Investing with Family - How to Set UP

Investor · CA · Member since 2023 · 2 posts · 3 votes

Hello, Myself and my three daughters are wanting to start investing in multi-family. Looking for direction on how we should set up the business or IF we should set it up as a business before we start or wait until after our first purchase. Also, looking for a real estate attorney, CPA, tax adviser, experienced realtor in investment properties and local active real estate investment groups and connection to anyone that has done family investing successfully. I do have my RE License but it is not active now and I am currently a Regional Property Manager for Manufactured Housing Communities. Hoping to connect with and develop a great team to help guide us. Thank you.

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Katie Balatbat

CPA and Attorney · San Diego, attorney · Member since 2022 · 302 posts · 219 votes

@Kim Harlow-Williams

Congrats on jumping in! What a lovely family legacy to leave.

I think you've received thoughts so far that people have shared, and I would add a few other thoughts for consideration. The question of how any debt will be held is a good question, as well as how initial equity will be contributed and shared. An LLC or similar entity may provide you a very streamlined ownership structure with a manager and single bank account, but also comes at the cost of additional paperwork, filings, and that pesky $800 annual cost. Conversely, holding title jointly outside of an entity can make tax filings and bank reporting more of a hassle, as well as have additional liability exposure, depending on circumstances.

If you need referrals for CPAs, realtors, or attorneys in the San Diego area, I can definitely assist with some names there, just reach out.

*This post does not create an attorney-client or CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

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Joe HomsBusiness Member
Flipper · Mission Viejo, CA · Member since 2014 · 2k+ posts · 1k+ votes
2y
@Kim Harlow-Williams you are in a great area for multi-family investments. What should you do first?
1. Establish who will be on the title and loan to the property. Get pre-approved for a loan. You will need to qualify for a loan and the property must close in your names. You can transfer it out of your name after closing into an LLC.
2. Unfortunately, you are in California, like me, so you will need to file taxes here. If you form an LLC there is an automatic $800 charge per year. Then you will need a CPA to do your tax return, unless you can do it yourself (no that difficult.)
3. You do not need a real estate attorney?
4. You do need a good Real Estate agent (Investor knowledgeable) to help you find something, unless you want to activate your license and look yourself (my recommendation.)
5. Make sure the property cash flows. This may be the most difficult part here in California.
6. Go to some meetups in your area and find others who are doing the same and speak with them.
Good Investing...
[email protected]949-625-4533
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Alex Hunt
Lender · Member since 2022 · 441 posts · 134 votes
2y
Hello Kim,

Have you and your daughters gained any additional expertise in property investments? I'd design the LLC to emphasize the most significant credit and property-related experience among the four of you.

Please don't hesitate to send me a private message. I've previously been involved with numerous multifamily properties purchases

Thanks
*
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Nate MeekerBusiness Member
Real Estate CPA | California · Member since 2020 · 544 posts · 251 votes
2y
@Kim Harlow-Williams - Hey neighbor! Lots to think about here. I would start with an attorney - I have a few recommendations. I personally invest in a lot of deals with my dad so I can give you some insight there. Are you looking in CA or out of state?
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Katie Balatbat
CPA and Attorney · San Diego, attorney · Member since 2022 · 302 posts · 219 votes
2y
@Kim Harlow-Williams
Congrats on jumping in! What a lovely family legacy to leave.
I think you've received thoughts so far that people have shared, and I would add a few other thoughts for consideration. The question of how any debt will be held is a good question, as well as how initial equity will be contributed and shared. An LLC or similar entity may provide you a very streamlined ownership structure with a manager and single bank account, but also comes at the cost of additional paperwork, filings, and that pesky $800 annual cost. Conversely, holding title jointly outside of an entity can make tax filings and bank reporting more of a hassle, as well as have additional liability exposure, depending on circumstances.
If you need referrals for CPAs, realtors, or attorneys in the San Diego area, I can definitely assist with some names there, just reach out.
*This post does not create an attorney-client or CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
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Jim Spalding
Investor · New York, NY · Member since 2023 · 5 posts · 2 votes
2y
Hi Kim,
Excellent choice choosing to invest in multifamily properties. As far as setting up the business, It is crucial you iron out the details between yourself and your three daughters before moving forward with setting up an LLC. An operating agreement outlining percentages/ distribution of profits (and losses), management structure, etc. It is typically not required to have an operating agreement for an LLC - but it can certainly make things easier, especially when working with a group of four.
When deciding to start the LLC before or after the purchase, I tend to lean towards before the purchase. Transfer complications can arise from starting your LLC after the purchase, along with the drag of updating your insurance policy once the property is transferred to the LLC. Financing may be easier when lenders are aware of a business entity being involved, a key consideration in ou decision of whether you want to start the LLC before or after your purchase.
I would love to chat more about your decision to start investing in multifamily properties, and specifically where you would like to invest - I'll send you connection request, feel free to reach out!
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