All Forum Posts by: Keong Kam

@Sandeep S. Awesome. Thanks for the note man. Make sense. I have same question as Sagi on more details of portfolio loan and which bank you work with.

@Sagi Kumar With Sandeeps financing model, his example deal would cash flow with ~7% ROI based on my quick calculation using 50% loss, which would include PM. If one is happy with 7%-10% ROI, have enough cashflow already to be financially independent, and there is likely a big upside from owning in bay area, i.e. huge appreciation waiting at the end, using PM and being a bit less hands on makes sense.

Sandeep S. Wow OK. Is that commercial loan? With such rate and interest only term it makes sense. If you have 35% down that’s a lot of capital tied up. How does it work number-wise if you don’t mind me asking? What’s your c-c ROI typically? Do you sell after a few years and exchange? Or Refi and pull equity out as from appreciation? Your financing strategy is really interesting!

@Jennifer Tsui

Are you using DST yourself? Does it provide asset protection like LLC? And you can avoid CA franchise tax?

If true, I am definitely interested. I will look into it. Thanks-

@Sandeep S.

On the MLS posting you linked - 350K purchase (with 15K discount from list price), at market rent of $2300, how does this cash flow? It doesn't right? Maybe barely breaking even if vacancy is very low and self managed?

I understand the principal paydown and appreciation play, but wanted to confirm that I am not crazy to think this property will NOT cash flow. Your investment objective is to minimize bleeding or even very small cash flow for appreciation, correct?

I have a rental condo in San Jose myself and basically the same situation. Barely positive cash flow, but appreciated like crazy... I am also investing in Kansas City for cash flow play. 

@Gary Mac, @Aristotle Kumpis

Thanks for all good suggestions. I am certainly consulting lawyers on this topic. I will update the outcome on the post.

Hello @Ali Boone! Read many of your blogs including that one. The blog and the discussions are totally great. 

CPA clearly stated there is no real tax benefit in having an LLC and is for asset protection, I know that. I see so many conflicting and different opinions online and I am trying to get to the bottom of this through talking to expert in person and also online researching. Your blog definitely is on my reference list.

I already have umbrella insurance policy and I understand that is definitely one way to protect assets, but as many says LLC and insurances can work together, not one or the other, to protect you. I guess I really need to weigh the pros/cons and cost/benefits to make the best decision here.

I don’t know how much you are offering for the property but you also have to consider how many months of $850 rent the old lady can pay off of the proceeds from selling the place, especially if she owns it out right, before you feel ‘bad’ for her. Gotta be at least 5-10 years????

Hi Matt- I was told that even if LLC is established in other states if I, CA resident, take income from the LLC CA finds out and they still consider I am ‘doing business’ in CA and they will fine you if you haven’t registered in CA let alone that $800 franchise tax... sounds ridiculous,,,,

@P.J. Bremner

Thanks for the reply. I kind of had similar thoughts after researching...

Definitely sucks when the cost of maintaining entity cuts into your bottom line on merely a couple of properties owned... especially with the additional penalty of being a CA resident...

I think there may be some cost of entity and LLC protection that becomes less and less significant as you build up larger portfolio, but I was also told by my CPA that if I put each property into separate LLC, that means $800 CA franchise tax on every single one of them,,,, which does not really become less significant with more properties...

I read in many books especially Loopholes of Real Estate by Garret Sutton, highly suggesting to have all properties in LLCs as second line of defense after insurance policy. 

I will keep everyone posted after I have consultation with different experts.

Hello! A question for fellow BP investors!

I am a CA resident and trying to create an LLC to protect my assets in Missouri.

My CPA says I need to create a CA LLC and then register in MO, then transfer MO properties into the LLC.

So,  basically:

1. To create an LLC in CA, there is some fee for this.

2. To register in MO as foreign LLC operating in state, there is fee for this

3. Then there is annual fee to maintain CA LLC and probably also to foreign LLC registration in MO?

4. CA LLC has min $800 franchise tax?

5. My CPA also says CA state taxes on my income from MO LLC for the portion of the difference between MO and CA state tax.

????????????

Seems like cost could quickly mount up!

How are other CA investors with OOS properties structuring the entities? 

I am searching around for real estate/tax attorneys to consult on this, but would really appreciate if someone can share what's working for them.

Thanks-