How to Transfer Parent's Residential Properties to my Company?

33 Replies

Hey everyone. I'm getting intro real estate investing. I have a 6 figure salary and great credit (785+). In Philadelphia, PA, my parents have 3 residential properties, one of them having an attached commercial unit that currently has a hair salon client. All of the props are in my dad's name. I'd like to transfer all of them to the ownership of my company, which I have not yet setup. 


My parents could be partners in the company, but preferably, my company would create a subsidiary company to specifically hold these 3 properties with my parents as partners; in the desired scenario, a business partner (non-family member) and I would own the main company. If this makes sense, the main company would own 30% of the subsidiary while my parents own 70% as partners for their existing equity in the properties.

Right now, my main concern is figuring out how to transfer ownership of the property to a company, regardless of the structure. From there, I can figure out the structure. Is any of this easy to do with a brand new company? Any other thoughts and strategies would be appreciated.

Thanks in advance.

Updated almost 2 years ago

One of my main goals is to avoid or minimize the tax burden for both parties during this transfer process.

Updated almost 2 years ago

It seems some people are having a hard time understanding what I'm trying to setup; or they just want to be trolls. So here's more clarification: With the 30% (or whatever number we end up at) or whatever percent we work out, I plan to leverage the properties to acquire many more with my own money and other partners. At the end of the day, my parents maintain 70% of whatever value we add or derive from their properties. That means my parents maintain 70% of the company and anything operations we carry out with and from their properties.

Originally posted by @Jacob Sampson :

A simple quit claim deed I think.  Reach out to a local title company, they can help and it will be simple and inexpensive.

Thanks for the response, Jacob. I'll look into this. Would this be the best option for avoiding/minimizing taxes? I don't want to have to pay tax for the value of these properties as they are worth a lot of money.

you arent getting around paying the 4% transfer tax, also, what is the point of transferring them to your company, and what are your parents being provided for the 30% stake they are losing?

Originally posted by @Gregory Hiban :

you arent getting around paying the 4% transfer tax, also, what is the point of transferring them to your company, and what are your parents being provided for the 30% stake they are losing?

That's good to know now. As for my parents, they are being provided the service of no longer having to manage these properties, losing out on rent from poor management, etc.

Even the most expensive property management firms charge 10% of rents per year to do very comprehensive management, which probably works out to about 1% of the property's value per year. I manage 20 properties for my parents in Philadelphia & Buck counties, and that is what I charge them. Asking for 30% of the value of the property to do management is beyond absurd, and honestly may be challenged by the IRS as they may reclassify it as a gift. If your parents simply want to do it as part of their estate planning, I wouldn't include any non-family members as it is essentially your inheritance.

Originally posted by @Gregory Hiban :

Even the most expensive property management firms charge 10% of rents per year to do very comprehensive management, which probably works out to about 1% of the property's value per year. I manage 20 properties for my parents in Philadelphia & Buck counties, and that is what I charge them. Asking for 30% of the value of the property to do management is beyond absurd, and honestly may be challenged by the IRS as they may reclassify it as a gift. If your parents simply want to do it as part of their estate planning, I wouldn't include any non-family members as it is essentially your inheritance.

I'm not asking for 30% for just property management; I don't even plan to do the property management myself. I'm asking for 30% as a business partner. It's not really an ask because at the end of the day, my money is my parents' money given they depend on me.

Originally posted by @Lincoln Daniel:
Originally posted by @Gregory Hiban:

Even the most expensive property management firms charge 10% of rents per year to do very comprehensive management, which probably works out to about 1% of the property's value per year. I manage 20 properties for my parents in Philadelphia & Buck counties, and that is what I charge them. Asking for 30% of the value of the property to do management is beyond absurd, and honestly may be challenged by the IRS as they may reclassify it as a gift. If your parents simply want to do it as part of their estate planning, I wouldn't include any non-family members as it is essentially your inheritance.

I'm not asking for 30% for just property management; I don't even plan to do the property management myself. I'm asking for 30% as a business partner. It's not really an ask because at the end of the day, my money is my parents' money given they depend on me.

