of work that may need to be reverted to keep the loan.  I hate doing work with nothing to show for it.  Maybe when I retire I will try it.

    Good luck and maybe post how it went if you choose to try it.

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  • KJ L.
    Rental Property Investor · Los Angeles, CA · Member since 2017 · 210 posts · 155 votes
    7y

    We own a duplex in Los Angeles with FHA financing under personal name and considered moving the property to an LLC but we were advised that a change in title and/or adding new construction will cause reassessment of property value for property tax UNLESS the property is moved to a trust. Based on prop 13, you can move properties in to trust without causing reassessment (consult with lawyer for the type of trust that is allowable to avoid tax increases under prop 13 rules). Also, if you have a residential mortgage on your property, you cannot safely move it into an LLC (could trigger due-on-sale clause) but you can move it into a trust without triggering that clause or negatively affecting your interest rates. Properties held in trusts can have residential mortgages while properties in LLCs can only get commercial loans.

    If you need a name of a lawyer to establish trust or other RE holding entities, PM me. 

    Hope this helps

    2Reply
  • Alex J.
    OP
    Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes
    7y
    YES reassessment risk is what i am most concerned about!  so even if i put it in an llc which will act as a pass-thru entity there will still be a risk of reassessment?  man that is brutal.  I guess buying more coverage on an umbrella is the only viable solution


    Originally posted by @KJ L.:

    We own a duplex in Los Angeles with FHA financing under personal name and considered moving the property to an LLC but we were advised that a change in title and/or adding new construction will cause reassessment of property value for property tax UNLESS the property is moved to a trust. Based on prop 13, you can move properties in to trust without causing reassessment (consult with lawyer for the type of trust that is allowable to avoid tax increases under prop 13 rules). Also, if you have a residential mortgage on your property, you cannot safely move it into an LLC (could trigger due-on-sale clause) but you can move it into a trust without triggering that clause or negatively affecting your interest rates. Properties held in trusts can have residential mortgages while properties in LLCs can only get commercial loans.

    If you need a name of a lawyer to establish trust or other RE holding entities, PM me. 

    Hope this helps

    0Reply
  • Weston Couch
    Attorney · Austin, TX · Member since 2019 · 128 posts · 98 votes
    7y

    @Alex J. Legal disclaimers and whatnot. You can just use a land trust to "transfer" the properties to the LLC/s. Since the land trust is a disregarded entity(considered yours for tax purposes), it avoids a new tax assessment and as an added benefit, avoids due on sale issues. The land trust is then assigned to the LLC which means the properties get the liability barrier of an LLC(but are still yours for tax purposes).

    Please feel free to connect with me if you’d like to know more.

    1Reply
  • Account Closed
    Real Estate Agent · Los Angeles, CA · Member since 2017 · 120 posts · 36 votes
    7y

    @Alex J. What KJ said is correct. Plus, LA looks for any reason to get more money! Our property taxes are reassessed every 5 years (I think) but they can only increase a certain amount from that. If you transfer or sell however....

    Talk to a RE lawyer or accountant on the best options.

    0Reply
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