[earlyretirement]

Yes, I set up an LLC when buying my primary residence. There are other reasons besides liability protection. Other reasons can be tax reasons as well if you have citizenship or residency in other countries. Some countries tax you on your worldwide assets in your name. So setting up an LLC is a good idea in this situation so you’re not subject to personal asset taxes in other countries.

Also, a more basic and simple good old fashioned reason to buy under an LLC is good old fashioned privacy reasons. Buying under a Delaware LLC, there isn’t really any way anyone can figure out who owns the property doing public checks. Delaware doesn’t release this information like other states.

I hired a lawyer to set up a Delaware LLC. After a lot of research, Delaware seemed to be the best choice as it offered the best privacy and lowest annual fees.

After you set up the LLC, you have annual fees to Delaware of only $250 a year. You also have to have a registered agent to receive correspondence. I set up with a lawyer in Delaware to be mine for another $100 a year. So I pay $350 a year in fees to maintain the Delaware LLC.

You do have to be careful not to pierce the corporate veil for liability reasons but if you’re careful you won’t have problems. You have to make sure you are paying yourself and transferring into your personal account to the bank account you established for the LLC for rent each month.

The negative thing is banks don’t want to seem to touch dealing with financing a property under the name of an LLC.

If I start buying rental properties in San Diego, I’d definitely set up a separate LLC for each property.

They might be a “waste of money” if you aren’t using the LLC effectively however, it’s a valuable tool and essential if you structure it properly and maintain it properly. You will find much of the wealthy and affluent utilizing Delaware LLC’s for not only real estate but Yachts, airplanes, etc.

Just doing a public search of some of my neighbors and 2 others also set up LLCs to purchase their primary residence. (They aren’t renting them out..they live in them for their primary residence).

Yes, the others are correct. The annual fee to California if you set up a California LLC is $800 a year to the Franchise Tax office. I have a separate California LLC set up and I pay $800 per year.

Also, something worth mentioning is that there was a LOT of misinformation from insurance companies when I went to insure it. Some companies were just out and out thieves about the fees. Some greatly differed insuring it. Some told me it wasn’t possible or their company didn’t insure an LLC. Other times I called two different agents with the same insurance company located a few miles apart and got quotes that were hundreds and hundreds of dollars different for the same exact policy.

The way to go about it is getting insurance under the name of the LLC. And then getting a separate policy with the same insurance company for all the contents and insurance, etc. Basically a renters policy. Not many companies had experience setting it up for the SAME cost as getting an individual policy in your name. But I did find one that was great. It just took some due diligence.

SD Realtor made an excellent point about pumping up the coverage amount. In addition to what I posted above I also always recommend if you have significant assets to get an Umbrella insurance policy as well. Most people don’t realize how beneficial Umbrella policies are. Umbrella policies paid for O.J. Simpson’s defense as well as Bill Clinton’s legal defense during the Monica Lewinsky scandal. My point being Umbrella policies can cover you for quite a bit of situations. Well worth it and they are very affordable.

[earlyretirement]

[quote=flu]

Just curious… Do you have a mortgage on your primary? If so, how did you get it?[/quote]

No, that’s what I meant above about the banks. It was just about impossible to get financing or a mortgage on the house buying directly with an LLC. There might be a way to do it but I couldn’t figure out an easy way to do it.

My FICO score is 817 and I have no debt at all and still couldn’t seem to find a bank to write a mortgage buying with an out of state Delaware LLC for a property located in San Diego.

No, I didn’t end up with a mortgage on the property. I paid cash for the house. Even if there was an easy way to do it, I would have still gone the cash route. I ended up negotiating a great deal on the house that we wanted because I went in with an all cash offer and let them know I could close quickly. This was on a non-distressed/traditional sale. I totally don’t regret that decision.

It’s also important to add that since I was going in with a cash offer and could close quickly, I also negotiated with my realtor to kick back 1% of the buyer side realtor’s commission she got. So the escrow company withheld that and the day after closing I got a $10,000 refund wire back into my bank account further reducing the price of the property.

I doubt all of these things would have happened if I didn’t go in with the all cash offer.

