Real Estate Partnerships & Portfolios

[Jasmine Slivka]

Hey everyone! I'm curious to hear from those who have a small real estate portfolio with someone you're not related to? (i.e not a husband/wife team). Wondering how you structured it, and if you have any advice for my business partner and I? We are interested in co-owning the properties (with bank loans) and also the operating company. Thanks! 

[Ashish Acharya]

@Jasmine Slivka , Assuming you both bring in the equal capital, you would create two LLCs with 50% interest for both of you. 

Properties: Creating LLC will be treated as a partnership for tax reason, and you will file a partnership return. If you are owning the properties proportional to your capital contribution, you can just be co-owners and not file a partnership return. you will report your share of income/expense in your personal return. You need to look into this depending on your longterm goals. There are some steps you need to get this easy treatment. Such as not execute the partnership agreement ( co-ownership agreement is fine).

Management: Same with this, but would be beneficial to get LLC and elect S-corp once you guys scale up. This move will save 15.3% self-employment taxes form your management company net -income after salary. S-corp will file its
return and report income and expense to you based on your ownership.