What would you do or have you done for Out of state purchases?

Question

Hello BP,

looking to hear some advice on what others have done in this type of scenario.

i live in Indianapolis and buying my first 5 unit in Cincinnati OH (~2hrs away).

i need to put this in an LLC obviously, but not too sure on the approach. Should I open an LLC in OH to hold the property? ive read this helps in the event i need to file an eviction. or should i use an existing LLC created in Indiana to purchase which currently holding one property or open up an entirely new LLC in IN to purchase the property in the case of any lawsuits, only that llc is affected.

the next question is opening the LLC in OH how is that going to affect things come good ol tax time?

i know there are many ways people have done this but just not too sure on the best way or most commonly used.

Tanvir Sattar · Answer

@Henry Offiah I've always put the properties in LLC based on what state they are in. It sounds like @Lee Ripma has had success the other way. I'd just check on the taxes doing it each way.

Congrats on securing your first property! Are they occupied?

Lee Ripma · Answer

@Henry Offiah

My advice is stop thinking about all this. In the future you’ll hire someone to set it up correctly. Now is the time to take action. Buy something before the end of the year. Buy it in your personal name if you want RES financing. This is like people who say I can’t make money, I won’t know what to do with all of it! Good problem to have...

Henry Offiah · Answer

Thanks @Lee Ripma.Actually my goal this year was to add 2 more properties to my small portfolio. starting out last year i bought 2 rentals, and i wanted to get a 5+ unit this year or 2 sfr. i was able to buy and rehab 1 sfr in sept ending and got it rented mid oct and now closing on number 4 (the 5 unit). would love to get a 3 rd this year but will see.

Lee Ripma · Answer

@Henry Offiah

I have a spreadsheet with all the LLCs, EINs, due dates for various things. My bookkeeper helps and working on hiring a full time admin.

Don’t overthink it. Just go do some deals.

Lee Ripma · Answer

@Henry Offiah

So I’m not going to give you legal advice and talk to your attoney and accountant for your situation.

I personally invest in CA and MO. I have LLCs in MO, KS, WY, DE, and CA. CA requires me to pay an $800 a year tax to CA for each LLC since I do business in CA by living here. Each state has different laws for this. But I have props in MO with KS LLCs and MO LLCs and CA LLCs. A lot of investors use Wyoming and Delaware then register them in CA. I’ve never had a lender question my LLC state. In MO I have to register my LLCs that are non MO as a foreign entity doing business. Just a few thoughts and personal experiences that might help!

Henry Offiah · Answer

Update. I have closed on this 5unit building last week. excited to get my first commercial building. now looking for the next one.

Thanks to all for the advice and encouragement.

Melissa Oberti · Answer

@Henry Offiah congrats!!

Simon W. · Answer

Yes, you can have 1 parent entity owning all the other ones. Tax filing wouldn't be a nightmare if your accounting is clean and well-maintained, but that is something to consult with a CPA.

Some of my clients have 1 parent LLC and owning 10+ LLCs and it will just go through the Parents as consolidated financial statements to present to the auditors/CPAs when doing the tax returns.

But discuss with an attorney and CPA on structuring the LLC.

Cesar Ramirez-Fajardo · Answer

@Henry Offiah thank you! I’ll keep that in mind.

Henry Offiah · Answer

@Cesar Ramirez-Fajardo yes you certainly can. you can do a quit claim deed to change the ownership, keep in mind if you do have a mortgage on it, the lender does have the right to call it due.

What would you do or have you done for Out of state purchases?

What would you do or have you done for Out of state purchases?

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