LLC or Trust to hold investment property?

[Kevin S.]

Hi members,

What is the preferred way to hold investment properties?  My attorney(estate planning attorney) suggested two options.

1. LLC or...

2. My JRT (joint revocable trust) that I already have and buy umbrella policy.  

On BP forum it's usually mention of LLC or personal name with umbrella policy, don't remember mention of JRT.

What would you recommend and why?  Thanks in advance!

[Bob Stevens]

How many do you have? 

[Kevin S.]

This will be my first...What do you suggest?  Thanks.

[Bob Stevens]

Quote from @Kevin S.:

This will be my first...What do you suggest?  Thanks.

 Do one, then worry about how to set it up. It may take you months to get one. Worry about getting a deal closed, everything else is easy, 

You can transfer to an LLC after,

All the best 

[Kevin S.]

Quote from @Bob Stevens:

Quote from @Kevin S.:

This will be my first...What do you suggest?  Thanks.

 Do one, then worry about how to set it up. It may take you months to get one. Worry about getting a deal closed, everything else is easy, 

You can transfer to an LLC after,

All the best 

 Hi Bob, I am closing on the property in about 10 days and lender is asking what would I title the property under.  Trust was one of the option given.  Since I never heard of Trust mentioned on BP I got curious and put the question out here.  Appreciate your input.   

[Bob Stevens]

Quote from @Kevin S.:

Quote from @Bob Stevens:

Quote from @Kevin S.:

This will be my first...What do you suggest?  Thanks.

 Do one, then worry about how to set it up. It may take you months to get one. Worry about getting a deal closed, everything else is easy, 

You can transfer to an LLC after,

All the best 

 Hi Bob, I am closing on the property in about 10 days and lender is asking what would I title the property under.  Trust was one of the option given.  Since I never heard of Trust mentioned on BP I got curious and put the question out here.  Appreciate your input.   

Ok now that makes a difference. IMO LLC, I have used them for 20 years, I am NOT a tax expert, I would ask your accountant, and NOT get this advice online 
All the best 

[Shawn McCormick]

@kevin 

@Kevin S. If you are financing, you may be limited to closing in your name. If you are paying cash or seller finance etc, you'll have options. 

I close in a land trust or transfer to a trust after if I'm financing. A land trust provides anonymity (you can hold and transfer properties outside of public records) Then I have my LLC be the beneficiary of the land trust. So liens and lawsuits become more difficult to pursue. I have two great contacts here in Orlando if you need.

[Kevin S.]

Quote from @Shawn McCormick:

@kevin 

@Kevin S. If you are financing, you may be limited to closing in your name. If you are paying cash or seller finance etc, you'll have options. 

I close in a land trust or transfer to a trust after if I'm financing. A land trust provides anonymity (you can hold and transfer properties outside of public records) Then I have my LLC be the beneficiary of the land trust. So liens and lawsuits become more difficult to pursue. I have two great contacts here in Orlando if you need.

 Thank you Shawn.  I will DM you later for the info!!

[Nick Belsky]

@Kevin S.

Personally, I would put everything in the right kind of revocable trust, but there are complications.

As a broker, I deal with a whole lot of lenders who claim they will close in a trust but don't really understand them.  The idea that Trustee has ownership in the properties is what gets most of them.  The trust will own the property, not the Trustees.  I can't count how many times lenders try to assign a percentage of ownership to a Trustee when numerous attorneys have explained to them that it doesn't work that way, etc... Many lenders struggle with umbrella policies as well.  They like to see a single policy with a single property so the costs associated with it are crystal clear.  I'd say about 60% of my capital resources will work with umbrella's but not without obstacles.

I use a holding company, an LLC, to purchase properties, then once completed with renovations, I either sell or hold them as rentals. Once I refinance to a perm loan, I will then QCD the property to the Trust. That way I avoid all the lender hurdles while they try to understand what they are and how they work. So long as you are a Trustee/Beneficiary of that Trust, you are still on title, so if they try to give you crap about it, it is very easy to prove that.

A better way would be to get a non-recourse loan, then QCD to the trust, but the pricing for non-recourse has yet to recover from what I've seen in the lending market so far.

I don't have any experience or insight into a JRT... or what the advantage would be over an entity when doing JV...

Cheers!

[William Chu]

@Kevin S. If you have the first property just make it simple to get umbrella insurance would cover enough. Until you have a hand full of properties the you can have LLC or trust.