Real Estate Taxes for Out-of-State Properties

What is the best entity to use when investing in out-of-state
real estate, and what are the different tax implications?

I have noticed that the taxes associated with different entities
will differ. Therefore, you want to research what entity will meet
your tax strategy best. For example, there are franchise tax fees
associated with a LLC and Corporation. Here in California, it is
$800 per year minimum. Therefore, I would need to calculate that
into my property cash flow analysis if I were to use a California
corporation to buy an out-of-state property. I would not need to
do that if I bought it as an individual. On the other hand, I could
lower that expense by incorporating in the state the property
was located, etc.

In addition, I have noticed that different cities have different
taxes associated with property ownership. I have been in
situations where there were property user taxes that were not
included in the Property Tax. I have an additional one or two local
tax bills associated with property ownership in some cities. Make
sure to ask what are the different taxes associated with property
before purchasing. You will not be surprised when the City sends
you a bill stating that — your potion of the Table and Park Bench
Beautification Project is $84.35. Do your research before you buy.

Taxes I have paid associated with owning property differ greatly
depending on where it is. My job is to calculate that cost prior to
buying in that city. Can I make a profit is the bottom line. I have
not noticed any different in income taxes once I have made the
profit or loss. This is my personal experience.

For personal tax advice, you should consult a CPA or Tax Attorney.

Visit our Real Estate News and Information Website for the latest
Real Estate Investors News and Tips.

Or, visit our Real Estate Investor Forums
Discussion investor strategies and network with other investors.