All Forum Posts by: Zeb Wallace

Hi folks,

I'm in the home stretch of picking up a (very) expensive California Fair Plan (CFP) policy to get fire coverage for a 4 Plex since State Farm has dropped me.

My questions is - CFP seems to classify 4 units or less as a "Dwelling" policy and 5 units or more as "Commercial", but they also seem to say that "Business owned" properties are Commercial. I have a single member LLC that owns my 4 plex. Do you think I should be going for Dwelling coverage or Commercial coverage?

Any guidance is appreciated!

 Very helpful - I'll look into that. Thanks again @Chris Seveney. 

Hi,

I can't directly answer this question for you, but I can say that there are firms such as https://riechersengineering.com/ that seem to do a large amount of business in this space.

I'm not affiliated with them and don't receive anything from them.  I reached out to them about trying to do a lot split myself, but my property needs to go the SB 684 route and they seem more specialized around SB 9.

Best of luck to you!

-Zeb

@Chris Seveney - I think there's a lot to be said for that approach, and it's great to hear from someone with so much experience like yourself.   

A couple follow up questions if you don't mind my asking:

- Where might you look for buyers who would be interested in this type of opportunity?  Are there particular platforms that cater to these types of deals?

- Will the entitlements likely limit what the potential buyer may be able to do (i.e., does it bind them to a particular layout / size of unit) in a way that might limit interest?  

- Any recommendations on how to make this as attractive as possible to a potential buyer?

Thanks again for any insights you care to share.

Hi folks,

I’m in the process of using California's SB 684 to split my multifamily-zoned lot in order to develop a new multistory with ~6+ new units (hopefully) on the new parcel.

Does anybody have any experience finding developers and/or capital to invest in developing small multifamily projects like this?

I intend to front the money for all the planning work and will “contribute” the land as sponsor equity, but would be looking for someone else to come in to potentially manage the development and bring the capital.

Alternatively, I’m considering whether it makes more sense to just sell it as a development opportunity once I have obtained planning approvals.

Curious what people think would be the best way to proceed.

I have a property in CA that I want to put into an LLC.

A lawyer advised me to register my LLC in Nevada and then complete the foreign entity process for the LLC to also be registered in California, where the property is. I understand that at a minimum, I HAVE to register in CA since that's where the property is, but the lawyer is indicating that NV's a friendlier environment for Landlords so I should register in NV and just "do business" in CA.

My questions are:  

Is there a material benefit to registering in NV and then also CA?  Or should I just do CA?  

Is the lawyer just being extra, extra careful...or are there typical scenarios where having it registered in NV will help for a property located in CA?  If so, what would be an example? 

I am no expert (hence posting here) but the bit that I have read seems to indicate that if the business is located in CA and operating in CA (as is the case since the property is in CA), the business is likely to fall under CA laws in the event of an issue.  So how does being registered in NV help?  

On the downside, registering in NV is more complexity and cost.  I'm trying to determine if it's worth it. 

Thanks in advance all!

-ZW

I prefer Multifamily to SFR. I'm a buy and hold investor and I hire management companies to manage my properties. If you're talking about MFR with 4 units or fewer, I believe you would typically find more bank flexibility for SFRs. But since I presume you're not going to live in the SFR, there may not be much, if any, difference in how the bank views the two (the bank will view both as non-owner occupied investment properties).

You may want to explore House Hacking (living in one unit and renting the others) to try and get the bank to give you owner occupied rates.  That’s how I started out. 

If you’re talking about a multi-family residence with five or more units, the bank will typically place more of an emphasis on the economic performance of the property, and less of an emphasis on you as a borrower. 

Hope this helps. 

Hi Rob. Can I get your best contact information please? Would love to talk to you more. 

Really appreciate all the great insight guys! So it sounds like the best course of action is to continue making periodic deposits to the LLC bank account to cover costs, but not to claim those payments as "rent".

Is there any reason why I wouldn't be able to make a monthly, recurring deposit to the LLC bank account that I would count as an owner's equity contribution (or some other classification if there's a better way to handle), rather than rent?

Best,

-Zeb

I live in one unit of a triplex which I own (i.e., House Hacking). Both this property, and another property that I own are in a single member LLC, of which I am the sole owner. Because I have been staying for "free" in the unit, the cash flow of the triplex (and the cash-flow of my LLC as a whole) are not what they would be if I were renting out my unit.

The LLC is not generating positive cash flow, but would be if it had the additional income from my unit. As a result, I have to periodically put additional funds into the business to cover repairs to the units or the mortgages.

My question is this: What would be the implications if I were to start paying the LLC an amount of money each month that I feel represents the market rent for the unit? Are there any negative tax consequences (or other consequences) that I would suffer from doing this? Any other pro/con issues that I should be aware of?

I would prefer to pay the LLC rent, (which would make the business self-sustaining), and take periodic disbursements from the LLC when there is surplus cash not needed for reserves or other purposes.

Does anyone have any experience / thoughts on this type of a structure?

Thanks in advance!

-Zeb