Why did Brandon say that?

[Brenda Whittaker]

So stil stuck on the LLC thing. Please help me. First, does anyone know if my revocable living trust can own my LLC? Makes no sense to have a trust to protect your assets if all your assets are in an LLC and not in the trust. Right? Second, I just read an article by Brandon in which he was swaying toward it not always being necessary to form an LLC, and harshly said we use it for an excuse not to get going, which makes no sense, but he wrote that lenders will not lend to LLC's/ WHAT? Ive been studying this business intensely and have been an investor for many years, and everywhere I go they say use private investors for your real estate rehabs, and every private lender I spoke to said they only lend B2B, business to business, now Brandon says the complete opposite. What is going on?

[Jeffrey S. Breglio]

Let's get back to basics. Yes I am a lawyer with 18 years experience and 15 as an investor. There are 40 hours of video instruction on these topics on my website if you need further help. 

A family living trust is an estate planning tool to allocate assets upon your death. There is NO asset protection with this trust. 

A simple grantor trust, often called a 'land' trust, is used by many investors to hold title to property. This is used for privacy purposes. There is NO asset protection with this trust. 

The LLC is a business entity. There are two 'types' that are commonly used by investors. One is for asset protection and the other is 's-elected' for tax savings (we generally do not create corporations for our clients).

The asset protection LLC, of which the Series LLC is one for those states that allow them, should NOT be owned by your trust. It can be, and some estate planning attorneys recommend that as they are focused on estate planning. However, you can lose some of the protections and possibly put other assets at risk. From an asset protection standpoint, the LLC should have multiple owners if possible (people or other entities), and there are arrangements for single people. Then use Transfer on Death agreements to move your ownership to your family trust upon your death. That way you achieve asset protection while you're alive and estate planning after you're dead goals. Your LLC should be managed by a manager and you individually should be the manager. This structure is used for holding long term rentals.

The 'S-elected' LLC is an LLC with the S Corp tax election. This saves you taxes on flips, bird dogging, wholesaling, and real estate commission incomes. NEVER put a long term rented in this LLC.

So, the type of structure depends on what you are doing, and what your goals are. You cannot apply one solution to all problems.  

Conventional loans, your typical residence mortgage, always requires you to be the borrower. After you get the mortgage in your name, put the house in an LLC. I'm not going into the due on sale clause issue here.

Commercial loans are possible as well, particularly if you have a number of assets as collateral. They will loan to LLCs but will probably ask for a personal guarantee. All have their own lending requirements and 'typically' require a business entity..  

Private and hard money lenders will lend to LLCs but also typically ask for personal guarantees if they do. These will also loan to individuals directly. All have their own requirements. 

Do not bother with trying to pick a state to form your LLC. Set it up in the state in which you live and work. When your assets are sufficient to justify more complex asset protection arrangements, then you can think about other states and other types of entities and structures.

Do NOT use legal zoom to set your entity up. Use a good asset protection lawyer. Online sources will not set it up correctly!

Hope that helps. Happy investing. 

Jeff