All Forum Posts by: Kelly Byrd

I've had good experiences with Aaron Rietsema at Hegg Realty, and Michael Martin at NAI. Aaron started out with just an email filter, but after a few rounds of feedback from us, dialed in what he sends us. We have made offers on several properties with both and purchased two multi-family. Micheal Martin ended up representing us in both of those purchases. 

PM me for contact details if you want them. 

Thanks for the reply. My main concern right now isn't being able to predict the rates from deal to deal or over several years, when I could shop around. Pre-offer, I use a guesstimate for yearly insurance. During due diligence, I  get quotes and in could back out of the deal if I somehow discovered all the insurance quotes came in high enough to make the deal not worth it. My concern is that it based on my limited experience, the insurers are regularly going to "change the numbers" on me right after I have closed on the property and written the insurer my first check. To be a bit of a Star Wars nerd for a second, it feels very much like "I am altering the deal. Pray I do not alter it further." 

Is this just how the commercial residential insurance works? If so, how do folks account for it? Or, am I the sucker at the table and I just need to work harder to find a better insurer or broker?

I'm new to REI, with just two smaller multi-family deals, a 12-unit and a 24-unit. In both cases, I went thru an insurance broker and the process went like this:

Quotes came back, we accepted one. After closing and after the policy is bound, within the first month or two, the insurance company did a loss control inspection and came back with items they wanted addressed or changes to the policy based on what they found.  The specifics were different each time. In the first case, they wanted repairs we planned to do in the Summer/Fall of this year. On the most recent one (the 24-plex), I got "required recommendations" that I don't think are reasonable for the area and type of building, AND the premium went up a bit based on them changing the construction type on one of the buildings. This happened with two different carriers.

What I'm wondering is how others deal with this. Right now, it feels like my expense for insurance isn't very predictable. There's a risk they're going to come in after closing and insist on repairs or upgrades, or leave me scrambling for another carrier (who may wonder why my last carrier dropped me?) or raising the premium by $100-$200 a year after the deal has closed.

To be clear, $100-$200/year on a 24-unit place isn't making the difference between positive cash flow or not, but I'd like my numbers to be predictable before I enter into a deal and present it to my partners. Should I just be saying: "here's the insurance quote. I've added  on $300/yr and $1000 in one-time capex as because that's may be what happens?"

Part of me wonders if I'm the sucker that the table and I just don't know it.  Is this just common in commercial multi-family?

Huh. So I live close to both Fremont (#1) and San Jose (#3). I wouldn't call either of those particularly "happy" and while either of those could easily have been my farm area for REI, I chose Sioux Falls to invest.

Originally posted by @Ryan Scott Isacksen:

I am not a legal expert, but I looked up the California LLC code.

Owning an LLC for out of state property looks like it is clearly a foreign LLC. Simply owning or being a member of an LLC is not considered doing business in the state.

Entering into contracts that must be accepted out of state, maintaining property, maintaining a bank account for a foreign LLC company are all clearly excluded in the code.

As it was explained to me, there is a difference between what the CA corporations code and what the CA Franchise Tax Board consider "doing business in California". The CA FTB takes a very broad view compared to other states. The FTB considers "actively engaging in any transaction for the purpose of financial or pecuniary gain or profit" (From R&TC 23101) to mean that if a member of an LLC that is managing the LLC (making decisions, talking to property managers, real estate agents, sellers, tenants, loan officers, etc) from inside CA. There was a court case in 2014 to exclude purely passive investors in LLCs like a private placement fund, but active management is still considered subject to the $800 franchise tax fee.

Originally posted by @Bo Kim:

Hey kelly

I am in the same predicament. I live in CA and have rentals in MO and IN. I was initially hoping to open 2 llcs one in each state...May I ask what you ended up doing?

Sure! I formed an LLC in South Dakota, where the property is.

Originally posted by @Sarah B.:

• I have just moved here to Sioux Falls and am preparing to purchase my first rental here.  (I have other properties elsewhere).  Are the meetings on the 3rd Sat of every month still occurring?  I would love to be involved.  

 
From my notes on the last one (I got teleconferenced in) the next meeting is Feb 17th. 9am. 

My approach to this has been:

• Get monthly income and expense numbers from the seller. 
• Verify income with copies of leases, if there is significant other income (laundry, etc) get verification of that. 
• Verify expenses with copies of utilities bills or invoices for big items. If these don't match your model, figure out why.
• Verify the net income with tax returns.

@Aaron Q.: You should to talk to a self-directed IRA specialist about how this works and the various details. BiggerPockets has a page introducing this topic, with a list of companies who can answer questions and set up the IRA for you:
https://www.biggerpockets.com/rei/self-directed-ir...

Originally posted by @Kaleb Carsten:

@kellybyrd I'll have to check. I post it to BP occasionally but I'm not the organizer

Thanks @Kaleb, looking forward to it.