Tax Question - Passive Real Estate Investment Income

[Frederick Hawkins]

Hey BP,

Looking at starting an LLC to manage future investment properties. Anyone have experience operating an LLC and not having to pay self-employment taxes? Here's my understanding of the IRS code on this question:

The self-employment tax (15.3%) does not apply to passive income that LLC owners earn from rental activities, unless you are a real estate professional, even if you materially participated in the property.

Thanks in advance.