Generational ownership of investment real estate - how do you approach differently?
Hey Reddit fam!  I have accumulated an investment real estate portfolio of 240 units - mostly multifamily in Pennsylvania.  

I would like some help thinking through setting this up to be a long term/perpetual family holding which will sustain me through retirement and then provide a base for my children. Call it 25+ years of planned ownership. Most people sell after 5-7 years - what considerations are different about planning to hold for much longer?

My question is this….  Aside from the obvious (don’t sell, manage leverage, invest in the longevity of the assets), what other considerations or approaches should I think through for very long term holding of real estate?  For example, certain tax benefits start to decline as depreciation is used up, maintaining reserves for refreshing assets every 10+ years. 

Has anyone thought through a specific approach to holding investment properties for more than 25 years?

Thanks for your feedback!
[{"id": "i5e2x5l", "text": "Creating a portfolio website is one of the best way to showcase your work or your skills, for me it was really helpful and its a great first impression for employers\n\n  \nEDIT: Someone sent me a PM asking how i created my own portfolio website, i actually [hired a professional on fiverr](https://freelinked.xyz/web) to do create one for me", "replies": [], "depth": 1}, {"id": "i5e3xtf", "text": "Treat the property and tenants well and you will be treated well in return. \n\nI\u2019ve observed that those who sell after 5-7 years are doing so to either monetize their promote interest and/or to avoid spending on required capex. Owners who do not have investors tend to look at things differently from the get go.", "replies": [], "depth": 1}, {"id": "i5e4on8", "text": "If you plan to hold that long invest in a good estate attorney, real estate attorney and accountant. Rely on their advice.", "replies": [], "depth": 1}, {"id": "i5ea2r1", "text": "Many experts would advise having a separate LLC on each large property. With an LLC, one lawsuit judgement or other large loss on one property doesn\u2019t sink the entire portfolio.", "replies": [{"id": "i5eap0g", "text": "Yes, agreed. Each property is already in a separate LLC.", "replies": [{"id": "i5ebfk6", "text": "My family has used trusts for commercial real estate holdings (not ideal for limiting risk on legal judgments), to eventually pass down assets to heirs.  With LLC\u2019s how do you pass down these assets to heirs?", "replies": [{"id": "i5ec0eo", "text": "The trust owns all the LLCs collectively with an umbrella liability policy. That\u2019s how my family has things set up", "replies": [{"id": "i5pxn22", "text": "Same.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i5elr3q", "text": "The primary question I see here is who and how will the properties be managed? If you have built this portfolio and have some involvement in the management, at some point you will not want/be able to do so. If you're kids have zero interest or ability to handle the portfolio, it will not work. \n\nI see this all the time where the parents wish a child would take the reins, however, they couldn't be bothered or focus their time elsewhere. As a result, the eventual old timer sells and takes the tax hit or somehow holds on until death and the kids dump out. Dealing with a client now (I'm a comm real estate broker) and he has finally accepted that he can't manage the property any more. He's selling.... reluctantly because he loves the property and understands he will be paying about a third of the proceeds in taxes and fees.", "replies": [{"id": "i5esk50", "text": "Yes, these are good points. I still have a couple of decades to be hands-on but my kids prob won\u2019t want to join the business. I\u2019m hoping to build my management team to handle the portfolio and make distributions to my heirs even if they don\u2019t work in the business.", "replies": [], "depth": 2}], "depth": 1}, {"id": "i5ev73d", "text": "All the others are great suggestions but something I have seen families that are long term owners make mistakes on are not saving up for capital expenditures. \n\nRoofs only 5-10 years old is great. Assuming Asphalt shingle these can break down in the next 10 years. Roofing costs are expensive and even more so when you have to replace decking. Cash out refi is an option but depending on how quickly you may need to replace roofs If they develop leaks it may not be immediately available.\n\nSame situation with parking lots and windows (if they haven't been replaced). And this is assuming it hasn't already had new debt placed on it recently at higher LTVs.