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Updated over 5 years ago on . Most recent reply

Account Closed
  • Broward County, FL
1
Votes |
12
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Land trust

Account Closed
  • Broward County, FL
Posted

I am going to get a rental property here shortly. I have not began investing in real estate to this point. What would make the most sense in terms of maximum protection for myself. I plan on building up to multiple rental properties. From what iv'e learned it is best to have each property in a land trust, and have all the land trust under the same LLC. Is this the best way to do it, or even a way that makes sense?

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Scott Smith
  • Attorney
  • Austin, TX
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Scott Smith
  • Attorney
  • Austin, TX
Replied

I have recently written a BP blog post on using the trust/LLC combo. I will be addressing asset protection in an upcoming BP podcast.

Maximum protection in real estate should be looked at as bricks that build a wall. The more bricks you stack, the higher it is to climb, but the more expensive it is to build. 

At a minimum I recommend 3 LLC's. One for the operating company, one to hold or be the beneficiary of your rentals, and one to hold or be the beneficiary for your flips. The reason for separating your buy and holds as well as flips has to do with tax treatment for the IRS. If you have them all together in one company, IRS can decide to tax you at the higher rate.

The biggest error people make is not following through with all the proper paperwork for the LLC which technically makes it so that it no longer protects your ASSets.

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