All Forum Posts by: Cody Backus

Registration of a foreign entity is much easier than forming an LLC, paying the annual filing fees, additional tax returns, dissolution, etc. Registration in AZ can be done by filing a form from the Arizona Corporation Commission's website at http://www.azcc.gov/Divisions/Corporations/forms/s...

Submit that form to the State of AZ and wait for their response. Should take less than 10 days. 

You will need to find a registered agent. Find the cheapest one you can. Should be less than $100 per year. I would say you should be able to find someone who would do that for $50p/year.  Just do a inter web search for Arizona Registered Agent Service and make a few calls. 

Although I am an attorney, this suggestion does not create an attorney-client relationship nor does it represent legal advice.  I am a licensed attorney in Arizona but do not live there, otherwise I could help you more. Seeking a business planning attorney in Arizona would be my first suggestion for you.  Keytlaw.com does a lot of work for LLCs in Arizona. 

Welcome @Trevor Carver, You are already getting some great recommendations. I can't speak highly enough of the Real Estate Investors Associations (REIA) here in Utah. Great way to get educated and connected at a very low cost ($100 p/year). I also know several guys that are finding off-market opportunities. This is the sort of thing that @Cody Tanner is looking for as well. I am the attorney for many different types of real estate investors here in Utah and am happy to connect you with people who are doing deals and bringing deals to the table.  

I might also suggest you look up Tom Krol at Wholesaling Inc. as a wholesale coach. I know several guys who have followed his system and are KILLING it here in Utah.  They swear by it.  

@Nick Jensen made a great suggestion about how to structure the arrangement between you and your two investors. An LLC with a good operating agreement will outline the structure of the relationship and will be the foundation for how you operate as partners, who gets paid and when, who has to contribute funds, how much, and when, what happens when one member wants out of the partnership, becomes disabled or dies, etc. It will also provide you with asset protection against the property and for the members so that your risk is limited to the investment and personal assets do not become subject to legal exposure. Happy to discuss this more with you. Some people might also suggest a Joint Venture agreement which is also a possibility but does not provide you with the asset protection so each party would need their own LLC to get that. I would just do an LLC for simplify and protection,

As a Utah business and real estate attorney, we advise investors clients on a regular basis how to set up these sorts of structures.  You can find us online at Breglio Law Office or shoot me a PM and I will connect with you personally.   

Justin Young, I typically sell private/hard money loan packages to private/hard money lenders. It is a set of forms that you can use when acting as a lender. If you want access to all the documents you would need for such transactions, shoot me a PM or call my office (Breglio Law Office, Utah).   

You can also do a inter web search for Note & Deed or Mortgage to see some of the language.  Hawaii looks like a trust deed or deed of trust state (different than a mortgage state). We have a 1 hour video on our website and on youtube that goes over hard money and private money loans. Search Breglio Law or Jeff Breglio on youtube and you will see all our real estate investor videos, including the hard money loans.    

Well, that language is certainly important in the note, but it is not enough to actually secure the note against the property.  Maybe you already new that, but you also would record a Mortgage (in New Jersey as a title theory state) or a Trust Deed (in other states) for this note with the county to fully protect the note against the property. The note/mortgage should also grant foreclosure rights, default amounts & timing, notice requirements,  personal guarantees, and lots of other stuff. This gives other potential creditors notice. Without this, your friends loans could be subordinated by other liens against the property, meaning they get paid second, not first. I would find a good real estate attorney in NJ that could give/sell you a simple loan doc. They can keep it simple but still cover more than just a paragraph. This will look good to your lenders and help them "feel good" about the loans they are providing, knowing their money is secure and the terms of payment, default, extensions, etc. Is all spelled out. If there is one way to make a friendship go bad, it is borrowing and not being totally clear on every detail about how things will work out. You will inevitably make assumptions differently and then expectations are different and then... friendship is over. It seems harsh up front but taking it seriously and spelling it out and laying it all out is the best way to show respect and professionalism. I see too often friends doing this and then it spoiling the relationship when things don't go as planned. And when do they go as planned in real estate investments? Exactly.  

