New Investor with Questions

[Jason Baker]

Greetings! My wife & I are new investors in South Florida, Martin County, we've been attending some local REI meetups here in our area & enjoying meeting many good people. We want to get in the game but want to do it right to avoid costly mistakes. My first question is which type of corporation should I form? We plan on buy & hold, wholesaling, and fix & flip. I am being gifted a rental house in California from my mother to help us on our new endeavor. The house is paid for, has the main house, 2/1, in front with a mother-in-law unit, 1/1, in back so two separate rentals that generate income. I want to hold this property as it brings in around $1300 monthly before any expenses. What is the best way to transfer ownership with the least amount of pain for my mom and for us as well. I believe this is a good opportunity to launch our careers investing so I don't want to mess it up. Should I form a land trust? LLC? What is the best and most advantageous path here? Thank you in advance for your time.

[Paul Allen]

Originally posted by @Jason Baker:

What is the best way to transfer ownership with the least amount of pain for my mom and for us as well.

Sorry to be morbid, but the best way is likely via the transfer of the estate upon death. If transferred with her estate you get a step up in basis to the FMV of the property on the date of death. If transferred as a gift while she is still alive your mother's basis in the property becomes your basis in the property - which can lead to higher taxes for you later if you decide to sell.

This is all based on my presumption that the property has increased in value since your mother acquired it, such that her basis is currently lower than the FMV of the property.

Talk to a tax professional and work the real numbers to see what the consequences of gifting will be.

Best of Luck on your REI adventure!