Posted by Mike-OH on July 20, 2005 at 06:01:24:
Hi Wade,
You can e-mail me at propertymanager@adelphia.net
Talk to you later,
Mike
Question after reading Bronchick’s courses. - Posted by Rich
Posted by Rich on July 18, 2005 at 18:46:35:
My plan is to use land trusts to hold each of my properties. I will set up the beneficiary as my llc. I am forming the llc using Bronchick’s LLC course that I ordered on here (great courses btw). I currently use a company name that is just a sole proprietorship that offers me no asset protection at all. Once I form the llc should I use that llc as my new business name. For example, should I use the LLC name on my business cards and letterhead. It seems to me that if I did this it would undo some of the anonymity that the land trust provides (because the name of the beneficiary of the land trust would be on the cards and letterhead). Just curious what other do about this. Do you just use the LLC name as your business name or do you just keep using a separate business name (sole proprietorship) that doesn’t own anything?
Thanks
What about non-rentals? ie. rehabs? - Posted by SteveA (FL)
Posted by SteveA (FL) on July 20, 2005 at 09:25:09:
Right now I have properties in my name (just 2) and I’m ready to get them out. I have one rental that I plan on selling end of this year or refinancing in a partners name (or LLC?). All I plan to do now is rehabs. Do I really need a land trust? Or will LLC’s serve my purpose to protect my personal assets? If I maintain homeowners, liability and builders ins., I should be covered?
I spoke to a RE attorney a few months ago and she suggested to just have a sep. LLC for each property. I don’t anticipate having more than 2 or 3 going at a time.
Thanks. Great info.
Re: Question after reading Bronchick’s courses. - Posted by Rich[FL]
Posted by Rich[FL] on July 19, 2005 at 11:51:25:
This has been answered several times in the legal forum. If you do a search there, you’ll find many posts that can be “assembled” to give a fairly complete answer.
However, here’s a condensed version of what Bronchick teaches. First, there really is no one “complete” answer of asset protection. The one single thing that scares most people are the nuisance suits that can easily be brought against landlords and owners. The FIRST step is the land trust, as Bronchick points out. The name of the LT is usually the property address; some states require a name in the title - generally the trustee’s name. The beneficial interest is owned by the LLC.
If a lawsuit happens, it would be “easy” for a lawyer and the court to force the trustee to divulge the owner of the beneficial interest, which would point to your LLC, but would require additional effort on the lawyers part with limited expectation of getting paid. Many contingency fee lawyers may quit at this point and require a retainer from the low-life tenants to continue wherein the suit may simply go away since most tenants won’t have the money to continue. Now, according to Bronchick, if your trustee is someone OUT OF STATE, a separate lawsuit would have to be started in that state (if/when they could find which state and track down the trustee) to force the trustee to divulge who the owner of the beneficial interest is. This will generally stop the rest of the potential deadbeat lawsuits.
Now, if a lawsuit ever progresses beyond this point, you’ve got many other things to worry about, which I hope never happens. The LLC should protect your personal assets, but keep in mind that you probably had to sign personally on any mortgages created when you purchased properties, which still sort of leaves your behind hanging out.
Hope this helps.
Rich
Re: Question after reading Bronchick’s courses. - Posted by Mike-OH
Posted by Mike-OH on July 19, 2005 at 11:37:54:
Rich,
Hold your property in a land trust. The trustee should be someone with a last name different that yours. The beneficiary would be your LLC. This LLC has a written contract with another LLC or C-corporation (also owned by you) that manages the property and performs other office services. The property management LLC or C-corp has no real assets. If you are managing the properties, you do so as a representative (employee) of the management LLC or C-corp - i.e. you’re the property manager. Use the management LLC or C-corp on all your correspondence and contacts with the tenants - including leases, letterheads, business cards, signs, advertising, etc. Don’t ever mention the beneficiary of the Land Trust. In fact, don’t ever mention the Land Trust.
Don’t ever use a sole proprietorship for anything. A sole proprietorship is YOU and has absolutely no asset protection.
Don’t ever say that you’re the owner - you’re not! Look at the deed!!!
Don’t use the same beneficiary (LLC) for more than 5 properties.
