All Forum Posts by: Abi Wegman

Are the loans First National Bank and US Bank make to LLC's commercial loans?

$5,000 for your down payment, closing costs, repair reserves, and other misc. things is pretty low, even for an area as affordable as Cleveland. 

A $5,000 DP is only going to get you a $25k house anyway.

 Unfortunately that's all it takes for California to require you to pay the annual franchise fee.

 When you say "suburbs", are you talking about places like the different Heights neighborhoods, Euclid, and Parma, or something different?

@Scott Smith

You're right, I think I have been misunderstanding how the structure works. So every entity within the asset hierarchy is a DST.

What benefit does an LLC offer that a DST does not? From an accounting & tax perspective, does the income earned by a DST or any of the Series pass through to the ultimate owner in the same way it does with an LLC, or does the Trust itself retain the earnings and pay out to the owners via distributions?

@Brian Bradley

I appreciate all of the helpful replies in here. This is immensely helpful and will help me, and I'm sure countless others, help guide the eventual conversations with estate planners/attorneys.

@Scott Smith @Brian Bradley

Thank you for posting this information. I have some questions about the Series LLC's that live under the DST.

The way I'm interpreting how this work, and please correct me if I'm mistaken, is that at the top of the pyramid is the DST, with branches coming down connecting it to each LLC that is controlled by the DST. Parent-child, like you said.

When filing the LLC, let's say I live in CA and create the LLC in NV for tax purposes, and the LLC will be the child to the DST.

Who is the legal owner of that LLC? Is it the DST, which is a Delaware-based entity?

Ultimately my questions is how do I, as a CA-based investor, avoid the $800 annual FTB fee for each LLC within the DST?

If I wanted to get really complicated, can a single LLC be partially owned by two independent DST's? Like if I wanted to set up a DST for my children and one for myself, but each would have part ownership in an LLC that owns real property. Is that possible?

Thanks for the tips! What kind of neighborhoods are your units in? Personally, I wouldn't rent a unit that doesn't have/allow a washer/dryer, and I assume most A/B/C+ tenants would be the same. Do you worry that by not having a washer/dryer, you're losing out on good tenants?

Are there any legal minimums to the water pressure on the main line coming into the property? 

Are you going to be living in one side? If not, you'll need 25% down and interest rates are probably closer to 5.75% or even 6% for investment properties.

I'd bump your vacancy up a bit. If you expect your unit to be empty 6% of the year, which is about 3 weeks, you'll need to consider that your PM will keep the first month's rent on a new lease. That's the one area I'm not super fond of on the BP calculators. So your expense will be 6% of rent that you don't collect + 1 month of rent that your PM keeps (8.3% of annual rent). Basically, if you have 1 turnover per year and it takes you less than a month to fill the vacancy, you lose 2 months of rent. So I'd just double your estimate to 10% or 12%. 

Finally, you're missing your utilities and insurance. In Cleveland, owners pay water/sewer bills. From what I've been reading, for a duplex you're probably looking at $75-150/mo. I've read that you can put in a clause that says that any amount over $75 will get billed back, but you can only do that if you have separate water meters. Looking at it now, you say this is actually in Painesville, which is in Lake County (Cleveland is in Cuyahoga). I'm not sure if tenants generally pay water in Painesville.

I think insurance on a duplex is going to run you $800-1500/year, so factor in an additional $80/mo for good measure.

How does it look now?

You're paying $20/mo/unit for water? How can it be so inexpensive?? Aren't you paying sewer as well?

For those struggling with the 512%, here it is:

Cash-on-cash is calculated as (Annual Income)/(Cash Invested). @Omid A. said he's getting $1,282/month in income. That's $15,384/year. He said he's left $3,000 of his own money in the deal.

$15,384/$3,000 = 5.128, or 512.8% CoC return.

What I'm not seeing is how you left $3k in the deal. You said all-in is $305k, but you took out $308k from the loan. Didn't you actually get paid to own this property?