[earlyretirement]

[quote=flu][quote=EconProf]$800 is what I thought too.
I just set one up in AZ for an AZ property–was well under $200, but can’t remember specifically.[/quote]

Yes, but you see if you plan on doing business in CA (IE renting out to tenants), it doesn’t matter….You’ll end up needing to pay to do business in CA anyway…

But I guess if it’s for your primary residence, that’s a different story…Not sure what that means from getting a mortgage. But then if you buy out your primary outright, then that’s not an issue…[/quote]

Flu,

That’s exactly correct. If you set up the LLC with the intent and purpose to rent it out to others and not use it as a primary residence then you also have to register the out of State LLC in California and pay the $800 a year to California.

But when I called them to ask about this fee if the sole purpose was to set up a Delaware LLC to live in it they asked me to send the Articles of Incorporation and they said no I didn’t have to pay the $800 annual fee to California if I was living in the house and not renting it out.

Although they were quick to point out if at ANY point for any reason if I rent out the house or derive any income from it I’d have to pay the $800 annual fee to California.

I still do end up transferring from myself to myself (LLC bank account) the rent each month but I guess that’s not considering “doing business” to California. The Articles of Incorporation were very clear that no business was being done and I was using it as my sole primary residence.

[earlyretirement]

[quote=poorgradstudent]He needed to renounce years ago to really save on his taxes, assuming he doesn’t try to cheat.[/quote]

Huh? Yes, he certainly will save a ton once this stock goes public. It will end up being a few hundreds of millions less. (The stock price will certainly go higher than the expected range). Not chump change. It was smart starting this back in September.

He is still going to pay a fortune in taxes to the US government so I wouldn’t feel too sorry for the government.

http://www.thedaily.com/page/2012/05/12/051212-news-facebook-saverin-1-4/

[earlyretirement]

[quote=Allan from Fallbrook]
Yup. Tax evasion is a crime. Tax avoidance is a Constitutionally guaranteed right and if I had that kind of jingle coming my way, I’d be figuring out every angle under the sun on how to reduce my tax burden.[/quote]

EXACTLY. Legal tax avoidance is just plain wise. It’s easy for Monday morning quarterbacks to say they wouldn’t do the same thing but I can guarantee you if you were about ready to come into a windfall of money like this…. you wouldn’t be thrilled about paying billions of dollars in taxes if you could legally avoid it. There are many other better countries to have a passport from.

He won’t get off totally free like the article mentioned. He will still pay a bundle in taxes to the US government.

[earlyretirement]

I also don’t see this as a big deal. I think it would be a bigger deal if the guy was actually born here but even then probably not if he doesn’t plan to live in the USA for the foreseeable future.

Sounds like a smart move to me.

Many American companies will take as many legal steps necessary to avoid paying taxes in the USA. And you know what? It’s wise to take advantage of as many legal steps possible. Now if they are breaking the law it’s one thing. But it would be foolish not to take advantage of paying the least amount of taxes as they can get away with.

There is nothing cool or patriotic about paying lots of taxes.

http://www.usatoday.com/tech/news/story/2012-04-29/apple-taxes/54633774/1

[earlyretirement]

[quote=bpnbpn]

For elementary, you will have to go to willow grove
[/quote]

Funny the way you word this. “You HAVE to go to Willow Grove”. LOL.

Willow Grove is one of the newest and highest rated Elementary schools in the area. It’s very nice. There can be waiting lists to get in here.

Heck, even for preschool last year our daughter didn’t get to go there. There was a waiting list about 30 kids long to get in here.

We feel very fortunate that our daughter gets to go to preschool here next year. We know several parents (including neighbors) that didn’t get in for pre-school.

I don’t think they are being misleading if they are giving the zip code and not saying the school district is something else.

When we were looking at houses last year we saw several in Carmel Valley and honestly we weren’t impressed. Why anyone would pay $1 million + on homes in developments like Pacific Highlands Ranch boggles my mind. Just was NOT impressed at all. (We ended up buying in Santaluz and LOVE LOVE LOVE it).

