My 2 neighbors in Southern California are considering building a larger apartment complex across our adjacent 7,000sqft lots. We purchased our properties decades ago and Prop 13 has kept our property taxes to less than 1/4 of what a new owner would have to pay if they bought our properties now.

The properties have duplexes and a 4-plex. The land is 90% of the current property value. The land is zoned for multifamily and based on my research, we can build a 5 story apartment complex. Rents and demand are extremely high in this area. The construction costs of the building would likely be paid off in 4-5 years.

I believe our lower property taxes possibly give us a competitive advantage redeveloping ourselves versus selling to an outside developer.

Here's my question/idea.

To keep the land portion of our property taxes at the artificially low rates could we retain ownership of our respective parcels while forming a separate LLC or partnership that would construct and own the building? We would each have part ownership in this LLC, which would pay us "rent" for the use of our parcels.

My hypothesis is this should allow us to keep our low property taxes on the land value - only incurring additional taxes on the value of the new improvements.

Is this legally feasible? Has anyone here done something like this before in California?