All Forum Posts by: Cody Backus

There are several potential issues that could be involved but ultimately he'll have to take the tenant through an eviction if the seller doesn't take care of that. The issue may be if there is a lease agreement in place, equitable conversion, etc. The buyer should build in some legal costs or negotiate with the seller about how they will deal with the tenant.

Drew M. Posted a great response to your question. My only addition would be to check with an Indiana attorney because what you are talking about specifically relates to how your entity will be treated from a legal standpoint and choice of law comes into play. You are better from an asset protection standpoint to have multiple member LLCs in most states due to limitations in charging order protection. If you want to insure that your membership interests in the LLC are transferred upon either of your deaths and would avoid probate you could do one of two things. Have the "Member" of your LLC be your revocable living trust or create a TOD or Transfer on Death agreement to transfer interests upon death. These are amendments to your operating agreement. This is where tax, asset protection and succession planning intersect and where good professionals can help. I am a Utah attorney work almost exclusively with investors having a these discussions every day. I must say though that I'm not licensed in CA or IN, so this is technically not legal advice and seeking legal counsel in Indiana may prove helpful.

Hector, the POA is most likely going to be your best bet. It is the form we include in all of our seller finance package of forms that we (Utah law firm dedicated to investors) offer. Most banks will almost always honor it over anything else. It should be a special power of attorney, specific to the use. Hope that helps!

@Paul Santos  You will only need the name registration with the state, Articles of Organization and the EIN to open a bank account. Most banks won't require an operating agreement, but some do. The operating agreement is something that can be amended at any point. 

As others here have mentioned, you can go online and find lots of documents and you can set up a shell of an LLC through the ACC.

What most of you don't see is how many people screw this up, who get into issues all the time because they don't have solid contracts or agreements in place, who don't have an operating agreement when they needed it most.

It has everything to do with your tolerance for risk, the game you are playing and what price you are willing to pay when things go south. You can't play in the game of real estate investing and think you'll never have issues with partners, tenants, lenders, and other creditors that want to get at your money or potential money. Play the game right and you will be ok. Play it haphazardly and you'll find out the hard way what you should have done. 

I take calls every day from people who "winged" it and who are coming to me to bail the out and because they didn't do things the right way, or things didn't go the way they thought it would. If it hasn't happened to you, give it time. 

Can LLCs be pierced? (meaning they offered no protection) Yes. Can attorneys overcomplicate a legal structure to create "asset protection" and cause more administrative headaches than it may be worth or and increase your tax obligations? Yes. Does that mean that you shouldn't have a solid legal plan in place? No.  

Anyone who tells you that an LLC is a waste of time is not telling you the full story. Are they a waste of time under certain circumstances? Yes, they can be. Can they provide great protection over a myriad of circumstances and help you keep a lot of money? Yes. They should be accompanied by insurance as well. This does not mean that insurance can cover everything either. We have all heard of insurance companies that deny claims.

There is a balance here. Don't go paying an attorney thousands of dollars to put something together for you, but don't trust some scrap document on the interweb to solve your issues or think you can patch things together. Don't hesitate to talk to a real estate and asset protection attorney that is also an investor to find out where that balance is and make a plan that fits both your strategy and budget. It is less expensive to plan than fail to plan. That, I can assure you.

Hey guys, take what I am about to say as you will, because I am an Arizona attorney and work with real estate investors every day as an asset protection and transactional attorney. What you get by going online is a name reservation that has LLC tagged on the end. What you don't get is real asset protection. In addition to the name reservation and a certificate or articles of organization is an operating agreement that actually spells out how your LLC will be governed. May not be as big of a deal if you are operating solo in your LLC, but absolutely critical if you are operating with a partner, even if that partner is your spouse. In all reality, your LLC won't do you much good if you don't have an operating agreement and you will get the most bang for your buck in terms of asset protection if you form a multi-member LLC, even if that other member has a smaller interest in your LLC.

If you want to get real asset protection for your rentals, set up a multi-member LLC and have an attorney do it. I see operating agreements all the time that don't really provide asset protection. Our operating agreements are going to prevent creditors from getting at certain things that you would otherwise lose. Trust me, the cost of setting it up the right way is worth way more than it would cost you to not do it right.

@Caleb Rigby, I'm with @Jeff Rappaport on this.  I did meet yesterday with a buyer who has been buying foreclosures for over 7 years and knows the process well. He also uses his own funds so he might be a good person to chat this over with or partner on.  He's also a BP guy. 

@Gavin Walker, definitely recommend you connect with @jeff Rappaport and/or MJRE group out of Lehi area. Also start coming to the SLREIA, UVREIA and UTREIA meetings to network with other wholesalers/buyers.  I happen to be a real estate attorney that works almost exclusively with real estate investors. I work with many of the most active and successful wholesalers and flippers in the state. Below is a link to our website for a couple hours of training on wholesaling. We are always generating new content to help educate investors and keep them out of trouble. I am happy to introduce you to other wholesalers if you'd like. If you need good purchase contracts and assignment contracts, etc, let me know. 

http://bregliolaw.com/wholesaling-basics-webinar/  

@Carlos Nunez, sorry I missed your post. Hope you were able to cover everything.  As a matter of reference, I am an attorney here in Utah (South Salt Lake area). My practice is primarily focused on real estate investors and their various transactions. I work with Jeff Breglio who has been working with real estate investors for over 15 years and has seen every type of transaction out there. We cover everything from wholesaling to asset protection strategies.  Jeff is also a licensed escrow/title officer so we close many transactions as well. This gives us the ability to help our clients structure creative investment deals as attorneys and help them close those transactions smoothly. Feel free to reach out with any questions. 

@Ronda Doxey, Generally speaking, a Series would be great for this. However, when you mentioned partners, I just want to make sure you understand how mosts series work.  Will you be using the same partners on all of your rentals? If not, the Series may not work. Utah Series don't allow for different Members on each property or each baby within the Series. If this is the case in Texas, and you want to use different partners on each property, a Series will not work for you. If you are using the same partners on each property, the Series is a great option for asset protection while reducing your accounting costs. 

@Joe Au, Does your family care if their money is secured by the real estate so that if you default they have a security interest in the property? 

What kind of deals are you talking about? Are these buy/hold or flips? Are you just doing deals in Utah or in other states? 

Do you plan to use their money to fund the acquisition or the rehabs?  

There are several ways this could be structured depending on your answer to the questions above. Happy to chat with you by phone if'd like. I saw you signed up at UVREIA meeting last week to get materials from Jeff Breglio. I am the other attorney he had stand up in that meeting, the one who hasn't seen any of the Star Wars movies...