Tax Implications for Out of State Investors

[Rory McGonigle]

What are your tax implications if you set up a LLC in your home state, but primarily buy RE in other states? Specifically for buy and hold REI. Would you owe any taxes to the state where your property is in? Or simply to your home state where your LLC is set up? Or would you recommend setting up the LLC in the state where a majority of your REIs are?

[Christopher Richardson]

Rory,

I have a few close friends who own properties in many states. I could connect you with at least one of them so you can here what states they own properties in and get more details. They all own a Wyoming/Nevada Corporation or LLC and use that as the umbrella LLC. Then that entity is the owner of the LLC in the other state in which the property resides in. Outside of revenue, there are two important factors that you need to consider when you own/control many properties; asset protection and strategic tax planning. Don't take what your CPA says as gold and also don't take what a Lawyer says as gold, combine both and see what makes the most sense for your goals.

I've have seen some more complicated more expensive methods. An offshore trust controlled by a person, who has a domestic entity, that is owned 98% by a limited partnership, and 2% controlled by a general partnership which is the offshore trust. Most of the persons local funds are invested into cash value in whole life policies, so it's liquid for purchases and is protected from creditors in most states. I hope this helps you out!

Always with my best,

Chris