All Forum Posts by: Mike S.

I have found some good information in the following three books. As mentioned before, they are not current on all strategies. However they will give you a good start what to look for and you can improve on them by staying current with blogs and CPA advice.

Tax-Wise Business Ownership by Toby Mathis, Esq.

Rich Dad's Tax Guide by Robert Kiyosaki

The Book On Tax Strategies for the Savvy Real Estate Investor by Amanda Han and Matthew MacFarland

I would also suggest the Tax Wise workshop from Anderson Advisors (don't pay the full advertised retail price for it as they often have deeply discount offers)

Originally posted by @Jennifer Gligoric:

The reason the Due on Sale is not triggered when you transfer it into a trust is that you are still the beneficial owner of the property through the trust as a trustee.   In the case of anonymity there is a Nominee Trustee on the face of the deed, but it still never triggers.   

Hope this helps :)

No exactly. You should be the initial beneficiary of the trust. The trustee does not matter.

The Garn St Germain Act applies to “an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.”

Because you are still the initial beneficiary, this protection from the Act will void any due on sale clause.

The assignment of beneficial interest to your LLC will be a private document that is not recorded. That what will put your LLC in play.

If at any time your lender wants to have proof that you are still the beneficiary, you can reassign the beneficiary to yourself in just the time it takes to print the form that you will sign yourself. Once satisfied, you can reassign the beneficiary to your LLC again in a minute.

The beauty of the Land Trust is that a change of beneficial interest is a private transaction with yourself that is not recorded anywhere. You may be want to keep one notarized in case later on you would need to prove it to a court.

Also, in some state you may have to report to your property appraiser when the ultimate beneficial ownership of the property changes more than 50% so they could bump up the assessed value. But if you are also the beneficial owner of the LLC, the assignment of beneficial interest of the Land Trust from yourself to the LLC is not a change of ultimate beneficial ownership of the property, so no recording with the county is needed also (except for the initial [special] warranty deed transfer to the Land Trust).

Originally posted by @Ryan Green:

double taxation are still a factor

It is only a factor if you are taking money out of the C-Corp. If you keep your profits low and not taking money out of the C-Corp the tax factor is irrelevant. Most of the income is rental based and transferred to the LLCs (with a 1099-MISC) and not subject to the C-Corp taxation. The only income of the C-Corp is the management contract that you can make as low or as high as you want (within justifiable reason).

If you want to get a W2, you will have taxes anyway you look at it. 

It is a great concept, asset protection wise, to separate the entities holding properties from the entities operating.
In my case all my properties are held in local single member LLCs that are all owned by a WY holding LLC (to get the anonymity and charging order protection).
In addition I do have a management C Corp that is under contract by all my LLCs to manage the properties.
This C Corp is the public face of the operation, signs lease, collects rents, pays all repairs, taxes and utilities. Quarterly, the C Corp pays the properties' owner (the LLCs) the excess profit.
The C Corp give me fringe benefits like wellness plan that reimburses all my out of pocket medical expenses, vehicle mileage use, etc...
I could also use that C Corp to get W2 income and contribute to a Qualified Retirement Plan or I could just choose to lower the management fee to just balance the expenses and make a minimum profit to lower taxes.

In your situation you are looking at a partnership. Will your partner be involved in the day to day operations, or will he only be just an investment partner? In the latter, you would probably have him only involved in the property LLC, while you keep full ownership of the C Corp. It all depends on your specific situation and future goals. As @John Warren suggested, consult with a real estate, asset protection oriented and tax savvy attorney.

You can transfer the title to a land trust where you would be the initial beneficiary. The Garn St Germain Act would protect you against a due on sale clause. Then you can quietly change the beneficial ownership to your LLC.

I would on the opposite buy it for a higher price. They should be able to get 121 exclusion to up to 500k. So I would buy it for 700k. You can then start the depreciation higher and you would later on get less capital gain when you sell. Also, have your parents sell it under installment so you will pay a little bit every year. Your parents can also gift you each year some money up to the tax free limit. There are a lot of way that you can mix and match all these strategies to make it work for your specific situation.

@Robert Carlson

I am having one bank account per LLC however I am collecting all rents and paying all expenses through a separate management C Corp that is under contract with all my LLCs

Only quarterly I am transferring some of the profit from the management Corp to each LLC then to the holding WY LLC as distribution.

@Anurag Velchala

That may answers some of your questions:

https://m.youtube.com/watch?v=aFvf66HHIYA

When I read a statement like that, I see a lot of red flags

To transfer your properties into your LLC you have two options:

If you own them free and clear, just do a warranty deed to your LLC (or a new LLC to separate the liability, don't put all of them inside the same one as an attack to one property exposes all the others held in the same LLC).

If you have a mortgage, check your lender policy regarding transferring the title to an LLC (do not ask them!). Some loan will authorize the transfer if you own 100% of the LLC, some will trigger the due on sale clause. To avoid any problem, just transfer the property to a Land Trust where you are the initial beneficiary. Then assign the beneficial interest to your LLC. Another side benefit of the Land Trust in Florida (and only in FL) is that it adds some liability protection too. For that reason, and also for the anonymity that the Land Trust gives, I would do it even if I owned the property without mortgage.

In addition, get a good liability policy for your LLCs with you as additional insured. On top of that you can add a personal umbrella policy.