 Sounds more like your parent's money is your money as you are taking 30% of their property value and providing them with NOTHING in return.  You are not even doing the property management so whoever does it will be getting paid from the company, further reducing  your parents potential income from their investment.

You every hear of a guy named Clayton?  You may end up being his roomie some day...

When my parents had rentals and were elderly, I helped them managed them for years and years.  Never asked my parents to even get reimbursed for gas or time.  Would have never, ever thought of trying to take 30% of their value as some sort of gotcha entitlement.  MY goal was to make my parent's life better, not to enrich myself off their assets.  

What you are proposing does not sound in the best interest of your parents.

Lincoln,

Even if the properties are transferred for a nominal amount, the transfer will trigger transfer taxes based on the properties assessed values. Another consideration is whether these properties have existing loans. This will complicate the transfers. I am also struggling to understand the reason for the proposed transfer as I am having difficulty understanding the benefits your parents receive. You mentioned good income and credit in your initial post. Perhaps if the properties currently have no debt or debt with low LTV's, in return for the transfer and 30% ownership, you can serve as the guarantor for loans for each property and the refinance proceeds could be re-invested into additional properties whereby your parents would have ownership interest. This could be an arrangement that's beneficial for all parties.

Your parents should contact an estate lawyer as you may be able to work something into a trust where they keep ownership but you work as trustee, then you can possibly sell 30% of homes to the business you set up to the company you establish with your partner?  Not a lawyer, no legal advice except to have a lawyer set it up for you so your parents are protected.  Assuming you and your partner want to preserve their equity but fix up the homes for higher rents and have your investment protected, but it does sound tricky with the other partner involved.   

Originally posted by @Lynnette E. :
Originally posted by @Lincoln Daniel:
Originally posted by @Gregory Hiban:

Even the most expensive property management firms charge 10% of rents per year to do very comprehensive management, which probably works out to about 1% of the property's value per year. I manage 20 properties for my parents in Philadelphia & Buck counties, and that is what I charge them. Asking for 30% of the value of the property to do management is beyond absurd, and honestly may be challenged by the IRS as they may reclassify it as a gift. If your parents simply want to do it as part of their estate planning, I wouldn't include any non-family members as it is essentially your inheritance.

I'm not asking for 30% for just property management; I don't even plan to do the property management myself. I'm asking for 30% as a business partner. It's not really an ask because at the end of the day, my money is my parents' money given they depend on me.

 Sounds more like your parent's money is your money as you are taking 30% of their property value and providing them with NOTHING in return.  You are not even doing the property management so whoever does it will be getting paid from the company, further reducing  your parents potential income from their investment.

You every hear of a guy named Clayton?  You may end up being his roomie some day...

When my parents had rentals and were elderly, I helped them managed them for years and years.  Never asked my parents to even get reimbursed for gas or time.  Would have never, ever thought of trying to take 30% of their value as some sort of gotcha entitlement.  MY goal was to make my parent's life better, not to enrich myself off their assets.  

What you are proposing does not sound in the best interest of your parents.

You have a lot to say about someone you hardly know let alone their relationship with their parents. I haven't gone into detail about the arrangement my parents and I would like to set up because that's not the important part of my question. I just want to know how to make a transfer of properties from one family member to another while minimizing taxes. You haven't been at all helpful on that front. If you would like to learn more about my business plan and how I plan to enrich my family, that's something you could ask about. Instead you chose to attack. Please keep that to yourself.

Updated almost 2 years ago

As for your "helping your parents without asking for reimbursement", i hope you donated all the money you acquired from selling their properties after they died. You're so silly for all of what you've said here. Please keep your moral superiority complex to yourself. That's not what I'm here for.

Originally posted by @Stuart Udis :

Lincoln,

Even if the properties are transferred for a nominal amount, the transfer will trigger transfer taxes based on the properties assessed values. Another consideration is whether these properties have existing loans. This will complicate the transfers. I am also struggling to understand the reason for the proposed transfer as I am having difficulty understanding the benefits your parents receive. You mentioned good income and credit in your initial post. Perhaps if the properties currently have no debt or debt with low LTV's, in return for the transfer and 30% ownership, you can serve as the guarantor for loans for each property and the refinance proceeds could be re-invested into additional properties whereby your parents would have ownership interest. This could be an arrangement that's beneficial for all parties.