While the area of Carmel Valley is generally convenient, we didn’t like the high density nature of the area with so many apartments and townhouse complexes. And most developments have houses packed on top of one another.

In many houses you had 4 or 5 neighbors directly looking into your house.

For anyone that has kids, I don’t think there is any way to be “easily confused”. All the parents I know when they are buying a house look, plug in the address first to see what school district the house is in before considering it.

[earlyretirement]

Congratulations and enjoy your new home!

Like you, I also waited on the sidelines for many years but finally bought last year and very happy with our decision.

Longer term, prices in desirable parts of San Diego will surpass peak levels again.

Not to say we purchased our home for capital appreciation because we didn’t. However, it’s never a good feeling buying at the top of any bubble.

You did good.

[earlyretirement]

Do you have a large nest egg (7 figures +) to plan on taking this early retirement?

Or do you have any assets that will generate cash flow each month/year like rental properties?

The plain fact of the matter is the vast majority of people in their mid 40’s wouldn’t be planning to retire in the next 5 years.

I say all the power to you and wonderful if you can safely accomplish it but to definitely have a fairly large nest egg to even think about this.

My goal was always to be able to retire by the time I was 40 if I wanted to. It wasn’t easy but I probably could fully retire if I wanted to. However, I’m not sure I will want to retire so early.

I guess it would be hard to give you specific advice without knowing how large of a nest egg you have.

I have friends that retired early (in their 40’s) and they had major events like sudden illnesses that really threw them for a loop. I guess that is my biggest fear retiring early.

Back a few years ago when I was in your position thinking about retiring so early, my strategy was to buy several rental properties that generate cash flow each month.

I know my case isn’t the typical situation but I went in and bought several rental properties and completely paid them off. I know most people will leverage but I didn’t want ANY debt at all heading into an early retirement.

My goal was to go into early retirement having my principle residence completely paid off, having my cars paid off and having absolutely no debt at all.

Also, I’d set aside a fairly large emergency medical fund just in case something happens.

Also, much of early retirement just depends what kind of lifestyle you lead. That probably is the biggest factor in how early you can retire.

Some people are content with just staying home or close to home and not doing much while others strive to travel non-stop around the world to exotic places.

I know our single biggest expense is traveling around to different countries in the world. That will most likely be our biggest expense each year while we are retired.

I know for me I’d feel very nervous retiring early with no cash flow generating income each month. Sure we have stocks but the stock market can be a volatile place and you really have to stay very diversified and stick with it for the long term.

My friends that retired early and had almost all of their assets in the stock market nearly had a nervous breakdown during the stock market meltdown a few years ago. Some of them panic sold some of their stocks only to see the stock market come roaring back.

[earlyretirement]

KinaBalu,

Congrats on your purchase in Santaluz. You will LOVE it here. We really love the area and the development is really wonderful. We totally don’t regret our decision to buy here.

I can strongly recommend Julio Hernandez. He isn’t a Landscape Architect but more of a GC type. He was actually recommended to me by Santaluz as I guess he did some work for them and several of the people living here use him and were happy with him.

He is a very ethical and honest guy and he’s done great work for us. We also use him for weekly maintenance.

His email is [email protected] and I’ll PM you his phone number.

Good luck.

[earlyretirement]

Hey EconProf!

I did send you a PM but in case you didn’t get it just PM me and I’ll resend. I just wanted to invite you to a coffee/lunch next week. Your posts were really helpful about Santaluz and so were some of your PM’s to me before we ultimately decided to purchase here.

Actually I don’t mind the CC&R’s. Before I bought, some of them worried me a bit (like only being able to paint my garage door 1 color that the community decided on) but honestly it’s been great and I actually prefer them now that I have kids.

I guess it’s nice not having to worry about having any neighbors painting a pink garage door or some other wacky color. And I like the fact that owners are forced to keep their lots looking nice and tidy. The security here is great. The staff at the community office is super friendly.

I actually think you get a good value for the money on the monthly $450 HOA fees because it includes 10 MB high speed internet, garbage pick up and Digital Cable included. I have met a few in the community that have been here since Santaluz started and they feel it’s high but honestly there are many places where you pay a few hundred bucks a month and it doesn’t include much and they do a horrible job maintaining the property or security is horrible. That isn’t the case here.

