All Forum Posts by: Ward Sorrick

We're CA-based investors who already own a duplex in Cleveland and are looking to acquire another MF property this year. We're looking for a local attorney who can help with LLC formation for our next acquisition.

Alternatively, would it be worth considering establishing the LLC in CA and registering it as a foreign entity in OH?

My brother and I recently made our first investment property purchase. We bought a duplex in Cleveland, OH last year with an intention of following the BRRRR strategy. We hired a property manager based in Cleveland to handle the day-to-day operations of the property. He is also handling the project management for the rehab.

On our end, my brother and I meet via video chat each week to discuss any new business and keep things moving. We correspond via phone calls and email with our property manager and any other people we need to talk to about our business. We do all of this from our offices at our respective homes in Northern California. 

Currently, the title is in mine and my brother's name, but we are considering setting up an Ohio-based LLC to transfer title to and to help us manage our risk. Do we need to register the OH LLC as a foreign entity in CA? What conditions would require us to do so? Are there circumstances where it is unnecessary to register the entity here in CA?

Thanks so much!

Ward Sorrick 

Hi BP Forum,

My brother and I are getting close to making our first purchase on an investment property. We're looking for cash flowing small multifamily properties for out of state investing. I've analyzed the numbers for a duplex in Bedford, OH, and the numbers check out (see report below). The property manager we've been talking to says we can actually get more income than what the current tenants are paying; however, I'm using the current rates since that's the income we'll generate as soon as we buy. I figure if the numbers work at the current rates, we are only better off if we can increase the NOI.

What makes me nervous is 1) just pulling the trigger on a making our first purchase, and 2) I'm nervous that Bedford is not a great part of Ohio. Neighborhoodscout.com says 62% of the population is economically disadvantaged as compared to 24% for the rest of the state. Is that a reason to be cautious in making an investment in this area? 

I'm also nervous that we won't see the value of the property appreciate much in the Bedford area and that we may have trouble selling at a profit if/when we decide to exit. The property was listed at $130k in March of this year, dropped to $125k in April and then to the current price of $115k in June and has sat on the market for 37 days now. A SFH 5 bed, 2 bath in the area recently sold for $94k. Granted that was not an income generating property, but it's concerning that a comparably sized home sold for so much less.

All in all, while the numbers work out, is the quality of the tenant pool and the market in this area valid cause for concern? 

View report

*This link comes directly from our calculators, based on information input by the member who posted.

@Jaideep Balekar what a fantastic post! Thank you for the detailed breakdown and actionable insights. It’s validating to see a lot of the work you did when you were getting started is work I’m doing now as I begin my real estate investment journey.

Would you be interested in chatting for 15-20 minutes over a call at some point? I’d be interested to hear more about the partnering goals you have. I’m interested in making investments in the Midwest and looking for that partner with “boots on the ground” like you mentioned in your post.

Also the proposed cost for the paint work is $5600 which was the middle bid of the three I received.

@Dave Foster thanks for your thoughts, Dave. I’m inclined to agree with you. Knowing that we might sell in a year, would you recommend investing in a new exterior paint job now or pushing that onto the new buyers? The paint job is definitely ready for a replacement but it can probably withstand another year and maybe the new owners would want to pick their color.

My brother and I own a 1,652 sq ft single family home in Walnut Creek, CA. We inherited it from our father when he passed away 10 years ago. The home is fully paid off and the tax basis on the property is around $400k.

We currently rent the home to wonderful tenants. It’s a family of four who absolutely love the home and take good care of it. They’ve been there 5 years now. We earn $3300 a month which is low for the area. We could probably get $3400-$4000 a month. We’re locked into the current rate with the tenants through May 2021.

The home needs some attention. We’re going to be painting the home next month ($5500 expense) as the paint is chipping and cracking in several places. The sprinkler system and deck need to be replaced in the next year, I think, too. Otherwise the house is in pretty good shape.

The home could probably sell for $1M+.

My brother and I are wondering: do we sell the property to take advantage of a 1031 exchange to buy a larger investment property? Maybe a multi-family property? Downside there is we’ll have a mortgage and a tax basis that is 10x what ours is now.

Or do we keep the property forever as a rental since it’s fully paid off and the taxes are remarkably low for this state?

Thanks!