Buying first properties and out of state

[Andrew Neal]

So I will try and make this as short as possible. I live in California in the glorious Bay Area, lovely place to live but not so much for first time investors. So I am looking to invest in two markets outside my own Dallas TX Area and Central Florida. These two areas because I have dear friends who run successful construction businesses in these markets whom I can trust implicitly. My main question is I understanding the purpose of setting up each property in its own LLC and I have owned my LLC here in California for 4 years and pay $800 a year for that privilege (sarcasm). Am I able to set up LLC's in the states I purchase the properties? Or would everything need to be run through California?

[David Faulkner]

Even if the properties and LLC's are not in CA, if you live in and earn money in CA, then the People's Republic of CA will extract it's pound of flesh in the form of another $800/yr per LLC. You could consider running it through your other CA LLC that you already pay the fee on, but this may defeat the purpose to some extent of separating your assets in a LLC. The other issue you will likely run into is financing the properties under a LLC ... banks won't like that and you will likely either need to get a commercial loan with worse terms than a residential one or buy in your name, get a residential loan, and then transfer to the LLC and run the risk of violating the "due on sale" clause and having the bank call the mortgage due (rare but does happen occasionally). Honestly, if you are not talking a $1M+ commercial property and/or not trying to protect multiple millions in assets already owned (you don't have to answer that), then you are likely much better off just buying the property under your name and taking out a sizable ($1M or $2M coverage) umbrella insurance policy to protect you.