I swear, if another client comes to me and tells me they took a real estate class and spent $40,000, I will drive to the nearest hardware store, buy the client a tack hammer and tell them to bludgeon themselves (not to kill them, but to inflict proper brain damage to prevent future blunders).
Client comes to me after paying $40,000 for a “Rich Dad” real estate seminar and the brilliant advice was to create a C Corp that will act as the parent company to his LLC (DRE) that owns a residential rental property. When I asked what was the strategy behind this, his attorney told him it would provide him with anonymity. Thankfully, the client has only created the C Corp and did nothing else.
I’ve had two clients in two weeks tell me this advice was given to them. Form an LLC to hold title to rental real estate, then form a C Corp to act as the parent company, then put all the LLCs under the C Corp. What is going on? I clearly am missing something here. Would that not trigger gain? Transferring an asset with a liability into a C Corp? And then, what if you wanted to transfer the asset out of the C Corp?
Then the client tells me the C Corp would act as the Management Company. Well, news flash, he already engages a third party management company to operate the rental. Tack hammer time.
Can someone help me out here? Am I behind the times? Did I miss something? I’ve never ever heard of a sound real estate purchasing/investing plan involving a C Corp. Hep me buddies!