A Combo Answer - Posted by Rich-CA
Posted by Rich-CA on April 24, 2008 at 21:22:11:
The things about being anonymous is that the only way to be truly hidden is to have no bank accounts, not assets, deal in cash. My wife works with systems that collect child support from people who owe it. Their reach from here in CA is nationwide and into some foreign countries. The only people they have real trouble finding are people who work cash jobs, have no bills, no accounts, and so on.
That being said, the next best thing is to be honest in you dealings with people. But also document everything as though you were going to be sued at any moment. This makes it easier to fight back when you are attacked. I see myself as an advocate for those tenants who are being straight up with me. I fix their problems quickly, I go to bat for them with HOA and others who I think are treating them unfairly. I follow the Russian saying: trust but verify. If you are squeaky clean, its gets real hard to gain traction. Don’t count on secrecy as a determined person can eventually connect the dots.
I also maintain liability insurance in excess of the value of the assets in the state where the assets are located and a minimum of $1 million to ensure the insurance company will fight rather than pay and drop me. The trust is just for helping lawyers looking to see if they should accept the case on contingency (which means their client does not pay them) decide that they cannot find enough assets to waive the retainer, usually a chunk of change that deflects many frivolous claims.
I recommend a commercial insurance policy that includes an “employee dishonesty” rider that covers your PM. Problems with the PM can flow through on to you and often a lawsuit will be filed against the agent and the owner at the same time. If that happens, you may have a PM who sees to their own interest and not yours. In some states E&O insurance is required to work as a PM and this is to your advantage. Its often errors and omissions that cause the problems that end up in court.
Most lenders are not going to talk to you if the property is in the name of an LLC or of a Trust that does not meet their requirements for a Living Trust. You will have to use your personal name and transfer the assets afterwards. In some states the deed of trust is recorded, so this really messes up the anonymous thing.
Another issue of trying to be anonymous is that it can, in the mind of a judge, give them reason to wonder what you have to hide. I personally like everything on the table because looking like the good guy does make it easier to prevail. Especially if you can prove you were responsive when a complaint came in.
Example. I had a property manager for someone else contact me with a complaint about my tenant. They claimed noise, mess, traffic. They claimed they called the police and HOA. So I called these people and asked for copies of the complaints (the police have a record of every call based on the address being complained about). I found no records. I responded that I had checked everything out and my PM had interviewed the tenant and we could find no evidence to support what they said in the letter but if they could be more specific I would investigate further. No response. They may sue some day, but we have a file showing our efforts to verify a complaint because we cannot assume our tenant is guilty (burden of proof is on the accuser) If we do get sued, I feel confident we will win because I did my due diligence. If you are squeaky clean, the crap won’t stick. The stories of unjust lawsuits being victorious are not really very common and the low cost of GL insurance tells you how likely you are to get sued. In 20 years as a landlord, we have yet to even get an attorney letter.