(REALLY LATE) Introduction from San Mateo CA

[Matt A.]

Hey all. I've been a lurker here for more than a year now, so it's long been time for an introduction.

I signed up last year after finally deciding to put my money where my mouth was and invest in real estate. Without any real direction or strategy, I knew only that I was going to invest in Las Vegas - as it is like a second home to me.

So with a year under my belt now, and a couple of deals done, I think I've finally settled and have defined myself to be a buy-and-hold investor of sfh/multifamily properties in the Las Vegas/Henderson area. And I think I owe a great many thanks to the wisdom and advice here, so thank you and I enjoy reading everyone's posts.

On another note, if anyone has a recommendations for a CPA and RE lawyer that fits my situation (preferably local to the Bay Area) I'm all ears! I want to get ahead and have structure in place as my portfolio grows. I'd like to create an entity for my properties (LLC?) and haven't decided on whether I should have it be a CA or NV LLC (pros/cons). Also, to those who invest similar to my situation (CA resident investing out of state), should I create my own LLC or pay up for the lawyer?

Lots to learn still, thanks for taking the time to read.

[Naseer Khan]

Welcome

@Matt A. and thank you

@Chris Mason 

Glad to see that your first year of investing was so successful. Investing out of state is really popular with the Bay Area investors. Regarding entities, here is something to consider:

As a California resident, you will still be subject to the California LLC franchise tax, even if your rental properties are located outside California due to CA's far reaching business rules. For example, Nick is a California resident and a member of a Nevada LLC. The Nevada LLC owns property in Nevada. The LLC hires a Nevada management company to collect rents and provide maintenance. Nick has the right to hire and fire the management company. He occasionally has telephone discussions from California with the management company in Nevada regarding the property. He is ultimately responsible for the property and oversees the management company. Nick is considered to be conducting business in California on behalf of the Nevada LLC. Hence, the LLC must file FTB Form 568 and pay the franchise tax. (FTB 3556 LLC MEO (REV 01-2015).)

Accordingly, you can open a Nevada LLC but you will still have to register as a foreign business LLC in California because you are considered to be conducting business in California, merely by you having some management control of the property and being a CA resident. On the same token, if you setup a California LLC and you decide to transfer your Nevada property to the CA LLC, you will have to file as a foreign registered business in Nevada and pay the same fees as other Nevada LLCs because you are conducting business in Nevada.

Either way, you are subject to the CA LLC franchise tax, There are ways to structure this that is still favorable to your situation, especially considering Nevada's low fees and its allowance of series LLCs. This may sound biased but I recommend talking to an attorney before setting up an entry and having an attorney set it up because it is very useful to have someone knowledgeable on the subject to talk to and do it right the first time. Let me know if you need additional help.

This response neither constitutes legal or tax advice nor establishes an attorney-client relationship. Inquirers must seek the advice of their own legal counsel prior to undertaking any course of action related to this inquiry.