All Forum Posts by: Scott Smith

Here is some information that may help you set up your partnership if you go the LLC route. https://www.biggerpockets.com/blog/effectively-conduct-joint-venture-agreements-as-a-real-estate-investor

I avoid naming LLC's with a personal names unless there is a great reason to do it. Other than that, have fun naming the Syndication. So many names are already registered, you may have to come up with several!

One way to work this is to buy the property in your name, then transfer to a trust with the LLC as the beneficiary. This helps you get the best rates on your loan, while protecting it with your LLC using the exceptions provided to the due on sale clause provided through the St Germain Act of 1982. This article explains it in more detail: https://www.biggerpockets.com/blog/llc-lending-problem

The LLC is helpful when the insurance doesn't cover, like negligence claims. Check out this article for more https://www.biggerpockets.com/blog/insurance-asset-protection

@Johnny Weekend, sorry I missed your earlier point of transferring from your name to a trust and having your name on the history of the deed.  Investors with the sole purpose of anonymity will not buy in their name to prevent this, and plan this in advance.  That means they have established financing for their entities and are never record as an individual.

Thanks @Jim Goebel,

The St Germain Act excludes transfers to an Inter Vivos Trust (estate planning tool) from the Due on Sale Clause. https://en.wikipedia.org/wiki/Garn%E2%80%93St._Germain_Depository_Institutions_Act

Privacy has many benefits, and most of them won't be realized until an investor needs them - but by that time it is not available.  This blog begins to touch on some of the benefits and planning to achieve privacy: https://www.biggerpockets.com/blog/anonymity-asset-protection-dummies-avoid-law-suits

The LLC or trust, even if not private, helps to limit liability to the properties in the entity. I did a review of properties owned under individual names in a resource we subscribe to, and was surprised to see investors holding large numbers of properties in their personal name (or their spouse). The danger is that if a judgement is made, Investors need to make seriously bad decisions related to their investments to free up equity to pay the judgement. Insurance generally doesn't cover negligence.

I recommend new investors get informed and understand that real estate investing is a business.  Over time, those decisions will protect the equity that is being developed.

There is a great strategy to not get caught up in the franchise taxes levied on California LLCs by segregating assets into trusts.  This is spelled out in the article https://www.biggerpockets.com/blog/california-real-estate-investors-delaware-statutory-trust.  I think this is what Johnny was referring to.

As an investor myself, I agree with Jim's comments above.  I was just trying to answer the "good insurance" question, and unfortunately my experience is with client's who felt they had good insurance.  Keep you eyes open and get advice from investors who have been there and done that.

The registered agent can be either (option A) a domestic entity in TX or a foreign entity that is registered to do business in Texas or (option B) an individual resident of the state. The foreign limited liability company cannot act as its own registered agent in Texas.

Owning the properties in a Delaware Statutory Trust avoids the franchise fees that California imposes on state and foreign LLCs for residents.

Disclaimer: This response does not constitute legal advice. We recommend you seek the counsel of an attorney familiar with your specific situation and market to ensure you make the best decisions within your real estate business.

Steven, Looks like you are getting tax advice. I have an article that identifies the different LLC's on the market and how they are taxed for your information. https://www.biggerpockets.com/blog/different-types-of-llcs-and-the-ways-they-pay-taxes.  There also are different tax implications for LLC's based on the State you are in, and strategies to keep your operating and maintenance costs lower.  You could check out some of my other articles that may fit your situation at https://www.biggerpockets.com/blog/contributors/scottsmith-2?page=1