Split up the properties according to risk. High risk properties (low income apartments) owned by one LLC (as beneficiary). Medium risk properties (blue collar SFHs) owned by one LLC (as beneficiary). Low risk properties (pretty houses in nice neighborhoods) owned by yet another LLC (as beneficiary).
All of these LLCs can use the same management company (LLC or C-corp).
It’s all common sense. Split things up and keep a LOW PROFILE!
The key to avoiding these lawsuits is to make it as difficult as possible for the plaintiff and their scumbag lawyer! To do this:
-
Keep a low profile. This is very important. Don’t drive your Mercedes to fix the sink. An older pickup truck is ideal when you’ll see the tenants.
-
Never be the owner. Don’t tell the tenants that you own the property. It may feed your ego to do so, but you’ll be sorry. This helps avoid lawsuits and also makes property management a LOT easier. Tenants won’t ask to pay the rent late if they think that you just work for some impersonal company that makes you collect the rent on time.
-
Buy every property with a trust. The property should never go in your name. Do this starting with the very first property. Trusts just make it more difficult for a predator to determine what you own, they don’t actually protect you. However, if they don’t find many assets, they probably won’t sue you.
-
Use an LLC to be the beneficial interest (owner) of the trust. When an LLC is sued, the best the plaintiff can hope for if he wins the lawsuit is to get a charging order. A charging order basically says that the plaintiff is entitled to the appropriate share of distributions from the company. However, an LLC with a proper operating agreement won’t distribute profits after being sued. The LLC will simply pay key employees (like the owner’s wife, children, etc). The plaintiff will never see a dime BUT WILL PAY TAXES ON ALL PROFITS (the profits they aren’t getting). That’s a powerful reason NOT to sue an LLC.
-
Buy Insurance and be sure it includes liability. This will pay for your legal defense and damages if you lose the lawsuit. Never tell anyone that you have insurance or how much.
If you are sued - SHUT UP AND DELAY. Throw every possible roadblock in front of the plaintiffs. Make them fight for every bit of information. Most of the time, these lawsuits are really someone trying to extort money from you. Make it enough of a hassle and the lawsuit may eventually disappear.
Obviously, running your rental business properly is necessary (legally and ethically). HOWEVER, THIS WILL DO VERY LITTLE TO PREVENT LAWSUITS. People frequently sue because they want what you have, not because they have been injured in some way. Believe it or not, people will lie, cheat, fake injuries, etc to get your money.
Good Luck,
Mike
Re: Question after reading Bronchick’s courses. - Posted by Rich
Posted by Rich on July 19, 2005 at 24:28:53:
For example, for those of you that send out “we buy houses” signs, mailers and flyers, what business name do tell them when they call you? Is it the llc name that is the beneficiary of the land trusts, or do you have another llc just for this? For what ever reason this confuses me to no end?
Re: What about non-rentals? ie. rehabs? - Posted by vacationlover
Posted by vacationlover on July 23, 2005 at 20:44:43:
Steve,
You could do the separate LLC thing, as taught by Steve Cook (and others). But, you don’t really need that. Set up land trusts and use trusted people as your trustees.
Re: What about non-rentals? ie. rehabs? - Posted by Natalie-VA
Posted by Natalie-VA on July 20, 2005 at 10:35:37:
Steve,
We buy our rehabs in the name of our S-Corp per our CPA’s advice.
–Natalie
Control, Never Own! - Posted by El Guapo
Posted by El Guapo on July 20, 2005 at 14:29:10:
Here’s a twist to all of this.
Step 1. Form a Title Holding/Land Trust. This provides FINANCIAL PRIVACY—without Financial Privacy, you can not achieve Asset Protection.
Step 2. Quitclaim Real Estate into Title Holding/Land Trust. Believe it or not, many attorneys and other, fail to take this very basic step.
Step 3. Form a New Mexico LLC whose Resident Agent is somewhere offshore. You can’t take to court someone you can’t serve!
Step 4. Form a Family Limited Partnership. Make the Family Limited Partnership the Beneficiary of the Title Holding/Land Trust. A classic Poison Pill maneuver—attorneys hate to see this move because of the onerous Charging Order.
