All Forum Posts by: Jeffrey S. Breglio

Rental properties in LLCs, preferably with multi-members. Some of our clients use a land trust for some privacy in addition to the LLC. If you're getting a conventional mortgage on the property, then deed it to the LLC after financing. Yes, the due on sale clause is something you should be aware of, but not something to worry about.

NEVER put a rental in an s-elected LLC or an INC!! Those are for flips and wholesaling and some other income streams. Doing so can make it a taxable event if you ever have to financing the property.

Do NOT put into your family trust. There's no protection, and problems can attach to other assets. Use the LLC with a transfer on death agreement. That way you get the protection while you're alive, and the tax free transfer if you were to die.

Happy investing!
Jeff

@Account Closed. same in Utah as VA.

And as for title and in Utah, I wouldn't insure the transaction if the party to transaction and/or the grantor/trustee of a revocable trust has judgements against them, even though technically the trustee holds legal title and the grantor holds equitable, for the very reason Matt said. I'd have to clear those judgments first.

Oh, no, @Matthew Kreitzer, you are correct about irrevocable trusts. They can be excellent protective tools.  I wasn't referring to those as the question was about family living and standard land trusts. And I find that the irrevocable trust arrangements just usually don't function well for 99% of my clients in 99% of their situations. So, for the most part, I don't recommend them.

No. A trust provides no corporate protection or charging order protection, i.e., no asset protection. When you say "revocable living" trust, I assume this is your family estate planning trust. This is great for your personal residence. It's tough to protect that through entities, and usually not worth the hoop jumping to try to protect it. But any rental properties should be in an entity, preferably owned by more than one person. I prefer transfer on death agreements to pass that entity to the family trust upon your death. But, in a pinch and if you are single, you could have the family trust own the LLC. But you need the LLC (or some other asset protection entity). Trusts work in combination with those entities to achieve other goals ALONG WITH asset protection.

If you mean a "land" trust (which is a type of revocable living trust), then again, No. there is no asset protection. It's great for privacy reasons. But the land trust should name an entity as the beneficiary for the protection.

Hope that helps.

Jeff

Of course. The fee CAN be paid at any time. Good luck, though, in most situations finding a final buyer that has the cash to pay the assignment fee before they get their hard money loan to buy the property. More typical is at and through closing.

Happy investing!

Jeff

@Mark S., there are options including TOD agreements between entities that hold some personal assets (for protection purposes) and your family living trust (for estate planning purposes). To some degree, you can achieve both goals. Discuss with a competent attorney for these.

Jeff

@Matthew Kreitzer has good advice. When we structure asset protection packages for our clients, we use a variety of entities, in combination or stand alone, such as:

Family living trusts

"Land" trusts

LLCs

Series LLCs

Holding/Sub LLCs

Single v multi-member LLCs

S-elected LLCs

Corporations: C (rarely) and S

Family limited partnerships

Multiple other variations of partnerships

TOD Agreements

Joint venture arrangements

TIC arrangements

insurance options, and I probably could go on.

In very rare, limited circumstances will we set up entities outside of the investor's home state and in which they are investing. Usually not worth the hassle.

The point is, we look at:

the value of your assets

what types of assets

the number of assets

where those assets are located

what kind of real estate investing you're doing

other income streams

other businesses you own

your family situation

your long term financial and real estate investing goals

your risk adverseness

and etc.

HOWEVER, let me add, that for the vast majority of investors who have a rental or two, the LLC is still the preferred entity and a great place to start. Can you get more complicated or use another structure? Sure. But why. The more complicated your structure, the more likely you are to screw up the maintenance of it. And then you've blown any protection the legal work provided. We provide education to all our clients on corporate governance (maintaining the LLC) as that is just as important as deciding on the structure. The LLC can be a simple entity with very good protection and easy to maintain. As your assets grow and diversify, then your structure can grow with it. There's a ton of info on my website if you need more info.

Also, a pet peeve, is when investors are "sold" into very expensive "asset protection packages"with fill in the blank forms for all of the above entities at these big real estate sale pitch events. These are not worth it!!! Don't buy in.

Talk to a lawyer with experience in real estate investing. That's easy. We're very nice people! And we want you to succeed.

Happy investing!

Jeff

I read earlier in the thread that for mortgage counting, it's the "titled owner" of the property and therefore to transfer the mortgaged properties to an LLC that you own so those mortgages don't count against you . if I understood that correctly, that is incorrect. @Chris Mason might be able to confirm, but I work with some of the best loan officers in the west who have decades of experience doing this. As an attorney, we work together to help the clients max out mortgages and keep their asset protection. Here's our position.

For Fannie Mae, Freddie Mac qualifying, they count the "debt obligation" that you are responsible for, irregardless if your name is on the loan, and irregardless of how title is held.

For exemple: If your wife has a mortgage on a property that is owned by an LLC that BOTH of you own, then that mortgage counts against BOTH OF YOU for "counting" purposes. This is because as an owner of the LLC, you are now obligated to make loan payments, i.e., you have a debt. They also count private loans, hard money loans and seller financing deals--irregardless if they are recorded!! Why? Because those are debt obligations. It's about honestly filling out the loan application, not what they can verify by credit reports or title records!! This is very important as failing to do so is loan fraud.

In this situation, we often create an LLC for just the wife while she is getting her ten mortgages to hold her properties; we create another for the husband; and when they've both maxed out we combine them so that they own the LLCs jointly. It's also recommended to get mortgaged properties before seller financing deals. Or wife, who can't qualify for a mortgage, puts the seller financing deals under her name/LLC while the husband goes and get mortgages in his name/LLC. There are lots of options.

Sure it's possible to control 117 with properties with multiple entities, but that does not mean that the investor has 117 conventional mortgages in his name because of that.

Long story short, consult with a very experienced loan office in real estate investment! These rules do change and often.

Hope that helps a bit.

Jeff

Keeley, welcome to Utah. We love it here and it's a hot bed for investing! If you don't mind, give me a call at the office and I'd be happy to help you get started here, help you achieve your goals and refer outlets for education and networking and other professionals. We really have some great resources here that you can take advantage of!

Jeff

John, all great advice above on where to look. When you look to the professional services (and really anyone), make sure you vet them, especially CPAs and attorneys. I'm always surprised at investors who will do a ton of background checks on their tenants, but nothing on the people they partner with. Here are some areas to think about:

RE Agent; Property Manager; Contractors; Handy-persons (different than contractors and these are key); bookkeepers; CPA; Attorney; Hard money/private lender. Remember that your time is best spent finding and doing deals. Let others do the rest!

They should have an extensive background in real estate investing specifically. This is a unique area and it takes experience to help guide you through. It's not just "real estate"! I often "undo" work other attorneys have done because it isn't right for investors.

Ask their years experience, how many investor clients, what percentage of their billing is with investors. They should also spend a few minutes helping you understand how THEY can help YOU get to where you want to be.

If you need further help, please don't hesitate to call the office.

Happy investing!

Jeff