All Forum Posts by: Max Gradowitz

Welcome from SoCal!  I did part of my undergrad in Chico.  Beautiful place.

I'd consider looking in Kern County, it's only 2 hours North of Los Angeles and it's very inexpensive and has some good rental markets. Message me if you have any questions about the market here.

For AirBnB-type rental structure, I would recommend having a very specific short term rental agreement (what landlords typically use for vacation rentals).  A good real estate attorney should be able to draft one that protects you specifically for short term tenants - ask them for a custom template with blank spaces for the tenant names, dates, etc so you can consistently reuse that form with all your tenants.  Message me if you have any questions about this.

The other thing is that, for proper legal protection, if you form an LLC to hold rental properties, you want to disconnect yourself as much as possible to give the appearance that this is a company by itself and not just you buying properties and transferring it into the LLC's name. Keep all rental income/expenses in a separate bank in the name of the LLC. The LLC should be doing everything - disconnect any personal connection with you and your LLC.

This is not advice, just information.

With only $100k, I'd leverage it to purchase an inexpensive multi-family properties.  I'd consider looking in Kern County, it's only 2 hours North of Los Angeles and it's very inexpensive (for CA) and has some good rental markets.  Message me if you have any questions about the market here.

That is what contingencies are for.  In CA, if your agent is good enough to use the correct type of purchase agreement for a rental property (not the normal purchase agreement), there is a specific contingency for the buyer to be satisfied with income/expense documents, lease agreements, etc.  If you aren't using an agent, have a real estate attorney draft a purchase agreement with that in it, in the proper legal language, so that you can easily back out on that basis.

If the purchase agreement is properly written, you can easily back out on the basis of numbers.  You just sign a cancellation of contract form, send it to the escrow company, and the cancel escrow and send you back your deposit.  As a practical matter, sellers (and their agents too, honestly) don't even understand this, and they will likely let you back out on any basis.  If you say its the numbers and they say there is no such contingency, just say "oh, and I don't like the condition of the property either".  If you want to back out right away in a transaction for any reason, the seller will just want to cancel and move on the next buyer that WILL perform.

This is not legal advice, just informational.

This is very simple.  A smoke and carbon monoxide detector costs less than $20.  Many municipalities require them.  Does yours?  I don't know, but I know you don't want to get sued and find that out later.  Many lenders require them as well (as a condition for doing the loan), so if you sell the property in the future to a buyer with financing, you'd probably have to put them in anyway.  Here in CA at least.

Just do it!

These courses will likely not help you out in your goals at all.  They are focused on passing the license exam.  It takes a decent amount of these courses to become licensed, then you have to pay expensive yearly fees to keep your license.  You have to declare a broker you are working under.  There are continuing education requirements too.  Most investors that I work with, even ones that buy a lot of properties every year, do not have a RE license.  It's simply not worth it to them because it's too expensive and time consuming to maintain.

It's best to get RE investment knowledge from investor-focused sources, like BiggerPockets forums, blogs, YouTube channel, etc.  Commercial sources should be focused on if that's your goal, as that can be tricky.  Pick your market and have a great investor-friendly agent to do the work full-time for you.  It's also good to know a good real estate attorney in case you get into any complex issues, want to form an entity for legal protection on your RE, etc.

This is not advice, just for your info.... If you get sued by anyone for anything related to real property that you own, they will sue the LLC that owns that property. If 5 rental properties are in the LLC's name, all those properties can be reached by a single lawsuit. That is why many investors choose to form separate LLCs for each property they own, to limit their potential legal liability in the event a tenant, contractor, handyman, etc sues. The cost and effort required to form and maintain a simple LLC for each property you own is not astronomical, although exact costs range by state.

Some people also choose form only one LLC and hold multiple properties in that LLC. If you own a lot of personal assets that you want to protect with an LLC, and have multiple inexpensive rental properties, forming only one LLC is a reasonable option. Just understand the risks of holding multiple properties in one LLC.

You can use any purchase agreement you want.  But, if you are a Realtor and pay for access to the CAR forms, you should be able to use those for your own off-market offers.  There are more advantages to this too - sellers, escrow companies, lenders, and everyone else involved are more familiar with the standard CAR form.

That being said, I've had plenty of people ask me to draft custom purchase agreements to use for making offers, so I know that occurs, especially with off-market wholesale transactions.

There is some debate about the due on sale clause regarding LLCs. Some lawyers will tell you that transferring to an LLC violates the due on sale clause, which allows the lender to call the loan due. Although that is legally true, the reality is that I've never seen the lender call the loan due. They just continue to collect the payments even if the check says "Chris LLC" on the top. They want your interest money. So, I've never seen anything bad happen from transferring to an LLC. That being said, just understand both the legality and the reality of the due on sale clause.

I can't comment much on the tax stuff, other than I have heard that if you are your own single member LLC, it's taxed as your normal income. You can elect to be taxed as a corporation, but if you don't make this election, your single-member LLC is treated as a "disregarded entity" and you won't be required to file a separate tax return for your LLC. But there is a annual state tax to pay, California's is $800 a year. It's probably less than that in most states.

By the way, this is not legal advice, only for educational purposes, obviously! :)