All Forum Posts by: Nakul Patel

Quote from @Katie Balatbat:

@Nakul Patel

California is generally more cumbersome than other states when it comes to taxes and filings. Even if you create a non-CA LLC, if you are managing the business from California, you will likely be deemed to be "doing business" in California and therefore likely subject to CA taxes. California charges a minimum tax of $800 a year per LLC, and more if you have gross receipts in excess of $250k. So, if you create an LLC in another state, you will likely need to register it as a foreign LLC in California. Though, this process will be the same for the other state (if you created a CA LLC you may need to register it as a foreign LLC in the state in which you are doing business/holding property). This means that you will probably need to pay registration and filing fees in at least 2 states if you don't buy CA property as a CA resident.

Be sure to tell your accountant that you may now need to file non-resident income tax returns in each state where you own property as well. CA taxes residents on worldwide income but may provide a credit for taxes paid to other states.

Most likely the state where the property is located is where lawsuits would be brought if they are something for personal injury like a trip and fall or something of that nature because the “cause of action” arose in that state. So even if you pick a state with stronger protections like WY or NV, the cause of action arose in the state where the tenant fell, so likely that the court where the accident happened would have jurisdiction. Of course, with all things, the answers to all these matters will depend on the circumstances.

California tends to have more laws on the books and requirements and restrictions that it can be a good idea to form a CA LLC for out of state property so that you as a CA resident are covered, and to try to have your contracts fall under the purview of CA courts. It also is helpful to have a California LLC in case you ever sell that property and move into another state so that you do not need to form a new LLC altogether with new operating agreement, just re-register in the new state as a new foreign LLC. Also, the state of formation is likely where internal disputes would be brought among LLC members, so if you and a partner and/or spouse live in CA, you probably want to arbitrate in CA if the two of you had a disagreement. But, that is not always the right answer and you should speak with someone familiar with your personal situation to get advice specific to you.

*This post is informational only and is not to be relied upon. Readers are advised to seek professional advice. This post does not create an attorney-client or CPA-client relationship.

Quote from @Chris Seveney:

@Nakul Patel

Best asset protection is an insurance policy, you open a LLC then you are gonna have to pay like $850 a year for it if you are in California even if it's a LLC in another state plus other fees and costs.

The city is growing at a fast pace. 

@Austin McClain has some great insight on this area. 

Hey there! Welcome to the investment world, and congrats on taking the first steps!

When it comes to renting to Section 8 (S8) tenants, there are definitely pros and cons to consider:

Pros of S8 Tenants:

• Guaranteed Rent: The government will pay a portion (sometimes all) of the rent, so you'll have consistent cash flow.
• High Demand: There's often a waiting list for S8 housing, meaning less vacancy time.

Cons:

• Property Inspections: Your property will need to pass regular inspections, and repairs/maintenance must meet specific standards.
• Tenant Screening: Just like with non-S8 tenants, tenant quality can vary, so thorough screening is still essential.

As for the down payment, yes, most lenders will require 15-25% down for investment properties. The exact percentage depends on factors like your credit score, the type of loan, and whether you’re buying single-family homes or multi-units.

A few tips:

1. Research both markets thoroughly (Southern California vs. Columbus, OH) in terms of cash flow vs. appreciation. Columbus might offer better cash flow, while SoCal could appreciate faster.
2. Consider your property management strategy—if you're not local to the property, having a reliable manager in place is crucial, especially with S8 tenants.
3. Crunch the numbers: Make sure the deal works in your favor with or without S8 tenants, factoring in all expenses, vacancy rates, and maintenance costs.

Hope this helps! Best of luck on your first investment!

For your first investment property, I'd stick with marketing to standard tenants rather than Section 8. As you gain experience, your might change your marketing strategy. Part of that experience might be that you rent to a S8 tenant to learn about it. There are more requirements that makes for more work and more potential liabilities for you.
Down payment will depend on the bank, but generally an investment property will need a commercial loan. In my experience, it'll be 20% down.