PropCo/OpCo LLC formation - multi-family investing California

[Roy Marks]

Hi California investors,

Asking for a friend who is looking into multi-family investing in the Greater LA area and wanted to get a few quick data points from the community! 

- For a multifamily property in the ~$1m range, would you advise having two LLCs in place? For example, a PropCo (Asset Company vehicle which owns the property and the debt), and an OpCo (operating company, which operates and manages the property)? Alternatively, is it sufficient to have only one LLC in place? What are the pros/cons of each approach?

- What are benchmark figures for the cost of legal formation for the two entities? Received one quote at $6k, and curious to know if this is in the ball park for an OpCo/PropCo set up. 

- Any idea of ongoing annual legal costs for management of the OpCo and PropCo? I'd imagine that there would be management services agreement between the two entities, and wondering what sort of issues could pop on an annual basis that could/would require additional legal support. (I don't imagine many, to be honest...)

- Similarly, grateful to receive any benchmark costs on having 3rd party accounting/books for the two entities?

- Would you advise incorporating in CA (the property would be in CA, so a foreign LLC would likely still be subject to CA's $800 franchise fee) or are there benefits to incorporating in another state (WY, Delaware)?

- At the moment looking at only one deal, but would love to continue to invest in the future. Are there any implications to be considered, particularly for the OpCo? I'm wondering if for future deals, a subsidiary PropCo could be created for each property, keeping one OpCo in place. If the different properties would have different financial/equity partners, how do we account for this in the OpCo? Would those partners only be involved as shareholders in their respective PropCos?

Thanks in advance for your thoughts as always!

Best,

Roy