All Forum Posts by: Tom O.

Option 4. Just buy a bigger umbrella. 

In my state (illinois) I have personally been in the courtroom when land trusts and LLCs get pierced. Here's what I have seen: 

1. Property owners get sued for a walgreens on land in a blind trust. Plaintiff brings a motion for the trustee to reveal the beneficiaries of the blind trust. The motion is granted without any objection by the trustee. The beneficiaries are then named in the amended lawsuit which then gets filed. SOME LAYER OF PROTECTION THERE, HUH? 

2. Trucking company owners are sued even though the company was in an LLC and all its operations were done through the LLC. Judge said "this looks like a shell game." Allows owners -- who fortunately had more than enough insurance -- to be sued personally.

3. Giant $100 million annual revenue plus company is sued. Company is structured so the manufacturer has all the assets and the transportation division is a separate LLC has all the liabilities and none of the assets. A federal judge (no slouch either, very well respected) granted the motion to treat the company as one big slush fund because they were hiding assets and deliberately strucuturing it to be judgment proof. In this one case given the huge liability there may not have been sufficient insurance to cover the loss as there were several dead and injured.

I'm not your lawyer. And I'm not trying to sell you anything. And this is not legal advice. And this was in a very pro-plaintiff state (but not the federal court). But my advice is to just get big umbrella policies. They're cheap. $1 million is like $3-400 per milllion. And if someone is trying to sell you some complicated structure in the name of asset protection, maybe talk to an insurance broker first? 

I like the price to be at 10 times the NOI. Not seeing that much lately. But you asked...

I think the easiest way is the NOMAD approach where you buy 2-4 units with an FHA loan, taking advantage of the low money down approach. Live there a year, rehab, rinse and repeat.

There are ways to get your first home with no money down. VA loans, USDA loans and first time buyers with good credit can take advantage of a program with a name that escapes me at the moment.

The easiest thing is to keep one bank account for your RE investments and your personal bank is separate. Preferably at a completely different bank. 

Then you hook it up to Stessa and it does a pretty decent job of the accounting and tax documents. 

There's a huge cottage industry trying to stoke fear in landlords and selling all kinds of expensive ********. Out of state corporations, secret land trusts and all kinds of other "asset protection" nonsense. 

I've even seen folks who haven't bought any investment property yet spending money on this baloney. I keep telling them: just buy more insurance. It's cheap protection. 

And personal injury attorneys really don't want to own real estate. They want money. 

1. What is your question? 

2. What do you need help with? 

3. I find myself recommending the following book reall often: 

David Lindahl, Multi-Family Millions. 

I like it because it provides actual analysis and numbers you want to hit to find profitable deals. Also, it's based on "forced appreciation" which just basically means you buy something and improve it and make it worth more. You then sell or refinance. But it's very focused on multi-family. 

Why do an LLC?

What do you think the value of it is? 

Do you own rentals already? 

I know in my jurisdiction the asset protection afforded an LLC is illusory given the pro-plaintiff nature of the jurisdiction and its judges. I always say: just buy more insurance. A $1 million umbrella costs a few hundred bucks.

I have personally seen cases where judges went right through even land trusts to pierce the trust and ignored the LLC structure to go after the personal assets of a company's owner. The other question I ask is if you are going to self manage? Because if you do, you will always be liable for your own actions regardless of how many LLCs you use to shelter stuff.

Lastly, every plaintiff attorney I know LOVES large fat insurance policies and HATES going after hard assets like real estate or an owner's bank account. In many many years I have NEVER seen an owner pursued when there was adequate insurance coverage. 

@Efrain Yakuta

Came here to say exactly that. It's possible some lines with brakes can be sleeved.

My insurance told me no AirBnB. 

Question: did you ever do this deal? I have a banker who has considered doing only 10% down if there's other buildings in your portfolio that can support the remaining 10%. Like say you have $50K in equity in another building. He might accept 10% down on the new buy with an equal amount as a lien on the building you already own. I can PM you his name and bank. I've done two loans with him but none using this feature.