How Do I Structure a Real Estate Partnership with My Parents in California

2 Replies

Hello Everyone,

I'm 25 years old and I work in commercial real estate in San Francisco. I'm planning on making my first real estate purchase with my parents and we're targeting a single family value-add home in the upper middle class town that I grew up in and that my parents still live in in the East Bay.

We're going to be purchasing the target property all cash, making some improvements and then subsequently putting traditional financing in place and hold the asset for the long term. I will be a 25% equity partner in the deal and I was wondering how we should structure this arrangement? Should we be setting up an LLC with all of us as members? I know that an LLC is probably the safest route, but in CA it is very costly and I don't know if it's even possible to then subsequently get financing on an LLC owned SFR property after we complete the improvements. I additionally want to make sure that I'm able to reap the tax benefits of being a property owner. Lastly, regardless of what form of partnership we put in place I want to make sure that down the road we wont be hit with a reassessment for the property taxes, since that's a huge benefit to buying and holding in CA.

If anyone has any experience in forming this type of partnership in CA any feedback would be greatly appreciated. Thanks in advance for your help!

@Alex Vidal If you're looking for conventional/conforming 30yr fixed rate financing on the back side, all lenders I've ever seen want a "natural person" or "individual" as a borrower - not an entity, like an LLC. Most people "quit claim" or otherwise transfer the deed sometime after the 30yr fixed financing is in place.

Not to say you couldn't have it an LLC for the flip period, but couldn't answer that tax implications going back and forth at that point. I have properties in Richmond, and in contract on a 4plex in Oakland now, so welcome to investing in the neighborhood! (Though sounds like you're probably in a "nicer" East Bay city.)

Email me your address through PM if you want to keep up to date on my monthly meetups, and my Big Summit in SF towards the end of the year!

Thanks @J Martin very helpful especially since I'm used to commercial real estate which is very different from SFR's. I'll PM you my info.

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