This is part of the plan. I have far more money, education, interest in the details of real estate development, etc. than my parents. With the 30% or whatever percent we work out, I plan to leverage the properties to acquire many more with my own money and other partners. At the end of the day, my parents maintain 70% of whatever value we add or derive from their properties.

Originally posted by @Lynn M.:

Your parents should contact an estate lawyer as you may be able to work something into a trust where they keep ownership but you work as trustee, then you can possibly sell 30% of homes to the business you set up to the company you establish with your partner?  Not a lawyer, no legal advice except to have a lawyer set it up for you so your parents are protected.  Assuming you and your partner want to preserve their equity but fix up the homes for higher rents and have your investment protected, but it does sound tricky with the other partner involved.   

 Thanks for your helpful input. I'll look into this approach. And yes, increasing the value of the properties and growing the portfolio is part of the plan.

The fact you are looking to utilize potential refinance proceeds to acquire additional properties without involving your parents is troubling. I believe your parents should be the ones securing legal counsel.

Good info.  Goes to show that these sorts of questions are best answered by a competent professional vs an open forum. 

Originally posted by @Kevin Branin :

@Jacob Sampson not in Pennsylvania. Unless it's from one family member to another, you're paying transfer taxes. You can't quit claim into an LLC without paying 1-2%.

Originally posted by @Mark Fries :

@Lincoln Daniel

Sounds like you are "just taking" these properties from your parents because you are financially taking care of them....weird

Did you miss this part of the thread or are you just inclined to be a troll?

"With the 30% or whatever percent we work out, I plan to leverage the properties to acquire many more with my own money and other partners. At the end of the day, my parents maintain 70% of whatever value we add or derive from their properties." That means my parents maintain 70% of the company.

Originally posted by @Stuart Udis :

The fact you are looking to utilize potential refinance proceeds to acquire additional properties without involving your parents is troubling. I believe your parents should be the ones securing legal counsel.

Did you read through the thread before sending your ill-informed input, or did you also want to just say something? Here's what I said just a few posts above yours:

"With the 30% or whatever percent we work out, I plan to leverage the properties to acquire many more with my own money and other partners. At the end of the day, my parents maintain 70% of whatever value we add or derive from their properties." That means my parents maintain 70% of the company and any operations we carry out with and from their properties.

Originally posted by @Jacob Sampson :
Good info.  Goes to show that these sorts of questions are best answered by a competent professional vs an open forum. 

Originally posted by @Kevin Branin:

@Jacob Sampson not in Pennsylvania. Unless it's from one family member to another, you're paying transfer taxes. You can't quit claim into an LLC without paying 1-2%.

That's a great point. I didn't expect to get trolls on BiggerPockets. I thought that was reserved for places like Twitter. Some people have chosen to speak on my relationship with my parents and my family instead of just answering the question or keeping it pushing.

Originally posted by @Lincoln Daniel:
Originally posted by @Lynnette E.:
Originally posted by @Lincoln Daniel:
Originally posted by @Gregory Hiban:

Even the most expensive property management firms charge 10% of rents per year to do very comprehensive management, which probably works out to about 1% of the property's value per year. I manage 20 properties for my parents in Philadelphia & Buck counties, and that is what I charge them. Asking for 30% of the value of the property to do management is beyond absurd, and honestly may be challenged by the IRS as they may reclassify it as a gift. If your parents simply want to do it as part of their estate planning, I wouldn't include any non-family members as it is essentially your inheritance.

I'm not asking for 30% for just property management; I don't even plan to do the property management myself. I'm asking for 30% as a business partner. It's not really an ask because at the end of the day, my money is my parents' money given they depend on me.

 Sounds more like your parent's money is your money as you are taking 30% of their property value and providing them with NOTHING in return.  You are not even doing the property management so whoever does it will be getting paid from the company, further reducing  your parents potential income from their investment.

You every hear of a guy named Clayton?  You may end up being his roomie some day...