Step 5. Form a 2nd New Mexico LLC whose Resident Agent is offshore. Again, you can’t take to court someone you can’t serve. Also, as long as your NM LLC remains a benign entity, the State of New Mexico DOES NOT require you to reveal the LLC’s Managers. Talk about Financial Privacy!
Step 6. File a Friendly Lien against Real Estate property using the 2nd New Mexico LLC; thereby stripping all equity. We write them as a 15 Year Balloon @ 10% per year. No income stream to NM LLC means no need to file income tax returns.
Step 7. Once per year, form a NEW Title Holding/Land Trust and quitclaim Real Estate into the NEW Title Holding/Land Trust (this is called the Migrational Methodology of Asset Protection). Destroy the OLD Title Holding/Land Trust. Repeat for 10 years.
As an aside, this strategy will stymie 99.99% of all lawsuits. This strategy could eventually crumble when faced with an adversary with unlimited time and resources. Not many—except the US Government, Bill Gates (maybe).
Solution, sell the Real Estate and spend your money.
By the way, as a full time Judgment Recovery and Collections professional, all of the above strategies have completely blunted my own efforts to collect and recover Judgments.
These are REAL WORLD, REAL LIFE, BULLET-PROOF strategies! Not just some academic ruminations by 99.99% of all attorneys who say they are Asset Protection attorneys.
By the way, the next time you meet and talk with an Asset Protection attorney, ask them if they’ve ever been on the Collection side of life! If not, take what ever they say with a BOULDER of salt.
Fortunately for me and my business, 99.99% of Real Estate investors DO NOT practice these PROVEN asset protection techniques.
Fortunately for me and my family, I have!
P.S. Form 1 Title Holding/Land Trust per Real Estate property. This follows the US Navy’s Submarine Strategy.
Re: Question after reading Bronchick’s courses. - Posted by Will
Posted by Will on July 19, 2005 at 20:45:32:
You are SO GOOD!!!
I really value and appreciate many of your posts that I have read.
Here is another one to add to the list!
THANK YOU.
Re: Question after reading Bronchick’s courses. - Posted by Greg(NJ)
Posted by Greg(NJ) on July 19, 2005 at 17:26:48:
Excellent post Mike !
Re: Question after reading Bronchick’s courses. - Posted by Mark(SDCA)
Posted by Mark(SDCA) on July 19, 2005 at 11:51:22:
Not a lawyer… maybe it should be posted on the legal forum. Still, my take. The land trust provides no liability protection. It helps with anonymity ie tracking down all the properties you own.
In order to avoid piercing the corporate veil, you need to be representing the LLC, not you ie you should Joe Blow, member or Joe Blow for MYLLC LLC. So I would represent yourself like that.
Mark
Re: Question after reading Bronchick’s courses. - Posted by Skip
Posted by Skip on July 19, 2005 at 11:03:37:
I’ve been hoping someone would answer your question because I think it’s a good one. My properties are set up the way you described (in land trusts with an LLC as beneficiary), but I use the LLC’s name to do business – ie. to collect rents.
I don’t know what is involved legally to use a business name, but my guess is you could continue to use your sole proprietorship to do business. The LLC (I’m assuming it’s a single-member LLC) doesn’t exist for tax purposes, so as long as your sole proprietorship is treated the same all of your tax reporting will be on your personal return.
I hope someone who knows more about it can clarify.
Re: Question after reading Bronchick’s courses. - Posted by Wade
Posted by Wade on July 19, 2005 at 19:05:16:
Darn Good post Mike, can you send me your email address so I can throw some questionts at you personally? Also, how long you been renting for?
You sound like you got it all down to a science.
Wade
Re: Question after reading Bronchick’s courses. - Posted by Greg(NJ)
Posted by Greg(NJ) on July 19, 2005 at 17:29:01:
Follow Mike’s(OH) advise and you should be fine.
Re: Question after reading Bronchick’s courses. - Posted by Rich
Posted by Rich on July 19, 2005 at 11:14:47:
I hope someone knows as well. My biggest concern about using the sole proprietorship as my business name is that someone could sue it (meaning me personally)? Not sure if this is correct or not though.