Best strategy for Equity Stripping?

Question

My business associates have 17 rental properties, many of which are free and clear.  They are in the process of transferring them into Land Trusts with their LLC as the beneficiary for anonymity & asset protection.  However, what would you guys recommend to do the equity stripping?  They could obviously record a Mortgage, but the stamps are about $1500 per property.  They were thinking of recording a lien on the properties... but didn't know if that was a good idea or not?  Any advice / thoughts would be appreciated.

Wayne Brooks · Answer

Seems like such a fruitless effort....

Anyone trying trying to track their assets will see the transfer from them to the land trusts and suspect they are still the owners and a simple search in sunbiz will show their ownership of the llc.

Any fake mtg would easily be quashed with minimal effort in court.

Megan Templeton · Answer

For equity stripping, I would set up an LLC to hold the notes and then have a note created between each property and the new LLC. The recorded notes would make it appear as if the property is over leveraged in public forums but you would be the actual note holder.

John Bloom · Answer

So, although I understand that a HELOC and/or Mortgage is considered equity stripping as your are literally pulling the equity out, as well as the "safety" of having an insurance policy, and the dilution tactic of ownership parsing throughout multiple entities.  Has anyone considered Equity Stripping by issuing a Secured Line of Credit against the property, from one entity to another by Deed of Trust?For instance, the property is owned by Company ACompany B issues a secured line of credit, payable by promissory note terms, and filed by deed of trust, much like a mortgage with a first lien.

Marcy Angulo · Answer

Thanks Wayne for all the input... it's greatly appreciated. 👍👍👍

One apparent benefit they have is that the LLC is from another State with no public record information.  Nevertheless I know they need to simplify all this as they have a bunch of LLC's both in FL & out of State.

And they did also recently get an umbrella policy.   Thanks again for the responses.  Have an Awesome week.

Greg Felt · Answer

Even if you have it your personal name and you set up loans from you to an LLC you set up...if it leaves you with no dead equity in the property and the lien ends up worthless.

Wayne Brooks · Answer

@Marcy Angulo Correct, the land trust doesn’t show up in sunbiz.  But a search of sunbiz under their personal names reveals any llc’s they’re a part of.... purpled with the public record transfers from them into the land trusts.

I guess it depends on why the asset protection/hiding.

—-For liabilities generated with the properties themselves, typical liability policies plus an umbrella of a couple million is more than sufficient.....even though I know attorneys and others Love to recommend complicated structures, that they get paid to set up/maintain.

—For liabilities created Outside the property portfolio, some other personal liability....that’s where I was saying the “anonymity” falls apart....working backwards, tracking the llc’s they have an interest in, the llc returns/k-1’s would turn up the real estate held in the land trusts.

But, to each his own.

Marcy Angulo · Answer

Thanks guys for the responses.  You guys are Awesome!

Weston,  we'll definitely take a look at the article.... it's greatly appreciated!!! 👍👍👍

Wayne...the Equity stripping was recommended by an attorney.  They're just looking at the most cost effective way of doing it.

As far as the Land Trust... yes, it is fair to assume that they still have an interest, but the goal is that even if it's known, it would still provide asset protection since each property will be owned by a different land trust..  (and the beneficiary is not public info so the Sunbiz search couldn't be done).

Are we missing something? Thanks for the input.  Just trying to help them.

Weston Couch · Answer

@Marcy Angulo Hi Mary, I work with a group that handles these issues frequently and might be able to help. This article details the methods we generally use to remove equity for protection purposes.

Best strategy for Equity Stripping?

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