All Forum Posts by: Nat C.

Sorry to sound harsh but you are not an experienced, hot shot investor when you own 2 properties. Not even close.

These days people are listening to real estate podcasts and suddenly they think they’re an expert.

You sound like the epitome of an entitled millennial. I barely know where to begin.

Your father no doubt financed your living expenses for at least the first 15 years of your life.

If all was fair and even and 50/50 you would have paid him back the costs incurred plus interest.

It is an honor for a child to be asked to help their parent at any age. In most cultures, this would be seen as a privilege for you to have such an opportunity.

A couple of years ago I helped my mother find 2 investment properties and then I managed the entire remodel project and found qualified tenants. I also paid for most of the remodel. I would not even consider asking her for some ownership stake in those properties.

It was my DUTY to help her. I felt grateful I had the opportunity to pay her back a little. I was extremely happy to see her taking what she’s considered was a risk and steps to fund her own retirement.

I could go on and on about the lack of respect and appreciation of parents and the elderly in western culture but I’ll finish here.

That's such a cute little property. Congratulations on your purchase!

I would love it. There are enough 2D characters around. I like people with more depth of character.

Sorry for not clarifying but there are a couple of select states that provide anonymity of LLC ownership and do no disclose the members or managers. I know that Delaware, Wyoming and New Mexico don't disclose.

My technique of outsourcing isn't common anywhere, simply because people don't know of this method but it's truly a winner move!

A land trust DOES NOT provide limited liability protection. Not at all. Land trusts are good, mostly just for the point I keep mentioning; anonymity. However you need to have an LLC as the beneficiary to achieve any limited liability.

And lastly, you are correct that having the loan in your personal name will expose you. Good thinking for pointing this out. A loan won't connect you to a property directly. Like if someone is trying to locate the personal owner of the property, they won't be able to do so using the address. However if someone knows your name and wants to find your assets, they could do that and litigation attorneys are very good at that. So it may be dangerous for outside threats, like a car accident.

Nice to connect with you again, my friend. 

 Thanks for your comment on my post, David. I am not sure what part was conflicting though?

Firstly, CA is a whole other ballgame. They do things their own way and impose high taxes for the privilege of living and doing business there. So I am only referring to the other 49 states. 

With regards to bookkeeping and tax filing costs, I disagree that this is an extra expense. Bookkeeping can be outsourced to a cheaper country. My bookkeeper of 8 years charges $3 USD an hour and has ninja precision. There's also inexpensive software platforms that do it all for you. With the holding company, there is consolidated tax filing. The subsidiary LLC's are taxed as disregarded entities and everything flows back to the holding company, needing only one tax return.

You can also avoid the commercial loan by buying the property in your personal name with a personal loan and then transferring the property into a land trust. You don't need to notify the lender when transferring to a trust. Then the LLC will be the beneficiary of the trust. So this is one workaround.

It's interesting to see that more people here are leaning towards personal ownership and away from using LLC's.

I feel there is a lot of misinformation and incorrect facts bouncing around within the RE community as a whole.

For me, the most pertinent issue is achieving anonymity. This isn't possible with either personal ownership or direct LLC ownership. If the investor is the managing member of an LLC, their name is shown as such on the Secretary of State website. And it's so easy for courts and lawyers to pierce the corporate veil. Many investors neglect to follow corporate formalities and their LLC is deemed to offer no protection.

A more sophisticated setup is a holding company in a state like Wyoming, which controls all the subsidiary LLC's. This keeps the investors name completely off public records and no one knows that you own anything. This decreases the chance of being sued astronomically.

I read an article a while back which asked Americans how they planned to make money in the future and at the top of the list was getting a payout from a lawsuit. There are many people out there who are actively looking to sue someone with money.

Homeless and poor people do not get sued because it would be a pointless exercise. The judgement would be worthless. Driving an inexpensive car and having nothing in your personal name is the best asset protection strategy you can have.

Having adequate insurance is good but I prefer to not get sued to begin with. Lawsuits are highly stressful. Insurance companies often just pay out the claimant because it's cheaper than going to trial. Your premiums then skyrocket.