Yes, I’ve enjoyed the moonlight walks. It’s really great! We enjoy the dark sky community. You are right that Santaluz grows on you but it has far exceeded our expectations so far and we plan on staying here for the long run.

Let me know if you’re up for a coffee next week and we can meet up at the French Roast Cafe at Santaluz. Coffee and lunch are on me.

Thanks again.

[earlyretirement]

[quote=EconProf]
Considering this, it seems neither too high nor too low in price.[/quote]

[quote=ocrenter][quote=kcal09][quote=ocrenter][quote=kcal09]Looks like price has come down quite a bit on this home-this type of home used to be over $1 million. Is it a good deal now or still overpriced?

http://www.sdlookup.com/MLS-120001859-8150_Santaluz_Village_San_Diego_CA_92127%5B/quote%5D

Well, these went for around $700k new in 2002. Which means 2001 pricing. Adjusted for inflation and upgrades, this is actually quite a bit lower than 2001 prices.[/quote]

Thank you for the information. Does that mean it’s fairly priced as most other properties have not reached 2001 levels (yet) or is the 2001 price still too high?[/quote]

Assuming this house was 700k in 2002, adjusted for today’s dollar the price without interior/exterior improvements would be 880k.

So 760k is a decent price.[/quote]

I agree with both of these gentlemen that price seems to be decent. And I also would have brought up the point about the inflation adjusted price.

One thing I’ll say is that we absolutely LOVE living in Santaluz. We looked at a lot of different areas including La Jolla and are so very happy with our decision to buy here. The quality of life and lifestyle are really great here. Our neighbors are all friendly and the community is always immaculate.

We looked at tons of houses over a few years span waiting for prices to fall in San Diego and I figured last year was a good time to buy. I reasoned that prices might dip a bit more but over the long haul if you’re buying for the long term, I think now is a good time to buy in a community like Santaluz.

I couldn’t really justify it a few years ago when prices were 35% higher as I figured prices were still inflated but I think values are decent now. I’d highly recommend Santaluz for any potential property owners out there looking. It’s a wonderful community.

[earlyretirement]

[quote=paranoid]sduuuude: I called the phone number on my property tax bill, and the company in charge of the MR called back with payoff number.[/quote]

Paranoid,

Did you have to pay anything for this information? I was told that in my area (Santaluz) that there is a fee to get the payoff quote.

I will probably end up paying off our Mello Roos as we plan to be in the house for the long-term (15+ years) until the kids are done with school.

It does seem to make sense if you are absolutely sure you will be in the house for the long haul.

[earlyretirement]

I’m sorry to hear this happened to you. Frustrating dealing with these types of things.

Just an idea and I’m not sure how valuable the stuff stolen is but you might want to try calling those numbers (his buddies) and offer a cash award for information leading to you getting your stuff back. Typically thugs like this don’t keep good company and I’m sure they would probably turn on their “friend” if a significant cash amount is involved. Just an idea…

[earlyretirement]

[quote=bearishgurl]

A “4000 – 5000 sf” home is not a “need” (unless you have a family of 16). It is a “want.” For a family of 3-5, it is a lot of toilets and empty rooms to clean (furnished or unfurnished) just because they are there. [/quote]

Actually I’d disagree with this. We bought a house around the same size as the OP (just a bit smaller) with 5 bedrooms and 5 bathrooms. At first I thought it would feel big. We have 2 kids with the plans to have another child next year.

We don’t even have 20 relatives visiting at one time! Ha, ha. We have had my mother in law here for the past month visiting the grandkids and the occasional family member that wants to vacation in San Diego and you can guess where they want to crash. And trust me….. I think I’d feel comfortable adding another 1,000 sq. feet.

With in-laws, sometimes a 4,000 to 5,000 sq. foot home is a “need”. 🙂

Congrats NavyDoc on the new home. It sounds wonderful and you will definitely enjoy all that space. We love all the space and definitely utilizing all of the space nicely.

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