It's not uncommon, and actually normal, for the operating entity to lease from the LLC that owns the building.

Just be mindful of the following things when it comes to California.California does not recognize Bonus DepreciationCalifornia does not recognize real estate professional status.Therefore, you can potentially reduce your Federal taxes but not your California taxes.

@Gene PanicciaManagement fees vary, but it's not uncommon for a PM to charge fees for managing tenant-paid utilities or coordinating repairs.

California does not recognize Real Estate Professional (REP) status, but you can still claim it on your federal taxes if you qualify.

Let’s say you have 12 lots and if everything went perfect in the exchange you would recognize your $30,000 profit per lot across the board.  

While with 1-4 units, refinancing to perm when vacant is not that uncommon at all.Cheers!

Quote from @Ashish Acharya: @Andrew Katz Since you're likely using the cash basis of accounting, income is recognized when you actually receive it.

This is very uncommon, though I see folks posting about HELOANs for investment property.  

And how will you recognize it?

Hey saw your other post on this earlier and wanted to repeat for others to see as well: It's great you are recognizing this.