Another newbie from Dallas, TX!

[Daniel E.]

Hello everybody! Glad to become a part of this awesome community!

My name is Daniel. I'm currently a graduate student working on getting my masters in Taxation. I am currently working as a staff accountant. I have one daughter and another little one on HIS way. Talk about being busy!

Although I am in accounting, my dream has always been in working in real estate. I've grown up around real estate industry thanks to my father and other family members being in the real estate business. So I am pretty familiar with how things work, but I am no expert!

I feel as if I'm ready to take the first in real estate investing. But first, I need some advice.

My father owns some land in which he said he will pass to me. What would be the best way to use the land for real estate investing? I've thought about selling it and using the money for my first investment. If I were to go that route, what would be the best way for my father to transfer the land to my name? Is it a complicated process? I'm not sure who I should go to about this, so I figured someone on BP might have some help. 

Thank you! 

[Dave Foster]

Hi Daniel,

This needs to be a semester project for you!  Everyone above has done a nice job of reiterating the same idea - best, highest, and most profitable use is asset dependent.  So that is your first assignment.  A return analysis on agricultural vs res or commercial development vs ???

Whats even more important and right up your alley is an analysis on maximizing profit and the first thing that comes to mind is minimizing taxes.  Regardless of how long your father has had it there is probably some gain above his basis.  In any transfer to you (other than the one time and gift exclusions) it will trigger a recognition of gain.  However if he retains title using you as his asset manager and the tool of the 1031 exchange to shape the portfolio, then upon his death you will get the "step up" in basis and whatever tax he built up on it during his lifetime will be gone.  Then you get to start over and apply the same actions until one day you too pass along in your estate property with a very low basis to your heirs.

Talk to your accountant (and no not just the one in the mirror :) ) to get confirmation of what you want to do. My initial thought is to go into business with your father. You manage and develop the real estate side and he stands by you with ownership of the asset or put it into an LLC of which you are both members. Have the property come to you in probate. I do JV real estate with my sons and it is fun. We work together, build together and through 1031 and good estate planning I benefit now and they will benefit in the next generation.

Good luck,

Dave