All Forum Posts by: Mike S.

Quote from @Nathan Gesner:

Quote from @Reya Ripet:

They claim it's to ensure Landlords maintain properties to code, but it really ends up a money/power grab that does very little to help Tenants and is more likely to hurt Landlords.

It will in fact hurt tenants as we will have to pass the cost down to them... Today if a property is not up to code, a tenant can complain to code enforcement. Having mandatory inspection will only let municipalities increase their budget to hire more inspectors and charge more fees.

Just creating an LLC by filing the document with the state is easy but does not mean that you have asset protection. What matter is the operating agreement. An operating agreement should be tailored for your activity. That is were a good attorney is needed, especially for asset protection.

For asset protection, you don't want to put all your eggs in the same basket as in case of judgement against your real estate property they will now have access to your other income.

LLC can have different tax status. It is very probable that an LLC for an active business won't need the same tax treatment as an LLC for passive investment.

An LLC can also be member or manager managed, single or multi-member. Each has its pro and con depending on your activity.

Last, if you seek anonymity (either to avoid some problems with tenants; or as one of your layer of asset protection), the LLC needs to be opened with that in mind. It is probably not the case for a loan agent.

So yes, it is very likely that you would need another LLC for your activity.

But please consult with an attorney to discuss your specific situation as there may be many other factors you need to take into consideration. Also you need to project yourself in the future to create a structure that will grow with you and won't need to be completely redone every few years down the road.

Most asset protection attorneys offer a free initial phone consultation to discuss your situation and give you a roadmap of what you may need. Make sure that the firm you talk to is also competent in tax optimization as the structure needs to meet both asset protection and tax optimization at the same time.

Quote from @Glenn N.:

I was working with Anderson, and when I saw their plan for the protection and a solo, I freaked out, they would not tell me the fees for the future to keep 11 LLCs, 2 land trusts, and a c corp going. Nor could I see it on their site, I'm presently trying to get a refund, way too much to handle at my age ..... still waiting for refund , they are stalling, 

While Anderson Advisors is not the cheapest out there, I have found their legal and tax advices to be very accurate and up to date. You don't have to use them as registered agent the following years and you can find cheaper ones. With that many LLC, C Corp, land trust I would guess they would charge you for a package in the $10 to $20k range to set it up.

After that, yearly you will have to pay between $50 to $400 per LLC and corp for state filing fee and another $30 to $75 registered agent fee per entity. These maintenance fee will be identical everywhere.

Now the question you need to ask yourself is do you need this full structure? It is probably the best for asset protection, but do you want or need that full protection or is that something that you want to build over time and can accept to have a lower level of protection for now and just create the corporation and one or two LLCs.

Again, it is your choice. But if you go with the full structure, it will cost you some money, where ever you go. But will a 10 or 20% difference in the price give you the same quality of operating agreement and asset protection? That something you need to assess and make your decision accordingly.

You have to take a salary out of the LLC. This salary (minus the withholding) can fund the solo 401k. On top of it, the LLC can also add 25% of your salary as profit sharing if the plan permits it. There is a maximum yearly contribution that you can put into it (for employee contributions and profit sharing).

You can also roll over fund from your IRA and maybe other 401, 403, 457 plans that you have if the sponsor authorize it (usually after separation of employment only).

There are multiple ways to use life insurance. It all depend of your needs.

You can have term life insurance for a temporary coverage need (mortgage insurance, children education, spouse salary backup...). They are usually cheap, but non renewable as the older you get the more price prohibitive they are. Also if you have a new medical condition, you may not be insurable anymore. The vast majority of the time, these insurances are never paying death benefit as they are lapsing before you die. They are just here in the unfortunate case where you die early unexpectedly.

You can have permanent life insurance (Whole Life or Universal Life) to cover the same needs but for your whole life. Or you can use it as a tax estate planning strategy. You can also use it, by maximum overfunding it, as an investment tool in conjunction with your other investments or as a retirement funding strategy. These insurances are usually more expensive as they are always paying a death benefit, as your death is inevitable at the end, and your policy is in force for your whole life. The sooner you get permanent insurance, the cheaper they are. The older you get, the more expensive is your premium.

I would suggest you have a look at these maximum overfunded permanent insurance products discussed in this forum. It will cost you more in premium initially, but it will benefit your financial health on the long run. And at the same time you will have a death benefit coverage that will satisfy your lender.

Also, make sure you are using an attorney who is savvy in asset protection for real estate investor.

Some services like Legal Zoom are probably not the best choice.

The three big firms often recommended here that cater for real estate investors are:

KKOS, corporate direct and Anderson Advisors.

I believe all three of them are offering a free 15 to 30 minutes initial consult and I highly suggest to use it so you can understand what they can do for you. Also check their website and Youtube channels, they have tons of great information for free that will make you understand the stake and all the concepts behind their recommendations.

I am sure you can find a local attorney who can do as good if not better for a cheaper price, but the problem is to find the right one.

In case you want to avoid the reassessment or some other transfer taxes in states where it can be avoided, the usual way is to have the buyer create his own new LLC documents, but puts you as the initial member.

You then do a no cost deed transfer from your current LLC to "your new LLC", immediately after you sell the new LLC and the new member become the buyer.

As you have been the owner of the "new LLC" for only a minute, the buyer starts fresh with no unknown possible liability later on.

If I was a buyer I would never buy an LLC that has an unknown history as I would inherit all its liability. However the step up LLC solution would work.

A more elegant solution is to have the deed of the property held in a land trust, the LLC being its beneficiary. You can assign the beneficial interest of the land trust to a buyer LLC without having to deed the property that stays under the recorded land trust.

I would suggest you invest some time watching carefully the hours of information available on the Clint Coons Youtube channel.

While there are different levels of structuring you can do for asset protection, and after having studying this field for over ten years now, this is the best comprehensive resource I have found on the net.

There are some more extreme asset protection techniques with offshore entities and trust that are not really discussed in this channel, but these are often not very useful for real estate asset as a local judge in the jurisdiction where the real estate asset is located can completely ignore the offshore part and seize the local asset. It is great however for cash, brokerage account, or foreign assets.

I don't have anymore any paper receipt. Every single receipt is scanned and saved in the proper folder on my computer. The paper original then go to a temporary basket that is shredded every month (they are just kept for a few weeks in case or store return).

It take almost the same time to scan and name the file than finding the proper paper folder to put it in.

At the same time I am also imputing the data into my excel books and even put a hyperlink to the receipt file.

The day when I am looking for a specific receipt, I am saving not only tens of minutes, but also a lot of aggravation as I can locate any receipt in a few seconds. It has happened many times when looking for warranty information. And if I have an audit, I just need to click on my book links and the receipt pop up.

You of course need a proper digital backup plan for all your data, but it is no different than if a flood, a fire or rodents destroy your paper archive.

Last but not least, when I am not home or traveling, I can still access all of them from my laptop.

I am doing the same with all my bank statements: I am downloading them religiously every month. Some banks will only let you access the last two years of statements, while other will cut your access immediately after you close the account. So I have every single of them in my own computer folders.

Quote from @Aaron Porter:

@Nicole Heasley Beitenman  There are some 401K accounts that allow you to borrow more than that.  I don't  know anything more than that about them but I have a few clients talk about them.  

It may be worth doing some investigating and maybe moving your current 401k to somewhere that allows you more access?

To my knowledge the $50k or 50% of the value, and 5 year payback is an IRS rule;
However there are exceptions that let you borrow up to $100k or 50% in certain circumstances: first home purchase or special hardship condition. During COVID a special rule let withdraw $100k without penalty for 3 years.