Attorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes
I'm the asset protection attorney out of Austin, Texas that protects real estate investors from lawsuits. What I want to know is the question you have about lawsuit protection, taxes, insurance, financing, etc. as it relates to owning property in a company.
Real Estate Agent · Ithaca, NY · Member since 2016 · 427 posts · 323 votes
10y
I have a simple one! (I hope.) When flipping, we would like to have contractors sign lien waivers. We've found some examples in books and online. Do they need to be any kind of specific legal document, or can we use the examples we've found and still be protected?
1. From an asset protection perspective, should landlords be housing their rentals in an LLC or is being a good landlord and having adequate insurance fine?
2. For flippers, many seem to have a parent company that owns subsidiary LLCs. The sub LLC will be opened and then closed per each flip. Is this an adequate asset protection strategy or are they missing the mark?
Investor · San Antonio, TX · Member since 2015 · 32 posts · 7 votes
10y
I run a furnished rental in San Antonio by the room that has five bedrooms which are rented at $60/night for an average of 4month stays. So $1800 per room per month. Business is competitive and highly based on referrals. I want to give up to a $1000 referral for anyone who refers someone to stay for 4+ months. Can anyone point me to resources about legal issues with this? Who can get the referral? Is there a $ limit? Anything Texas specific? Etc.
Thanks a lot, Patrick
Investor · Austin, TX · Member since 2015 · 19 posts · 11 votes
10y
Scott, I actually have a couple of questions I've been meaning to call you about, but since you asked here on BP, I thought I would ask my questions here in the hopes of helping out others with the same questions.
1 - Single Member LLC's are considered disregarded entities by the IRS. Do you see this type of thinking spilling over to the courts to the degree that a single member LLC's will offer no protection to the single member? How does having a trust as the single member help or not help the prospects for these types of entities in the future?
2 - Is there any case law that supports the use of Joint Venture agreements for investing in real estate notes? I've heard some people say that these types of agreements might not be OK with the SEC as they may consider this type of transaction agreement a security. Is there any concern in using these types of agreements when pulling in a money partner for taking down single notes or multiple notes with the same single investor?
Investor · Union City, CA · Member since 2016 · 3 posts · 0 votes
10y
I am the seller and the buy has not removed his contingencies by the specified date. I had already granted a 10 day extension and his loan has not been approved nor has he removed the loan contingency by the extended date. Assuming the standard California Realtors standard Purchase agreement, Am I entitled to collect his deposit? My realtor says I am not and If we issue a notice to perform we will not collect the deposit which doesn't make sense to me.
Real Estate Investor · Tempe, AZ · Member since 2012 · 874 posts · 648 votes
10y
Peter Lange , I'm not the OP, but I don't think the IRS uses the word "disregarded" in a pejorative manner. It's an ugly sounding word, but in my opinion it is used not to take rights or privileges away from the taxpayer, but rather to simplify the return and take what would have been two redundant returns (the individual's and the entity's) and combine them into one. Just my two cents.
Oak Lawn, IL · Member since 2016 · 53 posts · 12 votes
10y
My husband will be exposed to professional liability in his career. Investments will be under my purview, not his. Will investing within an LLC protect me from any of his malpractice exposure? We live in Illinois.
Also, (and this is the newbie in me) if I create an LLC, can I exclusively pay myself as a stockholder? I'll own 100% of the company.
Investor · Austin, TX · Member since 2015 · 19 posts · 11 votes
10y
Thanks @Dan Schwartz and @Chris Soignier, I understand the IRS's use of the term and the tax implications. I'm asking my question from a legal perspective because I saw a presentation by Aaron Young, CEO of Laughlin and Associates, over the weekend,and he was basically saying that he didn't think single member LLC's were good corporate entities siting the "disregarded entity" designation as one of the main reasons why. Of course, I am I'm paraphrasing here, and I may have interpreted what he said incorrectly, but I don't think so. I think this is an important legal question to be clear on because I think a lot of us out there have single member LLC's. BTW, if you and your spouse are the only members of the LLC, it is still considered a single member LLC if you file jointly. @Scott Smith, what say you?
Real Estate Agent · Los Angeles, CA · Member since 2015 · 201 posts · 82 votes
10y
Riq H. The reason you can not collect the deposit is the buyers still have their contingencies in place. In residential real estate, the contingencies are removed by the buyer actively (i.e signing removal on contingencies form), not passively based on a date.
If you gave them an extra 10 days, you can deliver the notice to perform (telling them to remove contingencies) and if they do not you can cancel and move on to the next buyer. You do not however get to keep the deposit at this point since they have not actively removed the contingencies.
So to keep the deposit they would have had to remove all contingencies, and then you deliver a demand to close escrow which gives them 3 days, and then you could keep the deposit if they do not perform.
Investor · Union City, CA · Member since 2016 · 3 posts · 0 votes
10y
Eric, Thanks very much for the clarification. So based on what you said, a shorter loan contingency period has no bearing on the strength/value of the offer (when evaluating which offer is the best). ?
Investor · Tustin, CA · Member since 2016 · 3 posts · 0 votes
10y
@Scott Smith I am thinking of assigning my option to buy a parcel as It doesn't look like I will be able to perform and close. The property is priced below market and I should be able to find a buyer to take my place. Can I simply sell it with an Assigment of Purchase Agreement? Should I record my option agreement? Thanks!
Real Estate Investor · Tempe, AZ · Member since 2012 · 874 posts · 648 votes
10y
Peter Lange very interesting. Wasn't insinuating that you didn't know what it was; I've just noticed a lot of chatter about the disregarded entity lately and offered up some thoughts. Your link didn't post. If you have a chance to repost, please do (or maybe it just isn't showing up on the mobile app....)
I'm the asset protection attorney out of Austin, Texas that protects real estate investors from lawsuits. What I want to know is the question you have about lawsuit protection, taxes, insurance, financing, etc. as it relates to owning property in a company.
If you ask, I'll answer.
Scott, short question. Is there any way to allocate/protect your assests (LLCs, trusts, bitcoin, etc.) so that if one gets married in the future, they are protected in the (unfortunate) case of divorce? Protected/not even known about/not a factor.
Real Estate Agent · Los Angeles, CA · Member since 2015 · 201 posts · 82 votes
10y
@Riq H. Yes and no. If you are not going to hold them to the time frame, then a shorter loan contingency makes no difference. If they put their contingencies at 10 days, then send them a notice to perform, you can do it as early as day 8, and cancel when they do not and move on to the next buyer. If they do remove and fail to close because they failed to get the loan then you keep the deposit and again move on to the next buyer.
I'd argue no, since I am not technically admonishing him or telling him what course of action he should take, merely calling his attention to a potential issue that any barred attorney should be cognizant of. Its up to him to decide if it is worth potential reproach from any one of the bar associations of the states where the individual posters are from. Or better yet, it is up to him to decide whether or not his malpractice insurance provider will appreciate this venture.
Los Angeles, CA · Member since 2014 · 5 posts · 0 votes
10y
I am so sorry that I am just weighing in on the LLC conversation. For some reason someone out there threw LLC as the almighty GOD in BOLD big letters and did not even whisper or write in fine print. That there are several different ways to set up LLC's and for different reasons, and the sad part about it is that all these online companies are thoughting how cheap it is and you can do it in seconds. So everyone it thinking that hey this is not so complex where I need any advice before I set one up. BUT people let me tell you that is far from the truth. I have had to clean up so many messes from people running out and doing just that. Just like investing in real estate you have to make a blueprint / roadmap to what you are going to do and how you are going to get there. Setting up an entity to protect your investments takes the same kind of work.