Utah LLC funded by international investors

Foreigners Buying in the USA
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Utah LLC funded by international investors

Joe Au
Investor · Draper, UT · Member since 2016 · 120 posts · 57 votes

I have several family members want to fund my deals in the State. What is the best way to do that?

Should I just borrow their money and wire to my personal account, then I transfer to my LLC? (they don't care if they are on the title or not)

Or open an LLC, and have them be the member of the board.

And how would they be taxed for the profit?

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y

there are tax considerations for foreign investors ... suggest you talk with account.. before doing this.

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  • Chris Popov
    Investor · London, Greater London · Member since 2015 · 31 posts · 12 votes
    9y

    Hi, I have set a Florida LLC with a family member (50-50), and we only had money to buy 2 SFH. Even less, we borrowed for one of the house from a local bank in Florida. This is my experience.

    I would say, set a LLC, but you need to be more than 1 person or else limited liability could be defeated by a judge in case of litigation. So maybe give minority shares to your family members. Capital can be low - 1000, or 100$. Then your family members can loan the money to the LLC. They will have to pay tax on any profit proportional to their share though.

    If you have serious money, maybe you should go for a proper US corp or even offshore structure to own your US LLCs and Corps.

    I am no expert, and I am just sharing my experience. In any case, you need a good accountant specialised in RE.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    there are tax considerations for foreign investors ... suggest you talk with account.. before doing this.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    1Reply
  • William Hochstedler
    Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    Hi Joe,

    An LLC is a very common way to set up partnerships for long-term real estate holds. A good attorney can help you prepare an operating agreement so everyone is protected. Utah (and 10 other states) recognize a Series LLC which allows you to hold multiple properties in a single LLC with the same protections as having each property in its own entity.

    One thing to consider is leverage. You will only be able to use commercial loans if borrowing as an LLC.

    If you want to borrow on 1-4 units and take advantage of conventional financing, you will have to borrow in your own name (foreign nationals have a tough time getting US loans).  In this case, family members can "gift" you cash to put toward a purchase.

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  • William Hochstedler
    Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    @Cody Backus

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  • Joe Au
    OP
    Investor · Draper, UT · Member since 2016 · 120 posts · 57 votes
    9y

    I want things simple for them. If they have to file for tax every year when they are part of the LLC, they probably not going to do it.

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  • Aaron Smith
    Bountiful, UT · Member since 2016 · 112 posts · 52 votes
    9y

    @Joe Au I would ABSOLUTELY talk to a RE attorney and CPA. You want to make sure there aren't any issues with borrowing money from foreign investors. It's always better to be safe than sorry and end up having an audit next year. 

    All the best, 

    Aaron

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  • Cody Backus
    Attorney/Investor in Lehi, UT · Member since 2016 · 70 posts · 65 votes
    9y

    @Joe Au, Does your family care if their money is secured by the real estate so that if you default they have a security interest in the property? 

    What kind of deals are you talking about? Are these buy/hold or flips? Are you just doing deals in Utah or in other states? 

    Do you plan to use their money to fund the acquisition or the rehabs?  

    There are several ways this could be structured depending on your answer to the questions above. Happy to chat with you by phone if'd like. I saw you signed up at UVREIA meeting last week to get materials from Jeff Breglio. I am the other attorney he had stand up in that meeting, the one who hasn't seen any of the Star Wars movies... 

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  • Joe Au
    OP
    Investor · Draper, UT · Member since 2016 · 120 posts · 57 votes
    9y

    Yes, I didn't get a chance to shake your hand. I did chat with Jeff a little bit though. I will probably call you sometime this week.

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