Business Entity to Acquire Property

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Business Entity to Acquire Property

Charles Wade
Member since 2022 · 17 posts · 7 votes

Greetings

I have read many posts and replies on business entities, but I have not seen any that are in line with my question (see below)

A little background first: I have one (1) STR in Atlanta that I acquired in my personal name over two years ago. The property was then put into a land trust which is owned by my first series LLC; however, the mortgage is still in my personal name

My question: What is the best approach to acquire the next property? I would prefer to NOT use my personal credit to acquire, unless there is a clear benefit in doing so. What entity are others using to acquire property and is it still advisable to transfer the property into another land trust then have it owned by the next series LLC?

In summary:

-What entity do I use to acquire property and why?

-If I use a separate LLC (not my series), do I still transfer to a land trust and have it owned by a series LLC?

-If it is best to use my personal credit to acquire, how are others managing multiple properties and how do you get them out of your name or do you?

Thank you in advance for your feedback and assistance

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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
8mo

I am not a lawyer, but have talked to a lot of them.

Some lawyers argue that if the deed is in the LLC, but the mortgage is in your name, you have pierced the corporate veil. In other words, the LLC may provide you no protection whatsoever.

Generally, you need to decide are you going to go the LLC route. Going the LLC route provides you greater protection, assuming you do the ongoing work to maintain the integrity of the LLC. On the other hand, you cannot get a conventional mortgage, so will need to get a DSCR or bank loan, which often has higher interest rates and a balloon payment.

If you go the route of putting it in your name, you can get a conventional 30-year mortgage. To provide added protection, you may want to beef up your insurance.  

I've gone both routes in the past.  Those properties that I had in my name I had $2.5M of liability insurance.  I used an umbrella policy, and slept great at night.

You mentioned that you do not want to use your personal credit, but until you get in the commercial space, you are almost certainly going to have to sign on every loan as a guarantor, even if the loan is not in your name.

Asset protection is important, but it can also be a distraction.  I see tons of people worried about having the perfect structure before moving forward.  If you are operating your businesses ethically, legally, and have good insurance, that covers the majority of problems.

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    8mo

    I am not a lawyer, but have talked to a lot of them.

    Some lawyers argue that if the deed is in the LLC, but the mortgage is in your name, you have pierced the corporate veil. In other words, the LLC may provide you no protection whatsoever.

    Generally, you need to decide are you going to go the LLC route. Going the LLC route provides you greater protection, assuming you do the ongoing work to maintain the integrity of the LLC. On the other hand, you cannot get a conventional mortgage, so will need to get a DSCR or bank loan, which often has higher interest rates and a balloon payment.

    If you go the route of putting it in your name, you can get a conventional 30-year mortgage. To provide added protection, you may want to beef up your insurance.  

    I've gone both routes in the past.  Those properties that I had in my name I had $2.5M of liability insurance.  I used an umbrella policy, and slept great at night.

    You mentioned that you do not want to use your personal credit, but until you get in the commercial space, you are almost certainly going to have to sign on every loan as a guarantor, even if the loan is not in your name.

    Asset protection is important, but it can also be a distraction.  I see tons of people worried about having the perfect structure before moving forward.  If you are operating your businesses ethically, legally, and have good insurance, that covers the majority of problems.

    1Reply
    • Tron Pham
      Investor · Atlanta · Member since 2025 · 14 posts · 3 votes
      8mo

      @Greg Scott has love the last part. You nailed it! 

      0Reply
  • Charles Wade
    OP
    Member since 2022 · 17 posts · 7 votes
    8mo

    @Greg Scott, thank you for this detail

    I have a better understanding of the pro's and con's; however, do investors simply acquire property in their name? How do you scale that way?

    I guess what I am trying to do is establish a standard process. If I have an LLC that is the main vehicle that I use to actually purchase the property (DSCR, Hard Money or Private Lender) then put the property into a land trust...does that make sense to do?

    Hope my follow up questions make sense

    Thank you again

    0Reply
  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    8mo

    Scaling has nothing to do with how you are holding.  How you hold is an asset protection, and possible estate-planning discussion.  

    Scaling is more about money, processes and people.

    If you are talking about land trusts, sounds like you are listening to too many gurus.  That would make sense if you are also the type of person who doesn't use facebook and never posts on social media sites like this one.  Otherwise, you've already lost your privacy.

    Just remember all the structure you create comes at a cost.  The cost is in both dollars to cover fees and the time to manage it properly.  Usually the structure people use changes and grows over time as their business gets bigger.

    0Reply
  • Charles Wade
    OP
    Member since 2022 · 17 posts · 7 votes
    8mo

    Greetings @Greg Scott and thank you for your input

    The question is not about holding, but rather acquiring. My concern is very much related to scale as I do not want to acquire multiple properties in my name. Again, the main question is what is the best approach to "acquiring" properties...not holding them as I have a structure for that

    Additionally, putting properties into a Land Trust is the approach that my attorney advised and that I executed on. In speaking to other investors, that is an approach that many have taken

    Charles

    0Reply
  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    8mo

    To acquire, you need money.  Yours or someone else's.

    Regarding Land Trusts, be skeptical of the advice of someone selling you a service.  I know dozens of SF investors and I don't know of any that use land trusts.  To this day, I have never used one.

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