All Forum Posts by: Franklin Marquette

Thanks Chris!

Thanks Gregory!

Hello all,

I am building a 2 story ADU complex in Los Feliz. The roof will be at 18 ft (height limit the city gave me). I am planning to have private roof access for each of the 2 townhome style units that will be in the complex. Will have artificial turf, plants, etc up there. There is a view of Griffith Observatory from that height so believe this will attract renters and, along with the luxury finishes, attract a luxury rental rate.

Anyways, from a build cost perspective it doesn't add much as a % of the total project (hence why its worth doing). HOWEVER, are there any legal / liability / insurance considerations here I should be aware of before I put a rooftop terrace 18 ft off the ground for tenants to use?

Thanks!

Franklin

Hey all,

Does anybody have experience with doing mid-term rentals on RSO properties in LA County? I have heard of certain investors doing it and finding success doing it but am wary given the restrictions on short term rentals (under a month) on RSO properties and generally how sensitive these rules are.

From what I understand, they are "hotel-like" bookings. So long as the stay is under 180 days and over 31 days it is technically allowed (although likely frowned upon by the RSO) and exempt from the RSO. In addition, there are no requirements to report rent levels.

Platforms to post on include AirBnb or Furnished Finder. Although Furnished Finder is just a marketplace and does not offer insurance options like AirBnb does.

This is just something I heard about the other day. It sounds too good to be true so just want to see if any other forum members have experience with it and know where I can read more and find more explicit information / rules around it.

Thanks!

Know this has been asked before and seems like for wood-type floor LVL is preferred. I have a slight variation on the question:

For context, building some 2 bed 2 bath Spanish modern style ADUs at my property in Los Feliz, Los Angeles, CA. They are intended to be luxury ~$4K/mo units.

Given they are "luxury" units do you think we will be able to get away with LVL? I would prefer to from a durability / cost standpoint. OR do we need to go up a level to engineered wood?

IF we do need to go to engineered wood, is there a specific type folks recommend? Favorite brand?

Long shot here but does anyone have great brands or stores they suggest in the Los Angeles area?

Appreciate any input / advice the forum has.

Thanks!

Hey! I recently went through a very similar decision process. I ended up going with a brand called PlastPro. For a 6 ft 8 in door, unfinished, 5 1/4 in jamb size, it was $2,087 per exterior door pre-tax. From what I found, for the quality, this was a good price.

I am on the West Coast so not sure on availability in MA.

Hope this helps!

I currently own 1 property as tenants in common with 5 other owners. I own the majority (~54%). We only have 1 tenant now.

We are doing a renovation of the existing duplex and building an ADU complex, Once finished, we will have around ~5,000 sq ft of living space across 2 2 bed 2 bath ~1,000 sq ft ADUs, 1 ~2,000 sq ft 3 bed 3.5 bath unit in the existing duplex, and 1 ~1,000 sq ft 2 bed 1 bath unit in the existing duplex.

This will be a 4 unit (s 4 tenant groups) property but units will likely be split so that is not equivalent to only 4 individuals. There will be a total of 9 bedrooms and 8.5 bathrooms.

Given the size of this property once completed and the amount of individuals potentially residing there, AND given the multiple ownership dynamic, does it make sense to have this in an LLC once it is completed or is that overkill given we only have the one property?

I am only asking from a legal perspective. There are increased costs and complexities with an LLC so wondering if it is worth it even at this size (only 1 property) from a legal perspective.

Thanks!

The Backstory:

1. I am the majority owner of a property with multiple other owners in Los Angeles.
2. We are tenants in common on the deed.
3. The property is a duplex. I live in one unit, we rent out the other.
4. Property is classified as my primary residence and is partially funded by a primary residence loan.
5. We are building a new ADU complex on the property and doing a renovation of the existing duplex.

Situation Summary:

1. A lot of $ need to be spent on the renovation and certain owners (i.e., me) plan to cover a disproportionate amount of the costs than their pro rata share would imply (based on the latest deed recorded with the county). This is because certain owners do not have more to contribute and others do.
2. An additional friend of mine well versed in finance would like to join this project.
3. Our attorney has created a Tenants in Common ("TIC") agreement for us where we can memorialize a form of partnership agreement.
1. We can notate different interests / owners on this TIC and could record a memorandum of agreement with the county such that any sale would be subject to the TIC and would require the deed to be updated to the latest ownership % and owners as notated in the TIC upon a sale.
2. This is fine if we choose to sell after the renovation without ever having transferred into an LLC or other ownership vehicle given we would need to pay capital gains tax anyways.
4. HOWEVER if we choose to hold this property long term (5+ years), we will likely seek to transfer into an LLC (especially since we do not plan on this being our only property, just our first).
1. IF we transfer into an LLC once the renovation is finished and update the LLC to the latest owners and ownership interests per the TIC, this will trigger reassessment at the renovated value of the house with a ~2,000 sq ft ADU complex added (not good).
2. While we would be OK on cap gains tax, this would create a recurring tax expense increase which would deteriorate a long term investment in this property.
3. I am ignoring the difference between taxation on income in an LLC vs a TIC situation, as well as the documentary transfer tax (DTT).
5. We could transfer into an LLC today BEFORE the renovation starts BUT would need to pay to refinance our fairly low interest rate loan which is not ideal (we have a primary residence loan that restricts transfer to LLC's).
1. ALSO even if we did this and got reassessed TODAY (not a huge deal because property value hasn't changed much), I believe that if (for example) 6 months later had owners invest again in such a way that ownership changed again and required an LLC ownership update, it may be classified as a step transaction and still trigger reassessment.

The Potential Solution:

1. Forecast full capital to whatever we expect the project completion date to be
2. Net out any amounts expected to be financed (i.e., we expect to pull down a 2nd mortgage once the ADU complex is complete to fund the renovation of the existing duplex).
3. Have each owner legally commit via contract to an agreed upon % of the net capital need. These can be paid in (for example) quarterly installments with full amount due within (for example) 2 years
4. Record a new deed with updated ownership % reflecting these additional capital commitments, as if they were contributed today.
1. Our lender is OK with updating the ownership % among existing owners on the deed and is OK with adding an additional individual investor.
5. The deed would then reflect a FUNDED state of ownership which should not change as we progress with the project.
6. Therefore, whether we transfer into an LLC or not, the LLC ownership will match the latest deed and an assessment will not be triggered (saving thousands in additional property taxes).
7. The only cost today would be the DTT and whatever the county re-assesses the property to this time around (but again we haven't done anything to it so this should be de-minimis).

Some Key Questions:

What are folk's thoughts / comments on the above proposed solution? Does anybody know of a better solution?

Does an LLC allow you to change ownership between LLC owners and avoid property tax re-assessment OR will reassessment always occur whenever ownership changes (whether by shifting % across existing owners or bringing in a new owner)? Is there any way to avoid property tax re-assessment upon ownership changes?

In our small scale situation (only 1 property) what are the tax benefits of an LLC? Not sure if they offset the costs of maintaining one at this scale looking only at tax benefits.

Thanks all!

That would be amazing if you could share a couple best SDIRA resources / books out there. I am intrigued and would love top learn more.

Thanks!

Thanks everyone for the incredibly helpful replies!