All Forum Posts by: Clint Coons

Either one works. It comes down to preference, buyer comfort level with the transaction, and the concern you may have regarding the lender accelerating the mortgage. The land trust is beneficial because it masks what is going on behind the scenes with the assignment of beneficial interest; however, it is not as straight forward as the LLC purchasing the property and some sellers get confused. I always recommend my clients inform the seller to run the transaction by their attorney (only when purchasing the seller's residence) to minimize future claims of equity theft, e.g., you took advantage of a distressed homeowner.

@Demetria Sanchez

One of the main benefits of using the wholesale trust is to avoid the assignment of contract.  If you can assign the contract, this is the most straightforward approach to take for the buyer, but when using the trust, you might consider assigning the trust itself.  This works as follows:

1. Enter into an agreement with the buyer to purchase your trust beneficial interest.
2. Buyer pays you for the beneficial interest (pays your corporation because the corporation is the beneficiary)
3. Your corporation will assign the beneficial interest to the buyer and resign as trustee.  The buyer then becomes the trustee of the trust.
4. I often recommend that buyer restate the trust agreement to remove any mention of your corporation or you as the trustee (I recommend this step because if title requests a copy of the trust the mention of your corporation and you as the trustee could throw the sale off.)

Best of success

@Lisa T.

For rental real estate, you typically elect to treat the holding LLC as disregarded or partnership for federal tax purposes. My preference is to make a partnership election because of the way the income flows on your to your 1040. If you want to learn more check out my youtube channel. The name is real estate asset protection.

@Lisa T. 

There is no difference between a holding LLC or a series LLC in WY. The holding LLC is just a term we use to describe its purpose, I.e., hold other LLCs. When you set up the LLC with the WY secretary of state you do not indicate you want a holding LLC versus a regular LLC. A series LLC can serve as a holding LLC. A series LLC is an LLC that allows you the option to establish cells (separate series) for asset protection. The main LLC is referred to as the parent and the parent is essentially a holding LLC with some additional upgrades i.e., active lane assist and a heads-up display. You indicate some commentators have stated series LLCs are not tested. I am not going to address this point for purposes of brevity but I would like you to know that these comments only pertain to the use of the cells and not the parent LLC. Thus, if you are trying to decide between a "holding" or "series" LLC to hold your other LLCs it will not matter. Both are LLCs and will accomplish the same goal. I think the more important question would be how will you treat it for tax purposes.

What your proposing is not an issue and is routinely structured this way by many investors. For example, properties are held in separate LLCs, and a management LLC is set up to handle tenants, accounting, rehab, etc. Ultimately you will need to remit the income back to the property LLCs (minus expenses and payments made on behalf of the LLC). Where investors can trip themselves up is when the money never flows back through the property LLC and is instead distributed out of the management arm to the investor. Granted, this is not a tax issue but an asset protection issue. A plaintiff could argue the LLCs were part of one joint enterprise and seek to ignore the entity's separate shields. Just make sure you run the money the right way and document the relationship between the entities, and you will strengthen your protection.

@Jake Langley

Yes, this is a common problem using land trusts.  First, find a different title company.  This is the most frustrating part when using a trust.  For example, a client of mine in Oregon ran into the same problem with Chicago title.  The Chicago title representative told me Chicago title does not recognize land trusts and won't underwrite.  When I pointed out Chicago title actually provides sample land trust documents on their website, the conversation got very strange, and we ultimately had to find a different title company.  Second, do not tell the title company you are using a land trust; just refer to it as a grantor trust.  When title asks for a copy of the trust do not provide the original land trust, restate it as a typical living trust.  I do this all the time now after years of fighting with title companies or their attorneys who hide behind emails and refuse to get on the phone with me to discuss.  This always works.  

The other issue you are going to run into is negotiating the check. If you have not opened up a bank account in the name of the land trust, then you will need to open one up. I like to use the same name on the LLC that holds the land trust, e.g., 14th St LLC and the 14th St Trust. Banks will typically allow me to deposit the trust check into the LLC if they have the same name. Another option is to register a DBA for the LLC using the name of the trust. I do not know if the DBA option will work, but I am currently trying it because I have a check made out to the trust and the LLC I set up 17 years ago did not match the trust name. Because of all of these hoops, this is why I typically tell people to transfer the property of out the trust prior to sale.

@Account Closed

Typically it's a good idea to wait 30 days before recording the deed the make sure nothing is amiss.  You will notice I said wait to record not "Wait" to execute a deed.  A common mistake made by individuals is the belief a deed must be recorded to be valid.  This is not the case.  You can deed the property to your entity, and it is a legal transfer irrespective if you record the deed; however, you will want to record to prevent personal liens from attaching to the property.  The "due on sale" is not an issue in my experience.  Freddie allows you to move the property into an entity without violating the acceleration clause.  As far as other lenders, so long as you pay the mortgage, insure the property, and pay property taxes, the likelihood of acceleration is very small.

@Dzenan Catic

@Matthew McNeil

Yes, the QC deed issue may not be universal with all title companies. It's always prudent to inquire and get it in writing. However, Dzenan the response you received " wholly-owned by the owner" what does that mean? If you use a holding LLC to hold the real estate LLC, are you covered? How about if you place your LLC in a living trust? I won't risk the QC unless there is another issue to consider, e.g., costs, etc.

@Dzenan Catic

The only thing is to complete all of your financings before you move the properties into the LLC. I have clients who will tell us after the property is placed in the LLC that they want to refi. Ugh. We have to pull the property back out for the refi then put it back in.

@Melanie J Clay

This is a bit more complicated to answer without first knowing what type of entity are you using to buy the property and how is it taxed.  If you provide this info and I can provide you an answer.