Hello Dana, wow, lots of great questions.  First let me say I am a real estate investment attorney in Utah and draft private money and hard money loans with regularity.  

The first question you should ask is whether it is best for you and your private lenders to have their money secured by the property. Any good private lender would and I think someone who is working with friends and family should also grant that right to them. This way they know their money is secured by the property and if you default, they can know that they have a security interest in their property and will get their money back.  This note then becomes a Note & Deed that should be recorded when you close on the property and a good title co will record this with the Warranty Deed.  

The rest is a matter of negotiations and what is best for your lenders. Some charge an origination fee, some don't. Some want payments, some say just pay at the end when you refi out or sell.  My father was recently a private lender to my brother on a transaction for $130K. My recommendation to my father was to charge an origination fee and secure his interest on the property. This way, even if my brother flips the property in a few weeks, my dad hasn't risked $130K on something that only paid him a few $$ in earned interest. To me, that was a lot of risk for very little reward.  

I would suggest some form or origination fee or minimum about owed so that if you refi or sell quickly, they are rewarded. If you would like access to some private money loan form documents to use in these scenarios, let me know. 

Sure...Me. Ha ha. What do you need a lawyer for? Can you be more specific? Title companies are everywhere, but you should find one that is familiar with wholesale transactions. Have you attended any local REIA meetings? If you don't know what I am talking about, search the web for "Atlanta REIA" or "Conyers REIA" and you should see some local chapters. REIA stands for Real Estate Investors Association. Free to attend the first time and you should find lots of people there that know lawyers and title companies that work with wholesalers. You will also learn a lot at these meetings.

@Todd Krzeminski, your outline of the steps is accurate. The Warranty Deed transfer can be done by a title company or by yourself but because this will be recorded with the county, they have to be very exact and accurate.  PM me if you'd like to know more on this topic. 

The biggest thing you are missing in your "steps" is an Operating Agreement (OA). Brian P. is correct, in that a poorly operated LLC can be pierced, especially if you do not observe the corporate formalities and respect the entity. One disadvantage of setting up an LLC online through the state is you do not get an OA, which is a critical component of the entity. Many people think the Certificate of Organization of Article of Organization which is provided by the state when you are done is an OA. It is not. The OA acts like bylaws for a corporation and is the governing document for how the LLC operates and behaves. A court may consider that without an OA you were not very serious about how the entity behaves and is governed, which reduces your protection. Even for a single member LLC this is important because the OA dictates how the company and corporate veil can be pierced. Weird I know, but without the OA, your protection defaults to your state statutes and you may not get the protections you need. A good attorney will know how to draft an OA to get you the added protection you need, and can advise you on how to protect the corporate veil. At our firm, we act as registered agent, help our clients have annual meetings and record those minutes, guide them on the commingling of funds, make sure they are signing all their documents as managers or members of the LLC, using the LLC name and bank account when appropriate, not signing personally, etc.

A good attorney can be worth their weight in gold.... but hey, that is easy for me to say because I am one! Hope this helps. 

James Miller hit the nail on the head. If you choose to transfer wealth through real estate, the Revocable Living Trust is a great tool to ensure that the properties do not have to go through probate (a formal or informal legal proceeding) to be transferred on to the next generation. However, as James mentioned, the RLT does not provide asset protection. LLCs on the other hand are great for asset protection, and Utah is one of the few states that allows what is called a "Series" LLC. The Series is designed to reducing your cost and administration head aches in creating a new LLC for each property while still providing isolated asset protection for each property. Finally, because you do not want to limit your asset protection by putting an LLC into a trust (because then it becomes single-member and your asset protection is reduced, you would use a Transfer on Death document that transfers that property into the trust when your parents die, this way while they are alive, they can get maximum asset protection and avoid probate. As a Utah attorney at Breglio Law Office, we create this sort of structure for our clients on a regular basis. We can discuss this with you and determine if it is the best way to accomplish your goals.