All Forum Posts by: Weston Couch

@Steve Banovic Hi Steve, that sounds pretty steep. I know one of our affiliates does an LLC for free. If you'd like to connect with me or DM me, I can give you more information and details.

@Bonifacio Capuyan I can't give you legal advice here, but from my experience, landlords actually would not be liable for damages in a lawsuit from a tenant if their rental was held by an llc. What they(the tenants) could access through a lawsuit would generally be limited to the assets of that LLC(the rental property itself). Of course this could still be a big loss, but it would be a lot better than losing the house you live in too, or or other investment properties as well.

Connect with me if you'd like to know more, I can give you a lot of resources on the subject.

@Leigh Mueller Hi Leigh, we specialize in this kind of thing so I guess I can be Batman here. Long story short, you can do both an LLC and a land trust, and they compliment each other. We typically put properties into land trust, and that in turn goes into an LLC. Feel free to message back or connect with me if you'd like to know more. We have a lot of free resources on the subject that I'd be happy to share.

@Christopher Janney Hi Chris, congratulations on the deal. You mentioned you put it in a land trust. I was just wondering why you decided on that?

A lot of investors think insurance is all they need to keep their properties safe, but what if you get in a car accident and are sued for a $2 million(true story) or even just have to pay a 50k settlement?

@Mike McCarthy  @Lynn McGeein Hi, just sharing from my experience. Do y'all use an LLC as well to protect your properties? The new one's are pretty cheap and let you put all your properties into separate liability compartments which really supplement the insurance a lot more cost effectively than having a bunch of separate LLC's. https://www.biggerpockets.com/blog/the-traditional-llc-vs-the-series-llc-which-is-better-for-real-estate-investors/

@Junior Allen As John was saying, it's pretty much any way you want if it's paid off. If not, it gets a bit trickier because of the due on sale clause, but we do it for clients a lot. In that case, a transfer directly to an LLC will trigger the due on sale clause and should therefore be avoided, even though banks are hesitant to ever foreclose as long as the note is being paid. Even with the note being paid, the banks will still send threatening letters. This issue can be avoided completely and cost effectively by transferring the property into a land trust.

While a transfer to an LLC will cause alarms at the bank and prompt them to send you a letter, a transfer to a trust will not. A transfer to a trust is exempt from due on sale violations since banks will view transfers to a revocable trust as an estate planning tool that doesn't technically transfer it out of your control. With a trust, you shouldn't even receive a letter from the bank.

This article can explain the general process of taking a property into your own name and transferring it into a Land Trust before assigning it to a LLC.

Hope that helps. Please feel free to message or connect with me if you’d like to know more.

@Chien Yeh What do you have in place to protect yourself from potential liabilities?

@Alyssa Weber  Hello Alyssa, I work for an asset protection organization, and this is from my experience. Other than shopping around providers, there aren't a lot of options that I know of for getting the insurance premiums down to where you want it. That said, it's important to keep in mind insurance is only one facet of keeping yourself safe as an investor. When I sit down with clients, I 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. Generally though, I break it down into the "five 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(maintain your property, etc) - 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, people suing 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. If you're interested in using an LLC, this article also further explains the advantages of a Series.

The fourth pillar is somewhat similar - you want to separate your operations from your assets. One company owns everything and does nothing (this is your SLLC a/k/a "asset holding company") and a completely separate company handles all of your operations (this is a traditional LLC a/k/a "operating company") For the operating company which serves as your face to the world and through which you do all your business, you establish a Traditional LLC to carry out the operations of your investments. The operating company takes on all of the liability that would otherwise blow back on you including: paying property management, paying contractors, collecting rent, marketing, etc.

The fifth pillar is owning everything anonymously. If people don't know that you have assets, then they are less likely to sue because there's no use in suing people that qualify for food stamps. This anonymity can be accomplished for free by using land trusts to own your companies as well as the assets. Trusts create this anonymity by removing your name from public record. Even if they can see you used to own a property, when properly transferred it will look like it was sold to investors. If they somehow guess you are the owner though, it still doesn't matter because you would not be the owner. The land trust and the LLC are the owner of the asset/real estate, so even in the scenario that potential litigants guess, they would guess wrong.

You can leave a reply of DM me if you have more questions. 

@Amy Bellone Hello, Amy. There may be a work-around by having them transfer the property into a trust/llc structure that would leave them in control(thereby not triggering the due on sale) and give you control of the property as well. A transfer to another person will trigger a due on sale clause and should therefore be avoided, even though banks are hesitant to ever foreclose as long as the note is being paid. While the banks may not foreclose, they will still send threatening letters. This issue can be avoided completely by transferring the property into a land trust that your family could then be co-trustees of either directly, or through an LLC(for better liability protection).

While a transfer to a person will cause alarms at the bank and prompt them to send a letter, a transfer to a trust will not. A transfer to a trust is exempt from due on sale violations since banks will view transfers to a trust as an estate planning tool. You should not even receive a letter from the bank. Your family could then control the property through the land trust as trustees's, either individually or through an LLC.

Please feel free to connect with me if you’d like to know more.