Trust, S-Corp, LLC, Property

[Dwayne Fritz]

Hello again BP community.

I'm new and eager to get into REI for Buy and Hold BRRRR's mainly looking for cashflow in North Eastern PA. I met someone through a meetup group, and they recommend getting my investment business setup before I actually acquire any property. Is this necessary?

He also recommended getting everything setup and the way he said I should do it is.

Getting a Land Trust, putting my S-Corp in that land trust, setting up an LLC in that S-Corp and then when I purchase my first property putting that in my LLC. Each property would then get a unique and individual LLC.

It sounds good, but not sure if I need to do all of that before getting any property. Would anybody be willing to advise me on this?

Thank you,

[Bill Exeter]

Hi @Dwayne Fritz, 

Wow!  That is a complicated structure to start off with. It creates a lot of ongoing administrative work, too.  

I would sit down and write out your business plan if you have not already done so.  Decided what you are going to invest it, what your investment strategy is going to be.  

You then need to do something that many investors do not do.  You need to decide on what your exit strategy is going to be. It might change later, but you need to come up with an idea of what it will be or look like. 

Once you have all of that sorted out, I would sit down with your legal AND tax advisors to determine what structure is best for you.  The structure that you outline could cause all sorts of exit strategy problems depending upon your business plan, exit strategy and goals and objectives.  

Do not rush into any legal strategy that is that complicated.  You need to understand all of the above first to make sure that you are not overcomplicating your legal entity structure, especially when starting out.  Sometimes the best risk management strategy is really good insurance, period.