\n\nHolding it that long will mean the finishes may be sometime tired and outdated for the time period. Planning on selling with lower than market rents because finishes are old means you may leave money on the table. \n\nMost of the time people rarely have to plan for ALL of these being replaced if holding less than 10 years. But holding that long means you need to have a better idea of where large capital expenditures will come from, whether refinancing (and keeping in mind debt may not always be this readily available) or holding larger amounts of reserves to ensure you can make the improvements without coming out of pocket or refi.", "replies": [], "depth": 1}, {"id": "i5f1d9v", "text": "You might consider a Charitable Remainder Trust (CRT).  It\u2019s with a community foundation and offers a lot of tax benefits.  You essentially give your assets to the foundation and receive the value back without capital gains as a type of tax free annuity over time. The funds are held by the foundation and managed (invested).  The foundation sells the property. So you get the appreciated value or full market value.  The tax benefit is taken in the year the assets are transferred.  \n\nYou can designate beneficiaries too. So the annuity continues until you and your beneficiaries pass. Any remaining funds are donated to charities (of your choosing).  \n\nIt could be an interesting way to ensure longevity without the downside risk of real estate.  It can be combined with other estate strategies as well to manage the assets and their distribution in a tax/value efficient manner.", "replies": [{"id": "i5f2392", "text": "Thanks for the suggestion!", "replies": [], "depth": 2}], "depth": 1}, {"id": "i5f7fdi", "text": "How many individual properties do you have?", "replies": [{"id": "i5f7w2i", "text": "10", "replies": [{"id": "i5f9v39", "text": "Would you consider selling a few of the older properties to trade into newer less management intensive properties?", "replies": [{"id": "i5fev39", "text": "I have already traded out of some of the properties I didn\u2019t think were solid long term locations.  But I like what I have now. All are irreplaceable locations. I would sell my two smallest properties but there no good reason to do that.", "replies": [], "depth": 4}], "depth": 3}, {"id": "i5flep4", "text": "Setup a family trust specifically for holding the portfolio and make the trust the owner of the LLCs (don\u2019t transfer titles to the trust). \n\nAs long as you\u2019re alive and well, you can manage the properties how you see fit. If you die or become incapacitated, you successor trustee steps in (normally your spouse followed by children oldest to youngest). \n\nIn the trust, spell out how to manage the portfolio to a T (3rd party management, basic capex reserve plan, if/when the properties can be sold, etc\u2026) - This is where you really need a good real estate/estate planning attorney because this can easily be 20-30 pages. If your children are young, consider a provision for the trust to pay for their education and/or escrowing the profits until they reach a particular age at which point they get free reign; or you can structure it as an income stream that is eventually passed to their children if you\u2019re thinking really long term. \n\nI\u2019m a debt broker, so I\u2019ll also throw in that you should consider long-term debt options. If you\u2019re a long term holder, just set it &amp; forget it. You can do a 35-year fixed rate, fully amortizing loan with FHA; and there are also a select group of banks and life companies that offer 25-year fully amortizing loans.", "replies": [{"id": "i5flm4n", "text": "Thanks, this is very helpful.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i5fedov", "text": "First of all congrats, building up a portfolio of 240 units is commendable regardless if they\u2019re in Souther California or Mississippi. \n\nA good piece of advice I received when I was starting out was to place your kid(s) into your holding LLC. I can\u2019t explain in detail, but this is a way to work around gift limits and avoid taxes when you pass on the assets. Since the kids are already in the LLC (at 10% ownership or whatever you see fit) they\u2019ll have a clear cut path to buy out your shares (defined in the operating agreement). There are other benefits but I couldn\u2019t explain them accurately. But my point is, you should look into this. Since you already own the assets, I think you\u2019d have to set up a new holding LLC and give them shares before any assets are placed in. Again, consult with an attorney because I did this prior to owning any CRE.", "replies": [], "depth": 1}]