All Forum Posts by: Justin H.

@Toni Conway I'm in CA so that what I know best, but my understanding is each property would need to have an LLC setup in the state where it is located. A CA LLC should not be directly holding a out of state property. If the LLC isn't properly registered it can lead to all types of problems, like if you do actually get sued. I've heard of issues when you try to evict and the judge or tenant (or their counsel) identifies the LLC as not a true legal entity. The eviction could get tossed.

You can have a subsidiary LLC of the parent LLC hold property in other states, but it definitely gets tricky. One problem with subsidiaries is that it potential leaves open a path back to the parent LLC in a suit. Not sure on your business structure, but some states also don’t offer maximum protections for single member LLCs either. I’m unfamiliar with series LLC so I can’t help there.

As for the number of properties per LLC, that mainly depends on how many you are willing to risk. In CA, property is so expensive that one per LLC is best, despite the $800 franchise tax per year. Many people have 10+ properties in CA with no LLC and just umbrella insurance. Sometimes insurance companies will find ways in the fine print to justify not paying out for all claims leaving you vulnerable, especially when there is high dollars amounts involved.

It's a matter of your risk tolerance and ability to navigate the complexities of multiple LLC without driving yourself or your accountant crazy. Also, much depends on who you are and what you do that could make you a target. Attorneys are trained to do asset searches to identify deep pockets prior to filing a suit.

One benefit of the single LLC per property is that when you go to sell and need to show the buyer proof of rental income and expenses, it is easy and not combined with other properties. Same goes for a lender who will want to see bank accounts and tax returns. Plus having one property per LLC means each has their own bank account and tenants/vendors only focus on that one. Lots of other benefits, but it comes at extra costs and energy.

Disclaimer: I’m not an attorney or accountant. Please consult the appropriate professionals.

@Account Closed Seeing as he didn’t even properly qualify you as an agent and then gave you the access code to the house I would say he’s either a newbie or very unorganized. I suspect the contract error is just more of the same. Probably an honest, but dangerous mistake. If it’s a good deal I would proceed with asking him to correct it.

Since you caught the error I’d also say continue to skip the buyer agent. You never know but he might screw up again, maybe next time in your favor. Just triple check everything and you should be fine. 

@Stephen Dillard I am impressed you replied to the callout from a 9 year old post. Reading old threads on BP is an incredible asset. Great to hear you’re still wholesaling! Merry Christmas 

Sounds like your father doesn’t need to be cashed out, but does he want the higher return (partner with you to spilt equity) or simpler route of letting you take over payments (subject to)? Sub to are great and since you know the seller…seems very reasonable this could work.

You’ll still need the family money to rehab the place. Once you’ve got it fixed, rented, and stabilized, then go get long term financing. You can cash your dad out then and you’ll have your rental

I agree with the others here: get a real contract, go through escrow, do it all correctly and professionally. Then you have the best odds to make it a win-win for everyone.

@Joe Black I moved from Eureka a few years ago, but visit every month or two so my info is relatively current.  I see Eureka in a bit of a stall over the last 20 years - maybe it has always been like that.  There are improvements in some parts of town while others continue to decline.  Like many cities, homelessness and poverty are omnipresent.  It just seems to be in your face a bit more in Eureka because of Hwy 101 running through downtown and the lack of facilities and resources to assist people,

Overall I would say Eureka keeps chugging along without any great economic opportunities in the near future. Tourism still appears the leading economic driver which will help support short-term rentals.  The best part about investing there is the lack of developable land and municipal utilities to support a large increase in rental supply. Plus the redwoods near the edges of town (Cutten and Myrtletown) are simply amazing.

Eureka and Arcata are almost two separate worlds.  Arcata is dominated by the University and a more affluent population typically while Eureka, the county seat, is a more diverse economy yet suffering from crime and squalor.  Arcata is more geared towards short-term rentals, but parts of Eureka could also support short-term rentals.  The whole county has a lack of housing, mainly due to geographical constraints along with limited public utilities in many parts. The involvement of the coastal commission in developments near the ocean has not helped.  There is also a significant absorption of housing by persons using rentals for cannabis grows thereby limiting available units and driving rental prices upward.  

I like the Fortuna area for long-term rentals as they are more pro-landlord and have an established base of renters.  Eureka has sections of class C minus properties, with spots of Class B mixed in.  Arcata is going to be far more expensive but is a better location overall.

@Account Closed Thanks for the reply. I really like your problem-solving. The development side can be very challenging if you are starting from scratch (maybe a rezone or conditional use permit) vs rebuilding an existing park. But even that is not easy.  I appreciate the offer to chat and I might take you up on it someday soon.

@Jonathon Nila It should only increase the value. However, depending on the location it can make parking more difficult. I did find it surprising that the ADU law allowed the conversion (I think this would be a JADU) without regard to replacing the lost parking. The legislature clearly valued the infill potential more than the potential impact on neighbors.

@Account Closed I have heard of the THP idea.  Sounds great in a gentrified area.  Are you replacing existing mobile/manufactured houses or filling empty lots?  Or is this a new development?  I think a lot of the municipal and neighbor issues with MHPs can be reduced with the tiny home approach.

The biggest issue I can think of is how expensive the tiny homes are listed for sale.  Of course, that's a retail price and maybe at scale, the cost could be further reduced to be competitive with new manufactured homes.

Have you talked with lenders to see if the stabilized community could be loanable? Are there financing options for new tiny homes? Are you planning to sell the homes or keep them park owned?

Sorry for all the questions, but I have been thinking a lot about this idea for an age-restricted baby boomer community or a younger demographic alternative to cramped apartments. Thanks

@Elijah Skinner You will need to have the LLC set-up in the state you buy the property in. I would wait to file the LLC till you have completed enough due diligence you feel sure the sale will go through. The only catch with that is some state's lead time to complete the filing could be longer than the remaining time under contract. Also, if you still live in CA then Cali will want you to pay the $800 franchise tax even if the LLC is out of state. I think there is a chance CA wouldn't know any better if you kept the LLC as a disregarded entity. A CPA, EA or attorney would know best.