When my parents had rentals and were elderly, I helped them managed them for years and years.  Never asked my parents to even get reimbursed for gas or time.  Would have never, ever thought of trying to take 30% of their value as some sort of gotcha entitlement.  MY goal was to make my parent's life better, not to enrich myself off their assets.  

What you are proposing does not sound in the best interest of your parents.

You have a lot to say about someone you hardly know let alone their relationship with their parents. I haven't gone into detail about the arrangement my parents and I would like to set up because that's not the important part of my question. I just want to know how to make a transfer of properties from one family member to another while minimizing taxes. You haven't been at all helpful on that front. If you would like to learn more about my business plan and how I plan to enrich my family, that's something you could ask about. Instead you chose to attack. Please keep that to yourself.

 Actually the money was split between 11 heirs as their trust directed.

Not superior, but also not a taker.  What my parents worked for was theirs.  I can work and make my own money without using theirs as my foundation.

When you leverage you put your parents assets at risk.  Depending on their age and financial condition they may not be able to recover from a loss.  Leveraging is a big risk to older people.  

Originally posted by @Lynnette E. :
Originally posted by @Lincoln Daniel:
Originally posted by @Lynnette E.:
Originally posted by @Lincoln Daniel:
Originally posted by @Gregory Hiban:

Even the most expensive property management firms charge 10% of rents per year to do very comprehensive management, which probably works out to about 1% of the property's value per year. I manage 20 properties for my parents in Philadelphia & Buck counties, and that is what I charge them. Asking for 30% of the value of the property to do management is beyond absurd, and honestly may be challenged by the IRS as they may reclassify it as a gift. If your parents simply want to do it as part of their estate planning, I wouldn't include any non-family members as it is essentially your inheritance.

I'm not asking for 30% for just property management; I don't even plan to do the property management myself. I'm asking for 30% as a business partner. It's not really an ask because at the end of the day, my money is my parents' money given they depend on me.

 Sounds more like your parent's money is your money as you are taking 30% of their property value and providing them with NOTHING in return.  You are not even doing the property management so whoever does it will be getting paid from the company, further reducing  your parents potential income from their investment.

You every hear of a guy named Clayton?  You may end up being his roomie some day...

When my parents had rentals and were elderly, I helped them managed them for years and years.  Never asked my parents to even get reimbursed for gas or time.  Would have never, ever thought of trying to take 30% of their value as some sort of gotcha entitlement.  MY goal was to make my parent's life better, not to enrich myself off their assets.  

What you are proposing does not sound in the best interest of your parents.

You have a lot to say about someone you hardly know let alone their relationship with their parents. I haven't gone into detail about the arrangement my parents and I would like to set up because that's not the important part of my question. I just want to know how to make a transfer of properties from one family member to another while minimizing taxes. You haven't been at all helpful on that front. If you would like to learn more about my business plan and how I plan to enrich my family, that's something you could ask about. Instead you chose to attack. Please keep that to yourself.

 Actually the money was split between 11 heirs as their trust directed.

Not superior, but also not a taker.  What my parents worked for was theirs.  I can work and make my own money without using theirs as my foundation.

Your profile: "I had helped my parents with managing their rentals for years and after they passed away and I sold their property when I settled their estate, I found that I missed that activity."

As far as your own profile bio is concerned, you took your parents properties, exactly what inheritance is, and sold it for money that then went into your account. Please spare me your twisted definition of "take". If only your parents knew all that time you were just helping them manage your own inheritance ... 

My parents are business owners and are interested in building generational wealth with their kids. We all immigrated to this country and have worked hard to make a better life for all of us. I happen to be the one who went to school and became a highly paid software engineer.

You do you and enjoy your life. Just leave me and my family's choices out of it. Good day to you.

