BRRRR & DST's for CA Resident

[Frank Von Arx]

I live in California and have been researching getting started owning out-of-state rental properties recently. From everything I have read I am interested in the BRRRR method, and also using a Delaware Statutory Trust to protect the various rentals I hope to purchase without having to pay the CA FTB $800/yr each. I don't have a ton of capital to begin with, this would most likely be accomplished by working with 2-3 close friends investing together, and starting out with cheaper, out-of state properties. Anyone experienced or knowledgeable on these subjects please correct me anywhere I am mistaken, but this is my understanding so far of how we would go about doing this:

1. Purchase and rehab a property with our pooled cash, then rent it out and refinance it in one or all of our names

2. Place the refinanced rental property in a Delaware Statutory Trust, the first one being "Series A"

3. Use the cash we have pulled out to repeat the process with more properties, which would then also be placed into the DST as "Series B", "Series C", and so on.

I welcome any corrections or suggestions for the initial plan, the questions I have myself concern what happens after this.

1. After some years where equity is built back up in the properties, if we decide to sell the property in "Series A" for example, would we need to distribute the proceeds or could we use them to purchase another property in the same Series? Would it be better to take the proceeds out personally, perform the BRRR, and then place it back into the trust or is there a way to do this, including the refinancing while still within the original Series? Related to this, if we decided not to sell but just to do another cash-out refinance on the property, is that an option?

2. If we did this successfully for awhile, and in the future another friend wanted to join us on the next property we bought, say "Series D", would we be able to have different beneficiaries for some of the child Series? Would this work for tax filing for the person who was only a part of Series D and not Series A, B, and C, or would the beneficiaries of the parent DST need to be changed if a beneficiary was added to a single child series?

3. What is the easiest way or the way most likely to succeed with a lender to get financing on each successive property, knowing that we will be placing it into a trust?  To have one, same person apply for each loan personally each time?  To have one individual apply for the loan but spread them out among the group? To have all of our names together on each loan? Or would it be better to place the property in the trust first and then refinance it?

4. As far as the operation and commingling of funds, would each Series need to have it's own bank account to collect rental checks and pay the mortgage?  Or would the separate operating holding company establish one account that would collect rent and pay expenses covering all the child series properties?

Any help at all with understanding any of this is greatly appreciated.  Thanks!