All Forum Posts by: Mike S.

When you have a personal residence that you turn into a rental for more than 3 years, there is a strategy to sell your residence as an installment to an S-corp, claiming the full sale amount that year on your tax return and deducting the 121 exclusion. Your S-corp will have the property on the new full current price tax basis and start getting depreciation. When you sell later on, you will still have to pay the capital gain, but on the new tax basis and you will have already collected your 121 exclusion that would have been lost otherwise.

@John Mark Pollard

One is not exclusive from the other. I have both.

LLCs protect you from two types of liabilities: inside liability (something happened within the LLC/property and your risks are limited to the LLC capital); outside liability (you are personally sued for anything not related to your LLC and the plaintif is trying to take your LLC away from you as remedy)

All states have almost the same inside liability protection for LLC. However the outside liability varies greatly.

As explained before, you would need a nexus in the same state as the property to act in this state (either as respondent in a lawsuit, or even simply to file an eviction). This could be done with a local land trust, a local LLC or a foreign LLC foreign registered in that state. As explained before, the last one cost twice as much as you need to pay fee in two states.

For outside liability protection you will need one LLC in a good charging order protection state (I personally prefer WY but there are other good states too, especially if you go the series LLC route).

This holding LLC will be the main one holding all your other LLCs.

Now if you go series LLC, all the child LLCs will be in the same state and each property owned by a local land trust.

If you go with separate LLCs (the choice I have made in my case), then each individual child LLC will be in the state where the property is located. You can also choose to use an additional layer of land trust for some other additional benefit that I would not develop here.

@Nik S.

I am not familiar with your state, but in Florida, if more than 50% of the controlling ownership of the entity owning real estate change, you have to fill out a form to notify the county that will then reset the assessed value.

Also, I am not sure how your depreciation will work as for the IRS, I would believe that the LLC will continue the one already in progress on the original cost when the LLC initially acquired the property.

Last, you will also inherit the past liability of the LLC.

If all those are ok for you, then buy the LLC. Or you can either create a new LLC and buy the property into it. You can also use a land trust to gain better anonymity.

The good:

Buildings are build to last many, many decades and your investment will last.

Newer building have very good energy rating.

Loan interest rate are really, really, really low....

Quality of life is great.

Property taxes are not very expensive compared to the US (but income taxes are).

The bad:

transaction cost are very expensive (but often paid by the seller)

rental regulations are a nightmare for a landlord as they overprotect the tenant. Professional tenants can play the game to pay only one month of rent and stay there for more than six months for free before you can kick them out (its illegal to evict during winter months).

You will need a lot of inspections to be able to rent (not that expensive but will cut your cash flow expectation if you did not know about it).

I would definitely invest in France in a property that I would like to use when I retire, and getting some rent until then.

Now, would I invest just for investing? I may, but unless I can find a very attractive offer, I believe that I would find better deal in the US.

You can create an LLC and just reassign the beneficial ownership of the Land Trust to the LLC with a simple signed unrecorded written assignment. There is no need to dissolve the Land Trust. If you do, you will have to retitle the property, creating a lot of additional registration cost and insurance headache for no reason.

In fact in my case, all my properties are titled into Land Trusts, each of them having an LLC as beneficiary. The Land Trust add an anonymity layer. In Florida it also add some additional liability protection.

Ask your lender. Some won't allow to buy the property under the LLC name.

@Will Tanzie

Please search this forum as there are hundreds of posts on this subject already.

Nobody can answer your question. Only you can decide if the cost of using entities for asset protection is worth for you. You will have to educate yourself on the pro and con of LLC to fully make a proper assessment.

In my specific situation I have made the choice of using LLCs. Some may have not.

@Ethan Spielvogel

As a general rule, you would want an LLC in the state where the property is located to be able to make any legal action in court (eviction for instance).

However as some states have week asset protection statute (the charging order is not the sole remedy), you would then need to have this local LLC owned by another LLC in a strong state like WY.

Now because you are located in CA, you are subject to the CA regulation that will force you to pay an expensive local franchise tax on your out of state LLC. There are some ways to get around it by using a DST or some other creative entities setups.

At the end of the day, it is always a question of how much are you willing to pay for the level of asset protection you seek. Only you can decide what will make you sleep better.

@Joshua Anson

How much gain on the property value since you bought it?

If it’s substantial I would suggest to sell it at full current value as an installment to an S Corp to get the 121 exclusion. You can then start to depreciate it and you will lock in your exemption.

https://m.youtube.com/watch?v=MWFzAE7wu3k