All Forum Posts by: Scott Smith

Sorry, doubled up :-(

Hi John, looks like you have been getting alot of good advice above.  I have a blog that identifies 5 ways to protect your investment which may help to organize your thoughts.

https://www.biggerpockets.com/blog/pillars-asset-protection-real-estate-investors

There are a bunch of different opinions on the subject, ideally you want to understand your personal exposure and decide on what level of protection you are comfortable moving forward with. While some investors are comfortable with moving forward with higher risk, others prefer as much privacy and protection as they can to protect the wealth they have already accumulated.

Reading the advice you have received, the umbrella will handle most real claims, while the LLC will compartmentalize investments. The land trusts as owners can provide anonymity and an operating LLC can separate your required exposure from your ownership. The use of series lcc with specific land trusts to allow for joint ventures investment is another advantage. Aspects of these can assist in Estate Planning later on as you grow your business.

Let me know if any of this information is helpful and I can send you some additional links as you get familiar with asset protection.

@Matthew Carducci

The Land Trusts are pretty time consuming to work on since they require to be formed under state law and collaboration with the country the property is located. It also required a second party, such as an attorney, in order to introduce anonymity since they will need to sign as the nominee trustee. Generally you will have each property nested into a single Land Trust - this article explains it in a bit more detail. You can also accomplish some of the same functions for your Series LLC by implementing an Agent Trust.

The Land Trust is an inter vivos trust, an estate planning tool, and so they are created to synergize with your living trust.

All 4 of you could take title jointly. This would accomplish the business interest but not the asset protection interest. This is where it can be good to have access to good relationships with lenders who will work with you - or have access to someone who has those relationships.

After the acquisition you can deed the property into a land trust, the trust being owned by the LLC and then the partners own the LLC. This would avoid the due on sale clause, accomplish asset protection, and split the interests.

Hey Anthony,

There are many ways to start, and I would honestly say the best type of investing to get into is the one that you find interesting. I have seen many investors burn themselves out because they get a higher return on a strategy that burns them out, so they quit a couple years in. It’s the investors who find a strategy that is compelling and exciting who often stick it out in the long run. You don’t have to enjoy it necessary, though many do, but you need to be okay with dealing with some rough seasons in investing when you dive in. So realistically I would just try chat and work with other investors to get a feel for what their deals look like, then stick with what you find to be the best fit for you.

Best way to get into it? Get your boots on the ground and dive in. Be cautious at first, since the lionshare of mistakes you make will be just starting out. But don’t be afraid to jump into it - many investors just end up spending all their time looking at deals rather than investing.

I would also recommend structuring it all in a smart way, since you are starting with so much money when you are also most likely to make mistakes that could get you in trouble. This article discusses what asset protection is, and explains the general progression of building your own asset protection empire.

The general approach would be to place the property in your personal name in order to refinance it at a more favorable rate - financing anything directly into an LLC will often come at a higher rate. The issue is that once you refinance in this way, a lender will often not want you to transfer the property back into the LLC - which is when the strategy above becomes useful.

Perhaps I misunderstood your question, though! What is the part of the refinancing that you are specifically having issues with? Sorry if I missed it.

While I have assisted many investors with the Wyoming LLC, it is not the only method to introduce anonymity for an LLC. When establishing an LLC you can also nest it into an Agent Trust for external anonymity, which functions in a similar way as the Land Trust would for the individual property. The involves having an attorney sign as the "nominee trustee." This means your name does not appear on public record, and instead it is a name protected under attorney-client privilege.

This means you can create and operate a (Series) LLC from any state with anonymity on public record. An example of what the structure of a Series LLC with anonymity would look like is this:

............................................................... Series LLC...........................................................................

....................................................... Agent Trust (anonymity) .................................................................

Child Series 1 ...................................... Child Series 2 ......................................... Child Series 2 ........... (etc)

Land Trust 1 ........................................ Land Trust 2 ........................................... Land Trust 2 ............ (etc)

Property 1 ............................................ Property 2 ............................................ Property 2 .............. (etc)

But it is just another option. Both work. I have just found that often the Wyoming LLC is more work than is required simply to introduce anonymity externally.

And as other people have mentioned in this thread, many trusts do not actually offer liability protection. If you are operating something like a Delaware Statutory Trust you are in a good spot, but that is not what it appears the OP was referring to.

The simplest and most effective asset protection strategies have often included a Series LLC as the asset holding company and traditional LLC(s) as operating companies. The asset holding company is implementing best strategies for both external and internal liability and will also separate each property into it's own "child" series for liability purposes. The Traditional LLC conducts the highest liability actions to limit exposure and carry the lionshare of the liability. Of course it all just depends on what types of investments you have and the size of your portfolio.

It would really depend on what you are looking for. They function in similar ways, but the main difference is that when you file the Series LLC you are incorporating the "parent" series, from which you can privately file as many "children" series for. This means that it will scale with less cost and hassle. The biggest arguments against the Series LLC is that it has less case law behind it (which I argue is a benefit because it shows how strong the laws supporting the entity are) and currently there are less than 20 states that allow you to form the Series LLC inside of them. A Series LLC can own property in any state, but some states haven't enacted the legislation to form them, so you may need to have to deal with forming it in another state.

This article breaks down the differences in more detail: https://www.biggerpockets.com/blog/the-traditional-llc-vs-the-series-llc-which-is-better-for-real-estate-investors

The Series LLC is ideal for investors who own multiple properties, since it allows you to create liability protection for each property by placing them in individual "child" series easily.

You would have a few options with how to proceed with refinancing the property. One strategy that investors will use is simply adding a Land Trust to the picture. Transferring a property into an LLC after refinancing it might trigger the Due on Sale Clause; however, transferring a property into a Land Trust is an excluded transfer from that clause thanks to the St Germain Act. Once the transfer is complete you simply assign the LLC as the beneficiary. This article explains it in more detail:

https://www.biggerpockets.com/blog/llc-lending-problem

If you have more questions feel free to reply to my message! Just another option that has worked for many starting and experienced investors alike.

You would have a few options with how to proceed with purchasing the property. One strategy that I have seen work for new investors to get both the beneficial financing available in your personal name, while still getting the liability protection of an LLC, is to introduce a Land Trust. Transferring a property into an LLC after purchasing it might trigger the Due on Sale Clause; however, transferring a property into a Land Trust is an excluded transfer from that clause thanks to the St Germain Act. Once the transfer is complete you simply assign the LLC as the beneficiary. This article explains it in more detail:

https://www.biggerpockets.com/blog/llc-lending-problem

If you have more questions feel free to reply to my message! Just another option that has worked for many strarting and experienced investors alike.