All Forum Posts by: Weston Couch

@Brett Lee @Luka Milicevic  You sound like you know what your priorities are, and there are certainly benefits to having more equity in your home Investing, and protecting the assets you already have, are both very personal and it's important to use an approach that gives you peace of mind. 

When I sit down with clients I will always discuss (1) their personal assets, and (2) what their current investments portfolio and other business ventures are before discussing (3) their future goals. Each of these variables will dramatically change the advice I give the individual asking me this question. I often break it down into the "three pillars" of protecting your assets.

The first pillar is avoiding unnecessary and risky activities (don't drink and drive, insurance generally won’t cover your poor decisions) and take good care of your investments - these simple steps will help you prevent lawsuits before they even occur.

The second pillar is a good insurance policy as that cover the majority of your exposure. However, insurance is limited because it only protects you from one type of liability: accidents/negligence. Insurance doesn’t protect you from any part of the sale or acquisition of a property (e.x. Somebody wanting to sue for you backing out of a bad deal or accusing you of selling them a property with defects like unknown termite damage). Insurance also doesn’t protect you from misunderstandings, especially those made in writing and email. What happens in these misunderstandings is that something goes wrong either in the sale or after, and then they sue you for some statement you made that they “misunderstood”. That lawsuit is a claim for fraud, and that’s what fraud typically is...a misunderstanding and someone being “injured” and wanting to hold the other responsible for it. Insurance never protects you from these kinds of claims and they happen all the time.

The third pillar applies after you have good insurance You need to protect yourself from what insurance doesn't cover by compartmentalizing your assets. Compartmentalization means that if something happens to one property they can't touch you or the other properties. You should use either LLC's (the old and expensive way) or a Series LLC (the new and more cost/time effective way). No matter where you live or where you own assets, I personally recommend the Series LLC to be a great tool for the individual investor who is planning to expand their operation, as it allows for you to scale infinitely for free- For more detail on the advantages of a Series LLC, you can also check out this article.

Of course, how you may want to apply these pillars varies according to your personal investment and risk approach, but the principle of them is sound.

Also, feel free to connect with me if you'd like to know more on how to implement any of these principles that may be appealing.

@Brit F. Hello Brit, you seem well educated on the matter now. Why don't you go ahead and convert your 401k from early in your career to a Roth if you plan on paying a higher tax rate in retirement than you currently are?

The IRA rules(including Self-Directed) are designed to prevent you from benefiting in any way from assets held within them before retirement age. This would include prohibitions on you living in any of your IRA owned property, and personally receiving income from it in anyway before retirement age. So while owning property in your SDIRA is a viable option, it's only an option to develop future passive income, as opposed to present passive income.

As Frank said, you could personally guaranty it. Or you can give the LLC a loan yourself if you have cash(to be repaid to you by the LLC). Buying it directly in your name and transferring it to the LLC like you said is another option. We have transferred many properties into LLC's, so if you'd like to know more, please feel free to connect with me.

@Vivek Shah Hello Vivek, many of our clients use a land trust to transfer their properties into an LLC, which also provides the additional protection of anonymity.

Protect your personal assets. Insurance and using an LLC can provide you with great protection(keep you from losing big if any legal issue ever comes up) and is affordable even when starting out(even potentially free for the LLC part).

@Account Closed Hello, the short answer is tax benefits and personal asset protection(making sure you never lose your shirt)

Some generalized comments on the topic, though. LLCs are better in general. With an LLC, you can choose the same tax treatment as an S-Corp, and LLC's are better for protecting your assets. While they both protect your personal assets outside of the entity, a key feature of the LLC is charging order protection. Someone suing you can only go after the LLC, not the owner personally. For S-corps and asset protection, if you own shares in a corporation and are sued personally (i.e. after a car wreck), a judgment creditor can reach your shares in the corporation. If you are the majority owner, the the person suing you could gain control of your business by virtue of share control.

LLC's are extremely cheap too. If you're interested in getting one, please feel free to ask me for more details.

This is not my advice, just my opinion from experience. 

@Lingo Lin  @Jerry W. I think Lingo has his head in the right place in terms of protecting his assets. Using entities can provide you with peace of mind that insurance cannot. They prevent you from ever being "easy money" for a lawyer and can protect you personally if some claim against you or your assets isn't covered by insurance. Setting up an LLC and a Trust with anonymity is fairly simple and inexpensive too, and if you choose the right state for your LLC, it's very cheap moving forward.

Are you familiar with the Series LLC as well? It's a model that allows an investor to keep growing their real estate portfolio without having to continue spending on high quality protection.

@Steve Vaughan @John Chapman If you've seen that pillars language on here before, it may be from some of my colleagues. As I was saying, these are principles, not must have structures for every investor. I would disagree that the ideas aren't relevant to 99% of people here as there's value in knowing these concepts to most people that rent property, from big to small. Do you know if that apartment complex was in the owners personal name? I suspect it was owned by some entity because the idea of creating an LLC for these assets is not to protect them as much as it is to protect other property and closer to home assets.

Is it better to manage properties through an LLC or personally?