All Forum Posts by: Jason Riddle

Hi, I live in San Francisco. I purchased my first rental property back in Oct 2022 in Texas. I was thinking about purchasing my next property somewhere in California. I'm considering getting a duplex or triplex, and living in one unit while renting the others out. My focus is appreciation, not cash flow.

Here are the cities I'm considering:
- San Diego
- Long Beach
- Santa Rosa
- Santa Cruz
- Los Angeles
- Santa Barbara

- I know with an FHA loan, I can get 3.5% down. However, I'm concerned having to put so little money down. Besides PMI insurance, is there a risk with this approach?
- At least in San Francisco, cash flow is very hard to achieve. However, there needs to be some cash flow in order to pay for the mortgage and expenses. Is cash flow still possible in the above cities?
- Do all of the above cities make it easy to build an ADU? Any estimates on cost per sq ft would be helpful.
- In general, does a SFH w/ an ADU appreciate faster than a SFH without an ADU?
- I've read that California is a pro-tenant state. Do any of the above cities tip slightly towards the landlord?
- There are other external concerns that I have i.e. state budget shortfalls, too much concentration in one job sector (ex. tech), running out of water situation, earthquakes, fires, etc., any thoughts on how others navigate this?

@Sendill Arun

Responses are below

> Thank you for your response. Confirming this is for registering foreign LLC in CA (and not for creating an LLC in CA) ?

This is for registering a foreign LLC in CA.

> How would I get certificate of good standing (assume that is for the existing out of state LLC) ? Is that included for $25 ?

For the existing out of state LLC, you can request a certificate of good standing from Incfile (assuming you registered it with them). It's not included for $25. I didn't request it, but you can request it and I think it's an extra charge. I believe you can request this directly from the state's comptroller for free if you don't want to pay Incfile.

> And when and how do you pay the franchise tax?

My understanding is as follows.

1. For a single-member LLC, the annual franchise tax is $800. For LLCs, "the first-year annual franchise tax is due the 15th day of the fourth month from the date you file your business with the secretary of state. In subsequent years, the annual tax becomes due on the 15th day of the fourth month of your taxable year, which is generally April 15." (https://www.legalzoom.com/articles/what-is-the-annual-california-franchise-tax#:~:text=For%20LLCs%2C%20the%20first%2Dyear,which%20is%20generally%20April%2015.)

2. You may owe income tax on it as well. This may require filing a separate LLC income tax return.

3. I believe all of this is paid separately from the usual CA personal income tax.

I derived some of this information from https://www.ftb.ca.gov/file/wh....

Also, for your previous question

> Do you have any contacts for Lawers / Attorneys that can help me register foreign real estate LLC in CA ?

I'm working with Katie A. Lepore (https://www.mmpph.com/our-team...) from Miller, Monson, Peshel, Polacek & Hoshaw (http://www.mmpph.com). She's been very helpful in getting my questions answered. She would be able to help with registering a foreign LLC and also answer tax questions as well. Her email is listed on the page.

Hello,

I'm currently under contract for what will be my first property purchase in San Antonio, TX.

I've been given A LOT of mortgage initial disclosure documents and I'm having trouble reading and understanding those documents.

I'd like to review these documents with a lawyer so I can have a better understanding of the fee breakdown and to know what's going on in the document.

Does anyone have any recommendations for a lawyer? I'm assuming I would need a real estate lawyer?

Hi Sendill,

I'm currently in the process of doing this. I ended up using incfile.com to register, but there are other providers that offer a similar service. Their fee structure ended up being the following

CERT OF GOOD STANDING (required) - $25
REGISTERED AGENT FEE (optional, used incfile for registered agent) - $119
BUSINESS ADDRESS (optional, used incfile for mailing address) - $29
SERVICE FEE (flat fee) - $149

Total - $322

It's pricey but it feels nice having it all managed for you.

@Chris Wilson

I did end up going with Praxis, but one thing I struggle with is they give A LOT of information. Like 5-7 PDFs where each PDF ranges from 10-50 pages. I've started reading The Hand's off Investor (disclaimer, not yet finished with the book) which is originally why I reached out to them. My question to you is how do you evaluate their large MFH deals, especially when they can add properties to it over time? I'm familiar with how to analyze CoC and IRR for SFH and MFH(1-4), but large commercial (100-200+ units) leaves me feeling overwhelmed with analysis paralysis.

Hello,

I made a post similar to this a while back (https://www.biggerpockets.com/...) and realized I casted too wide of a net, so let's try this again.

My name is Jason and I'm a new real estate investor. My strategy is to purchase under market SFH or MFHs that requires light rehab + 1 major thing to rehab. I'm focused on cash flow as I want this to replace my full time job, but appreciation is always nice. I only plan on acquiring one property this year.

After researching different markets, I've landed on Texas. Specifically, the Houston MSA or the San Antonio MSA.

My current situation is that I'm unemployed, but have 150k in cash to invest in real estate. If I can't do an all cash purchase, I would need a DSCR loan.

So, what can 150k get me in either San Antonio or Houston? Can I purchase a MFH in a B-C class neighborhood or is it only enough for a down payment? Is it realistic to target MFH or should I stick to SFH? I would also be open to getting a hard money loan for rehabs.

I will be investing from out of state, specifically San Francisco. When I decide on a market, I plan to fly out and scope out the area for myself and talk with an agent/property manager in person to start building out my team.

I also considered Austin and Dallas, but the Price to Rent ratio looked better in San Antonio and Houston. I'm open to hear a second opinion on that though.

Thank you

I'm having trouble understanding the private money loan process with another investor.

So when another investor gets involved, that's because they also agree that you have a good deal. So they agree to give you money in exchange for either 1) a cut of the profits or 2) (perhaps) to pay the money back as a loan.

For 1)
- How do you decide how the profits should be split? Say it is 70/30 for example, is that profit only realized at the time of sale?
- What about when you are receiving rental income? Should the rental income be stored in an escrow account or a joint checking account?
- Also, what happens when you want to refinance? What does the split look like then?

For 2)
- I've heard the term "promissory note", so I'm assuming that's something I sign saying I agree to pay this money back?
- How is the investor keeping track of the interest versus principal payments? Are there banking platforms that support private lending and handle these calculations?

Also in both cases, do lawyers need to be involved to make sure the contract is legal and both parties are protected?

Thank you

Thanks @Miranda Holland, that makes sense.

Hi, I'm trying to understand how hard money loans work and if I'd be eligible.

My situation right now is I'm unemployed and have no income coming in. If I were to find an amazing BRRR deal, then to service the debt I would use a rentor's income.

However, because I have no income outside of that, would that affect my ability to get a hard money loan? I know for conventional mortgage DTI is an important factor, but I wasn't sure from the hard money side.

Thank you @Jay Hinrichs.

After some searching I found this which doesn't speak highly of them: https://www.biggerpockets.com/...