All Forum Posts by: Kelly Byrd

Just signed up, my wife (@Victoria Byrd) and I are new investors, under contract now on our first property, we should have closed on it by the time Summit happens. 

Thanks @David Faulkner for directly answering, I really appreciate it. So I'm not in the eight figures...yet ;-)  

But I'm doing a commercial loan anyway for this 12-unit property, so the loan isn't the issue. I intend on the umbrella insurance anyway, the quotes seem cheap for the amount of coverage. But, I just got an email from my home/auto insurance agent that they won't add a 12-unit to a personal umbrella policy.  Hmm, I guess I need to talk to a commercial insurance broker.

Ok, so CA investors with properties out-of-state, did you form your LLC in that state or CA, why did you choose one over the other?

I don't know how to answer the "how substantial is your net worth aside from these to be acquired assets?" in a public forum. It's enough that I'm concerned about it.  We have investments outside of real estate. We have our home. The property I'm acquiring is a 12-unit apartment building.

Agree about barbers and haircuts, that's why I'm asking here first. Re umbrella, I'm doing that regardless. 

A few years ago, I rented a place in Los Altos that would have been a horrible deal as a new buy-n-hold. But, if I remember correctly the owner had owned the place for 10-15 years so I think she was doing ok. At the current prices, I don't see how it works. 

I have heard of a few people in surrounding neighborhoods that will buy a place as a residence, have some life event show up and need to move away but know they still want to return to Silicon Valley so they'll rent it out just to lower the cost of keeping it, or they put significant cash down so their not financing that much. 

Anyone have some insight on any of my questions?

"California will consider an LLC formed in another state whose only asset is property in that other state as doing business in California, just because the owners live in California?"

@Jonathan Twombly: Yes, I am sure, my own research dug this up, my RE-focused CPA confirmed this. A few years ago, The California Franchise Tax Board decided on an expanded definition of "doing business in California". If I talk to my property manager about my property, or a banker, or whatever, I am doing business in California.

I assume you picked  Wyoming and Nevada as those are generally considered friendly places for forming an company, right?

But, don't you end up having to pay filing fees in WY or NV, plus register a foreign corporation in the state the property is in, and then also register in California? That's three places to do annual filings. Also, in many states, you have to have a registered agent with a local address in that state too. 

I think I have a simple enough situation that I won't require advice from a asset protection lawyer, I'm hoping some of you are in a similar situation and can pass on what you have done.

My wife and I live in California. We are under contract for our first investment deal, a multifamily in South Dakota. We have assets outside of this property that we would like to protect, so my plan is to form an LLC for this property and then get umbrella insurance on top of that. The property is over four units, so we're looking at a commercial loan regardless. The lender has no issue with an LLC holding the property.

I know California is going to consider us "doing business in California" and therefore subject to the $800 minimum franchise tax in California. It seems my options are to either form a South Dakota LLC and register it as a foreign company or form a California LLC and register it as foreign company in South Dakota.

My questions:

• The LLC operating agreement can be simple, my wife and I will be the only members. Can someone share a sample simple operating agreement for this "married couple holding a single property" LLC?
• What are the pros and cons of forming the LLC in CA vs where the property is? The typical advice for RE investors is to form in the state where the property is because it avoids the overhead of having to register a foreign corporation where you are doing business. But since we are CA residents, we have that overhead regardless.
• California is a community property state, South Dakota is not. If we form a South Dakota LLC, can we still treat it as a disregarded entity because we live in California?

Thanks in advance!

Is this for earnest money? I like to get the money to directly to escrow/title company, marked for the specific file that company has opened. Either wire transfer or dropping off a check.  If you want to be a bit more paranoid (like me), then find a number for the title company on your own and call them to verify the account info on your own.