Hi,
I’m planning on buying a condo and make it a rental. I have an LLC already. But I am curious about trust. Is it better to put the property in an LLC or a trust? If trust, which kind (land, family, etc) of trust and how do I get it?
Thanks.
Trust
Hi,
yes, you should buy it in a trust. Have the title company deed it into a trust as a part of purchase, or immediately after.
You can use a Land Trust - a Bronchick has a course on this site that has all of that.
Then the beneficiary of the trust will be your LLC. This way the LLC gives you the asset protection, and the trust gives you privacy.
good luck!
marko
Thank you Marko. I don’t have time to read Bronchick’s materials because I need to close in 10 days or sooner. Is there a short cut to doing a land trust? Does title company know how to do it?
You didnt provide much information about your end goals, so I am guessing you want the typical protections that most landlords desire. If thats the case, I wouldnt fool around with the trust if i were you. All that is going to happen is you are going to introduce a bunch of additional complications with your closing (and going forward) that no one is really going to properly understand including you. Furthermore, there is almost no benefit, even if you do decide you want to put up with the additional hassle.
My advice is use your existing LLC and have an attorny be the registered agent for the LLC.
My end goal is a typical landlord protection. What Marko said really peaks my interest. In your opinion, trusts is more hassle than it’s worth?
[QUOTE=newbie;885454]My end goal is a typical landlord protection. What Marko said really peaks my interest. In your opinion, trusts is more hassle than it’s worth?[/QUOTE]
More concerning is your desire to dive into various legal structures when you do not have the time to understand what you are doing.
[QUOTE=newbie;885454]My end goal is a typical landlord protection. What Marko said really peaks my interest. In your opinion, trusts is more hassle than it’s worth?[/QUOTE]
In my opinion trusts are more hassle than they are worth. Not because im lazy and dont want to put up with hassle, but because they really arnt worth much.
The basic claim of the trust is that it provides privacy. Its supposed to help thawart frivolous lawsuits by concealing the true owners of the property.
Heres where 99% of people screw this up. If you write your purchase agreement in the name of the trust or trustee then the trust or trustee has to finance it. If you get the financing and close in your name then deed the property into the trust you still have a mortgage that is not discharged, with your name on it, that will be recorded in public records and you have a deed with your name on it, as the grantor, and the trust or trustee as the grantee !! Anyone who thinks its difficult to figure out who to name in a lawsuit when all this information is recorded on public record is only fooling themselves.
Even if you pay cash or have another way to get all of the above correct your only barely helping yourself. In the event of a lawsuit the trust or trustee will be named as the defendant and at the first deposition either someone is going to lie under oath or everyone is going to find out who the beneficiaries are anyway.
Lastly, frivolous lawsuits generally dont really cause any problems anyway. Its the serious suits that matter, and if your entangled in somthing serious your going to wish you spent your time researching insurance policies not trusts.
Ok so here’s the situation. I am buying two properties in which I am paying cash for them. They will be free and clear after closing. On one property, I intend to live in it. On the other, I intend to rent it out. Here’s what I want.
-
Privacy protection on both properties. I don’t want my name on public record. I want to be anonymous.
-
I’ve never been a landlord before. I want to protect myself from potential frivolous lawsuits from the tenant.
What is the best strategies to accomplish both goals?
[QUOTE=newbie;885464]Ok so here’s the situation. I am buying two properties in which I am paying cash for them. They will be free and clear after closing. On one property, I intend to live in it. On the other, I intend to rent it out. Here’s what I want.
-
Privacy protection on both properties. I don’t want my name on public record. I want to be anonymous.
-
I’ve never been a landlord before. I want to protect myself from potential frivolous lawsuits from the tenant.
What is the best strategies to accomplish both goals?[/QUOTE]
I would use the LLC you already have. Make arrangements to have an attorney be your registered agent, and then dont worry about it anymore.
Also, change your mind so as to focus on legitimate lawsuits and dont concern yourself with the frivolous ones. This means, spend a bit of time understanding your insurance coverage and any exclusions.
Ok thanks!
Also, pay attention to John saying this:
More concerning is your desire to dive into various legal structures when you do not have the time to understand what you are doing.
Actually, I’ve decided to just put it in my LLC. I think that’s good enough?
Look into umbrella insurance so you are covered for liability that would exceed normal policies (auto, home, landlord, etc). It tends to be inexpensive for the coverage you are buying. Either the insurance company will pay out on future lawsuits or they will fight it for you.
[QUOTE=newbie;885464]Ok so here’s the situation. I am buying two properties in which I am paying cash for them. They will be free and clear after closing. On one property, I intend to live in it. On the other, I intend to rent it out. Here’s what I want.
-
Privacy protection on both properties. I don’t want my name on public record. I want to be anonymous.
-
I’ve never been a landlord before. I want to protect myself from potential frivolous lawsuits from the tenant.
What is the best strategies to accomplish both goals?[/QUOTE]
I assume you’ve already bought your two properties and put them in your LLC. I think you seriously need to get some advice as to the wisdom of putting your personal residence in an LLC. More problematic, putting it an LLC with a rental property.
There could be all sorts of reasons NOT to put your personal residence in an LLC. For instance, one of the major advantages of home ownership is the tax exclusion given to individuals who sell a property…up to $500,000 for you and your wife if you meet all the requirements. The question is, does an individual own the property? I think there may be a good chance this property won’t be considered as your personal residence, and therefore, you will lose a major advantage of home ownership. If I were you, I’d check with a tax attorney.
Second, mixing your personal residence with your rental property seems like a poor idea to me. The risks rise with a rental property, and you’re exposing your personal residence to those risks.
Then there are the additional expenses to operate an LLC. If you have any time left, get some professional advice.
Ben
Thanks Ben. At this point, I’m thoroughly confused about LLC. Maybe I would have to consult with a professional. Yes, one rental property has been bought under my LLC. The second one, maybe a trust.