All Forum Posts by: Tanya Maslach

Hi Tanya, I would absolutely love to meet! I can also share referrals from my network of GCs, lenders, PMs, etc. Happy to connect and answer any questions you may have.

What are the best cities to invest in midterm rentals which will cash flow and appreciating year over year?

My biggest tip here is work with the smaller companies. The bigger companies like Apple, Google, Microsoft, etc, use RMC's to handle their relocations and they are very very difficult to pierce. My question to you is, what is your plan to build up the inventory?

@Jonathan Greene thanks for the plug!  Just seeing this now!

Hi Tanya,

Great questions! Here’s some insight based on my experience:

Question A:

Since you live in California, it's important to know that California doesn't care where your property is located. As a resident, you'll still need to pay the $800 minimum annual franchise tax to the California Franchise Tax Board (FTB) for any LLC you own, even if it's set up in another state.

What I personally do is have a holding company (LLC) in California that owns my LLCs in other states where I invest. This setup ensures that I stay in compliance with California's FTB requirements. One of the biggest misunderstandings I see among real estate investors is thinking that setting up an LLC in another state allows them to avoid California's franchise tax. Unfortunately, that's not the case. If you live in California, the FTB still wants its $800 per LLC, no matter where your properties are.

Question B:

When it comes to setting up an LLC, here are three common approaches:

1. DIY Approach:

In most states, you can set up an LLC yourself for less than $100 in filing fees, depending on the state. However, you'll need to handle all the paperwork, figure out which forms to file, and stay on top of compliance requirements like annual reports. While this is the cheapest upfront option, mistakes can be costly. For example, failing to file a Business of Information (BOI) report correctly can result in penalties of $500 per day or even up to one year in jail if the filing is late.

2. LegalZoom or Similar Services:

LegalZoom can help create an LLC for about $600. They'll handle setting up your legal entity and obtaining your EIN (Employer Identification Number). However, they charge extra for things like the Statement of Information (SOI), which costs $75, and the BOI report, which costs $90. While this is a convenient option, the downside is that they don't offer any advice—legal, tax, or business-related. Their role is purely administrative, so if you file incorrectly or choose the wrong entity type, you're on your own.

3. Hiring a Lawyer or CPA (White-Glove Service):

This is the most comprehensive option, with costs ranging from $1,000 to $3,000. A lawyer or CPA will handle all the filings for you, including obtaining your EIN, filing the SOI and BOI, and ensuring compliance with the California FTB. They also provide guidance on entity selection, tax strategies, and long-term planning, which can save you money and trouble in the long run. While this is the most expensive option, it minimizes the risk of costly mistakes and ensures you’re getting tailored advice.

If you’re confident in handling the process, the DIY approach can save you money. But if you’re unsure about compliance or plan to scale your real estate portfolio, I’d recommend consulting a CPA or attorney to avoid costly mistakes.

My attorney says he prefers it when there is a business reason for the state of the LLC, and he said either your home state or where the property is located is suitable.

A much bigger topic is whether or not having an LLC is a good strategy given your personal situation. (It's up to you to figure it out.) Fannie Mae does not allow mortgages to be in the name of an LLC. I've heard attorneys argue that if you put the mortgage in your name and later move the property to the LLC, you may have invalidated the LLC. Many find a better route is building a fortress of insurance coverage. Unless you are getting a bank loan and are willing to accept higher interest rates and balloon payoffs, buying within an LLC is not a clear-cut decision.

An LLC can be created very quickly and should costs under $1K, but you need to know there will be costs and time to maintain that LLC every year.