Others have done a good job of explaining the legality of it as well as no subleasing clauses in most leases.All of that aside as a business model it's just not very good.You have all of the liability and risk of being a landlord without any of the benefits.

Less than 35 non accredited investors, no general solicitation or advertising, etc.The other 15 states are a hodgepodge of various laws or lack thereof.One thing almost no one understands that if you are sued by an investor because the investor lost money ( not talking about property foreclosure or liability for deficiency, but about being sued because you did not properly explain risks to investors etc), and you comply with SEC Reg D, you have an affirmative statutory defense against those allegations.

I'm curious to see what he comes back with and if liability is even something he'll be thinking about. 

This is not so good regarding liability.

Plus the liability is there as you said.

Doing it this way allows you liability protection and the bank has it's back covered too.good luckjim

Its not worth the headache or potential liability.

Delayed gratification is the key to success in this business, and if you can put off buying a house for yourself and dumping that money into an asset that makes you cash instead of a liability that takes your cash, the results are about 4 times better for you in the long run.Some things to consider.1) This is CA.

This is because the Property Premium generates 80-90% of the total annual premium, while the # of units drives the Liability premium, the other 10%-20%.

If it is common in the area that lots are 3 acres and you have 5 and a half, at some point some buyers may view the excess as a liability rather than an asset.