People saying that it's so expensive to have an asset protection structure are incorrect. If you pay an attorney to set it up for you then, yes, this would be true. However it's definitely something you can study and set up yourself. Let's say you have one Wyoming Holding company and 3 Florida LLC's for 3 million dollars of real estate. The setup cost is going to be around $500. The ongoing annual fees including registered agents is going to be around $600. That would hardly put a dent in your opex.

The unforeseen cost is in the case of any eviction or legal matters, the investor cannot self represent. Only an attorney can handle it but most investors I know use an eviction company when needed anyway. 

To be fair, I know very little about financing, having never really used it. I realize that a commercial loan is needed for an LLC, which comes with higher rates. But I also like to sleep soundly at night, not worrying about someone coming at me with a frivolous lawsuit.

@John Erlanger

80% of my properties are in Miami, near the water, then central Orlando, Charleston and a couple on the water in Daytona Beach. The first 3 cities are extremely expensive markets.

I’m not sure why you’re being so judgey and aggressive.

 No, Sir. I achieve a 20% cap rate by buying off market deals for well below market prices and number two, forced appreciate through sweat equity. I am a developer, rather than just an investor. Most of my projects undergo massive development. 

You are seeing 20% and think it's too good to be true. It's not. You only win when you buy. 

@Joseph James

It sounds like you are holding the properties in your personal name. Some people think this is completely acceptable if you have adequate insurance. Well did you know that holding real estate in your personal name, increases your chance of being sued astronomically.

It’s undoubtedly better to avoid being sued at all. Insurance companies typically settle with a claimant before it even goes to trial because it’s cheaper than paying a team of attorneys. And then your insurance costs will substantially increase.

Most people think they're protected with the real estate within an LLC. Well guess what, that's a false feeling of safety.

Firstly, the owners name is still on public record. Anyone can go to the Secretary of State website and see your name as the managing member of the LLC. That means everyone knows exactly what you own.

Secondly, the courts have in many cases ruled that a single member LLC is simply just the individual themselves. This is known as piercing the corporate veil and occurs when the investor fails to follow corporate formalities like using separate business bank accounts.

A holding company in a state with good asset protection laws and anonymity is an excellent method for keeping your personal name off the public record. If someone goes to the Secretary of State website in the state where the property is located, they’ll see the holding company as the managing member, not Joseph James. Jospeh James is in fact nowhere to be seen and doesn’t have a penny to his name as far as prying eyes can see.

An investor can set up an asset protection structure at any stage, even post acquisition. It’s very simple if the properties are owned outright. If they are financed, there’s a few extra steps.

You need to seek written permission from your lender to transfer from your personal name to an LLC. Your lender may require you to refinance with the LLC as the borrower and probably at a higher interest rate as a commercial loan.

Don't transfer directly to an LLC without written consent. Most mortgages have a "due on sale" clause, which means that if you transfer ownership of the property, the lender could require you to pay the full mortgage amount.

Alternatively you can transfer the property into a land trust without consulting the lender. You will then start an LLC to be the beneficiary of the trust.

Whether transferring property into a land trust or an LLC, you will need to deed the property into that entity. Most people say a quitclaim deed is fine but a warranty deed is a smarter option to strengthen the chain of title.

Deeding property isn’t too hard. It just requires filling paperwork and recording with the county recorders office. There are some small fees to be paid.

Asset protection attorneys will do this all for you for a hefty fee. I was able to do it myself with my paralegal completing the paperwork because I don’t like filling out forms!

Feel free to PM me if you need any help.

Maximum of one million dollars inside one LLC. Each LLC is owned by a WY Holding Company.

The subsidiary LLC's are disregarded entities and the income flows back to the holding company for consolidated banking and tax filing. The holding company can be any entity you choose (c-corp, s-corp, LLC) and should be selected after a discussion with your CPA.

There is no 'one size fits all entity or structure', however the above structure is an excellent asset protection method for real estate investors.