Attorney Charges - Any Thumb rules?

Question

Hi,

Today I spoke to one of the Attorney/portfolio company which offered a free consultation to talk to me about LLC strategy and ofcourse understandably also as a sales call to get me as their client.

Basic Structure --> They suggested a "anonymous" base Wyoming LLC and state specific discarded entity LLCs holding properties. Move any property into a "land trust" and then deed the property into it and move into LLC.

But some of the charges they quoted surprised me (as a first time investor :)). Posting here to get some guidance on what the acceptable attorney charges are. The following were their charges.

1. One time $2500 to become their higher tier member of their group (will get access to attorneys, consultants, Tax help etc its a whole bunch of access one will get including adhoc questions on need basis).

2. From then on a monthly $35 fees to keep the membership active (eternally)

3. Their cost to create a LLC is $1500 (apart from actual state fees)

4. Their cost to create a Land Trust was $600. An additional $450 for deeding my property into the trust. (apart from state charges and fees)

Are these charges in the right ballpark? Any tips?

Thanks!

Jerry W. · Answer

@Rocky R., I am struggling to understand why you would want such an aggressive set up for doing a few rentals. A well done LLC or 2 at the most should be sufficient. An LLc can be set up in WY for fees of $150 in about 10 minutes online. You can buy a stock LLC book online for less than $100. Learning how to run an LLC is much more important so you don't lose your protection by comingling assets, alter ego etc. Most of the folks touting the complicated expensive protection programs are the folks selling them. None of the real movers and shakers on these sites use them. They buy insurance, use LLCs or other entities and run them right. Deeds run about $50 to $100 and a lawyer can easily do a dozen a day.

Ned Carey · Answer

@Rocky R. Please read and understand @Jerry W.'s post Exactly, my concern about this is that you wont get the important information about how to run this structure properly. My guess is they are offering a boilerplate program not something specifically created for your needs. The fees they are charging are not outrageously out of line, but they are a lot more than I would pay. My initial LLC was set up by an attorney for $1,000, which i would think about average. But he could not explain the operating agreement he made for me or answer questions about it. He simply said "oh it is just boilerplate" There is nothing wrong with boilerplate documents, attorneys use them all the time but a good attorney better be able to explain it. Since then I know create my own LLCs. I have many books on the law and some by Nolo Press specifically about LLC, other entities. I am not suggesting you do it yourself. I am suggesting you learn about some of the legal issues so that you can communicate and work more effectively with your legal and tax professionals. Keep in mind that what an accountant recommends and a lawyer recommends may be in conflict. They are advising for different goals; tax savings vs assert protection. You not only have to initial cost of this structure but the cost of maintaining it. Multiple bank accounts, multiple tax returns, separate books, and other administrative tasks cost money as well as taking valuable time. i am skeptical of this because of things they may not tell you. As an example there is no statutory basis for land trusts in MD. While land trusts can have benefits, they are one of the most overused and oversold strategies in asset protection for real estate investors. They provide no true asset protection and the privacy they supposedly provide is easily pierced. A land trust is a revocable trust and often recommended when a revocable trust is absolutely inappropriate. They may also may not tell you that any privacy you get from a Wyoming or Nevada LLC is negated by the fact your LLC has to be registered in the state you do business in and there can go your privacy. Yes they will have answers for these. But his wouldn't even slow down a good attorney much less stop him or her. Unlike @Sean Morrison I am not an attorney and the above is not legal advice for your specific situation. It is just one laypersons understanding of the law.

Sean Morrison · Answer

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.Not knowing your situation, I would just say they are describing a pretty advanced asset protection strategy. The fees would not be outlandish if that's what you needed. Based on this description, I would assume you have a pretty extensive real estate portfolio spanning multiple states with an important need for anonymity. If that's not you, it may be worth shopping around.

Jerry W. · Answer

@Ned Carey, you changed your picture bud! It threw me for a bit.

Steve Morris · Answer

Well, if said atty specializes in real estate and business structures and has been doing it successfully for 25 years that'll cost more than a new law school grad.I don't think $1500 is unreasonable, but he should give you a GFE of hours and activities. It may be a complicated LLC requiring a bit more than a boiler-plate operating agreement.

Gabe C. · Answer

@Rocky R. I would get a second opinion from another lawyer. I agree that it sounds overly complicated and aggressive for what you’re doing. If you only have 1 property so far and only a little equity in it you probably could get by with no LLC and just umbrella insurance. It all depends on your situation and risk tolerance. If there’s not much for someone to go after, you aren’t much of a target. If your properties are scattered in different states, it will be even harder for someone to link you to them. Anyway, I’m not a lawyer, but it sounds like a lot of unnecessary work and annual fees.

Ned Carey · Answer

@Jerry W. I'm the one on the right. The good looking one is my dog. :-)

Rocky R. · Answer

Hi @ALL,People who have been dealing with attorneys, could you please indicate if these prices quoted above seem reasonable? I am thinking to get moving on this soon. Appreciate your help.Thanks!

Rocky R. · Answer

@Sean Morrison Thanks for your reply. I currently have 1 single rental property out of state. And my intention is to go up at least to 5 properties in the next 6-8 months in various state. I consulted to understand the strategy. But the fees surprised me, so I was not sure if these are reasonable. For example $1500 to create a LLC, I didn't have a baseline if this is the norm.