Originally posted by @Lincoln Daniel:
Originally posted by @Lynnette E.:
Originally posted by @Lincoln Daniel:
Originally posted by @Lynnette E.:
Originally posted by @Lincoln Daniel:
Originally posted by @Gregory Hiban:

Even the most expensive property management firms charge 10% of rents per year to do very comprehensive management, which probably works out to about 1% of the property's value per year. I manage 20 properties for my parents in Philadelphia & Buck counties, and that is what I charge them. Asking for 30% of the value of the property to do management is beyond absurd, and honestly may be challenged by the IRS as they may reclassify it as a gift. If your parents simply want to do it as part of their estate planning, I wouldn't include any non-family members as it is essentially your inheritance.

I'm not asking for 30% for just property management; I don't even plan to do the property management myself. I'm asking for 30% as a business partner. It's not really an ask because at the end of the day, my money is my parents' money given they depend on me.

 Sounds more like your parent's money is your money as you are taking 30% of their property value and providing them with NOTHING in return.  You are not even doing the property management so whoever does it will be getting paid from the company, further reducing  your parents potential income from their investment.

You every hear of a guy named Clayton?  You may end up being his roomie some day...

When my parents had rentals and were elderly, I helped them managed them for years and years.  Never asked my parents to even get reimbursed for gas or time.  Would have never, ever thought of trying to take 30% of their value as some sort of gotcha entitlement.  MY goal was to make my parent's life better, not to enrich myself off their assets.  

What you are proposing does not sound in the best interest of your parents.

You have a lot to say about someone you hardly know let alone their relationship with their parents. I haven't gone into detail about the arrangement my parents and I would like to set up because that's not the important part of my question. I just want to know how to make a transfer of properties from one family member to another while minimizing taxes. You haven't been at all helpful on that front. If you would like to learn more about my business plan and how I plan to enrich my family, that's something you could ask about. Instead you chose to attack. Please keep that to yourself.

 Actually the money was split between 11 heirs as their trust directed.

Not superior, but also not a taker.  What my parents worked for was theirs.  I can work and make my own money without using theirs as my foundation.

Your profile: "I had helped my parents with managing their rentals for years and after they passed away and I sold their property when I settled their estate, I found that I missed that activity."

As far as your own profile bio is concerned, you took your parents properties, exactly what inheritance is, and sold it for money that then went into your account. Please spare me your twisted definition of "take". If only your parents knew all that time you were just helping them manage your own inheritance ... 

My parents are business owners and are interested in building generational wealth with their kids. We all immigrated to this country and have worked hard to make a better life for all of us. I happen to be the one who went to school and became a highly paid software engineer.

You do you and enjoy your life. Just leave me and my family's choices out of it. Good day to you.

 I managed my parents rentals when they were alive and elderly.  

When they passed away I then became responsible for managing their Trust and executor of the last to pass's will.  In those roles I did sell their property and all their assets were distributed to who my parent's had determined decades before.  I was the Trustee and Executor and did all the work after they passed because my parents knew that I could and would.  I did not get the majority of their assets because I was not 'needy'.  The 'needy' relatives did get much more than I.  And that is all ok, it was exactly what my parents wanted, and I knew that for decades. 

What I did to help my parents and settle their Trust and estate was not because I got a lot through inheritance.  I did get a lot of work, and some personal items I had picked out years before but not so much in actual money.  That went to others.

BTW, my parents knew exactly what I was doing.  They took me to meet with the attorney who wrote their Trust and will, and other documents.  HE went over each and every page of them and explained what was expected and what they meant.  Same thing whenever my parents amended an estate document.  After it was done, they took me to meet with the attorney to make sure I understood how to do that.  

And because I knew what I was to do and how to do it, I knew to keep accounts separate.  When I sold the houses, that money went straight and directly into the Trust account by wire.  The checks to distribute that money came from the Trust account to the beneficiaries.  I wrote those checks.  That money never did ever touch my accounts.  Co-mingling of funds would never happen with me.   I know better.  And BTW, you obviously have no experience with selling property.  They will NOT let one wire the money to any account.  The account has to match in name to who owned the property, or go to an estate account in that name.  There are processes in place to help people not co-mingle funds.  And when a Trust is closed out, all the beneficiaries get a full accounting of the assets and their distribution, same with the will in my case.  Then the final taxes are paid for the estate and Trust.  So, no the money was not put in my account.  That would be criminal, prison, etc.  Not happening here.