All Forum Posts by: Philip Barr

Very interesting information.

I do not have experience in real estate investing abroad, but typically here in the United States, it is recommended to own rental or investment properties in limited liability companies or trusts, or a combination of both, to protect yourself from liability stemming from the property. Is there a similar strategy in Germany?



Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Great content, thank you for sharing.

These things can vary so much by state, but it is good to have a look at the bird's eye view of the eviction process in Washington.

Oftentimes, I tell clients that it is important to have an LLC set up in the state where the rental property is located to own that property so that it has the right to enforce eviction actions in court. In other words, it wouldn't be prudent to have a Nevada LLC own a Washington rental property. It would be best to have an LLC registered in the state of the property so it can be recognized legally.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

At a general level, it is recommended to have enough cash reserves to plan for RMDs so that you do not have to make in-kind distributions of assets like a house or to have to sell it to get enough cash for future RMDs. 

One strategy that some parents do if they want their children and/or themselves to be able to take distributions tax-free is to have a ROTH IRA. The ROTH IRA must meet the five-year rule before tax-free distributions can be made, meaning it must have been five years since the first contribution or conversion for assets that were converted to ROTH from a traditional plan. For plan owners, the distributions will still be subject to early withdrawal penalties, even after the five-year rule, unless the plan owner is over 59 1/2. Distributions to a beneficiary when it comes to an inherited ROTH IRA are not subject to early withdrawal penalties even if the beneficiary is under 59 1/2. The account typically must be depleted within 10 years, however. Of course, moving a home from a traditional plan to a ROTH IRA would involve taxes on the conversion of that home, basically, the market value of the property would be taxable income, but depending on the goals of the plan owner, that may fit for them.

Ultimately, these are questions that the plan owner should discuss with a financial advisor and/or legal counsel, as they can be quite in-depth. Interesting topic to be sure, thank you.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

This is great information.

Just to expand on choosing the right entity:

Typically, it's good to have a holding company to protect your assets, usually in a state like Wyoming, Nevada, or Delaware, since these offer great protection against personal creditors. The holding company can hold cash, interests in other LLCs, stocks, or similar interests, such as syndications. 

Many real estate investors will even put their rental homes into "rental LLCs," in the state where the rental property is located, and have those rental LLCs be owned by the holding company. That way, you can compartmentalize the liability, much like compartments to seal off flooding on a naval ship. One area's flooding does not affect the other.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

A helpful tip is to talk with a business banker when you get to the branch. A lot of the time, the typical tellers/bankers there lack familiarity with business entities in general, much less something a bit more complicated like a Series LLC. Providing your documentation also helps with the ease of setting up bank accounts, so it is typically best to take as much documentation on each cell and the parent of the Series LLC as possible.



This post is not intended to replace legal representation or provide legal opinion, give custom drafting services, review enforceability in a particular jurisdiction, or provide financial/tax advice. Please seek a local professional to help you.

Very cool resources. Thank you for posting.

Self-directed IRAs (SDIRAs) can be a great way to invest in real estate to grow your retirement funds, but it is important to make sure that you do not engage in any prohibited transactions, because that can have dire consequences for your retirement account. It is also typically recommended to set up and create an LLC with your SDIRA's funds to own the property directly so that the liability from that property is contained within the LLC and it does not affect the other assets in your SDIRA.


This post is not intended to replace legal representation or provide legal opinion, give custom drafting services, review enforceability in a particular jurisdiction, or provide financial/tax advice. Please seek a local professional to help you.

Quote from @Philip Barr:

Rental income is passive income, and contributions to retirement plans must be made from earned income. 

You could set up a property management company for your properties, where you would own the property management company, and it would act under property management agreements for each of your rental properties and be paid a fee. Typically, we at Anderson Business Advisors prefer to use an LLC or a Corporation taxed as a C Corporation since it has tax benefits to offset the active income and paying yourself a salary. Then that C Corporation would sponsor a Solo 401(k) plan for retirement benefits. As the individual employee you can typically make up to $23,500 in contributions from your salary and as the owner of the company sponsoring the plan, in other words, the employer, you could contribute up to 25% of your salary. Contributions across all qualified retirement plans you participate in typically cannot exceed $70,000 in aggregate.

This post is not intended to replace legal representation or provide legal opinion, give custom drafting services, review enforceability in a particular jurisdiction, or provide financial/tax advice. Please seek a local professional to help you.

Quote from @Philip Barr:

Typically, it is best to have an LLC own a rental property to limit liability from reaching you or your other assets. Real estate is a high-risk asset when it comes to liability, and nowadays, plaintiffs' attorneys can bring large lawsuits against you that go beyond the value of the property itself or insurance payments. I like to think of compartmentalizing liability like limiting a flood on a naval ship. There are compartments to seal off to prevent the flood from reaching vital areas of the ship and sinking it. Same thing with liability, you want to place the rental property in an LLC to prevent liability stemming from it reaching you or your other assets that you have obtained and built. In Texas, you can set up a Series LLC and have each series under the parent LLC own a rental property in Texas if you have several. It is a great, cost-effective way to achieve asset protection.

This post is not intended to replace legal representation or provide legal opinion, give custom drafting services, review enforceability in a particular jurisdiction, or provide financial/tax advice. Please seek a local professional to help you.

Typically, it is best to have an LLC own a rental property to limit liability from reaching you or your other assets. Real estate is a high-risk asset when it comes to liability, and nowadays, plaintiffs' attorneys can bring large lawsuits against you that go beyond the value of the property itself or insurance payments. I like to think of compartmentalizing liability like limiting a flood on a naval ship. There are compartments to seal off to prevent the flood from reaching vital areas of the ship and sinking it. Same thing with liability, you want to place the rental property in an LLC to prevent liability stemming from it reaching you or your other assets that you have obtained and built. In Texas, you can set up a Series LLC and have each series under the parent LLC own a rental property in Texas if you have several. It is a great, cost-effective way to achieve asset protection.

Rental income is passive income, and contributions to retirement plans must be made from earned income. 

You could set up a property management company for your properties, where you would own the property management company, and it would act under property management agreements for each of your rental properties and be paid a fee. Typically, we at Anderson Business Advisors prefer to use an LLC or a Corporation taxed as a C Corporation since it has tax benefits to offset the active income and paying yourself a salary. Then that C Corporation would sponsor a Solo 401(k) plan for retirement benefits. As the individual employee you can typically make up to $23,500 in contributions from your salary and as the owner of the company sponsoring the plan, in other words, the employer, you could contribute up to 25% of your salary. Contributions across all qualified retirement plans you participate in typically cannot exceed $70,000 in aggregate.