All Forum Posts by: Mike S.

The Garn St Germain Act protects you from a due on sale clause if you are the beneficiary of the land trust. What you do after with assignments is private, and you can always revert it back to you if needed by just signing the assignment paper and have it accepted by your trustee.

I transfered title of the property with a warranty deed to a land trust that I was the beneficiary.

I then assigned the beneficial ownership to the LLC.

My lawyer, who is also my land trust trustee charged me under $400 for the Land trust and deed.

I created my LLC and used an operating agreement that I bought from an an asset protection firm.

The LLC has its own account and all rents and expenses eventually go through it.

However as I have multiple LLCs for different properties, I also have a C Corp as management entity that is under contract with all the LLCs. My tenants are dealing only with my C corp for the rent and lease. 

All my LLC are owned by a WY holding LLC, that is owned by my living trust for estate planning.

I have annual meetings and board of directors meeting for my C corp.

One of the standard setup is to have each property in its own single member LLC in the state of the property.

The property LLCs are then owned by a holding LLC in WY or NV to benefit from their good charging order protection.

In addition, you would use a C corp as management corporation to take salary (if needed to show steady income for future loan approval), retierement, medical and other fringe benefit. You will also use it to deduct most of your business expenses.

This standard template may be modified to accomodate some specificities, like states where a series LLC may be less expensive than having a different LLC for each.

Also you can add a layer of Land Trust for each property for anonymity and to give some due on sale close protection.

A lot of people here will tell you that you don't need any LLC or entity structures and that you can do with only a liability insurance. I disagree as to me they are both needed, but I understand that for some it may not be necessary due to their threat level.

Also using entities will create additional costs (creation, maintenance fee) and additional administrative burden to keep its protection veil intact (multiple bank accounts, paperwork trail, tax reporting). It may also create additional issues for obtaining loan as most conventional lender won't accept to mortgage a property held in an LLC. Commercial loans are more expensive.

At the end of the day, I believe that it is the duty of all investors to understand the pro and cons of all these different setups and to make an informed cost/benefit choice about what will make they sleep better at night.

Do you have some good insurance brokers to recommend who cover Broward County?

So far I have been unlucky with the few prior brokers I worked with.

Either they have no clue how to deal with rentals and LLC or they never follow up on requests and I have to chase them down for weeks before getting any return call.

I am looking for a broker who could take care of all my insurance needs for my home, LLCs with rentals, condos, commercial and personal liability, etc...

If you are closing in your own name, you should pay yourself. How can you justify having a different entity paying for something that you buy for yourself? That would be commingling money and would pierce the veil of your company.

Depending on the bank a trust account will be considered a personal account or a business account. I created a living trust for my estate planning and retitled my personal accounts accordingly. Some banks kept it under the personal account agreement, some made me switch to a business account agreement.

Originally posted by @Michael S.:

What is legal to include in the articles for an LLC in Texas may be an illegal structure or arrangement in New York, for example. Be very careful doing this unless you're using articles from another LLC formed in your state.

 Excellent point I forgot to mention.

Registering a company is really easy and you can do it yourself or use any of the registered agent services that will charge you a small fee for it.

However the operating agreements, that would be signed by the members, are the most important piece of internal documents, especially for asset protection. The boiler plate ones that are provided by online services are very generic and are not optimized for the goal of your LLC. I you create an LLC for asset protection, you will need asset protection oriented operating agreement. If you want an LLC for a partnership in a real estate purchase, you will need an operating agreement optimized for that goal, etc...

That is why it is highly recommended to have a lawyer specialized in your field of operation to draft this operating agreement for you. Even if this document is not recorded nor published, that will be this document that will be your first line of defense or point of failure in court.

Now if you have multiple LLC having the same function, you can pay once for the first LLC and reuse the same operating agreement for the others.

In the same token, you can find some companies that are selling operating agreement templates that are focused on a specific goal. That may be cheaper than a full lawyer draft customized one.

You can also collect multiple sample operating agreements from other investors here at BP, and pick and choose the article that make sense to you and draft your own one. But that is risky if you don't know what you are doing as you may miss some big items. Also, you won't get any specific advice from non lawyers as it would be illegal to do so.

For me, I am more a DIY type and I have bought some specialized templates. I am also collecting operating agreements drafted by different lawyers from other members to attempt to compare them and try to understand the differences and see if I am missing something important in mine. For my core main asset protection holding LLC, I had my operating agreement reviewed by a lawyer.

When you have a tenant moving in the middle of the month are you prorating the first month and then collecting the next rents on the 1st, or are you collecting a full month and changing the lease contract to make the monthly due date on the anniversary day of the beginning of the lease?

I can see the following pro for both options:

prorate month:

- lower the total amount of money that the tenant has to give to move in, in addition to the last month and security deposit.

- make all collection date the same for all properties.

change date due:

- give a cash flow spread over the month

I have done both so far, and with only a few properties, it did not create too much havoc in my management.

However I would like to hear your advice and experience on the matter.

To limit the risk of the due on sale clause, you can create a land trust that you would be the initial beneficiary, then make an assignation to your LLC.