Just moved to Boca Raton, and would like to find an asset protection attorney. Planning on buying multi-family real estate and like to have the proper business structure created, that has the maximum protection from outside creditors.
Thank you,
David
@Joseph James
It sounds like you are holding the properties in your personal name. Some people think this is completely acceptable if you have adequate insurance. Well did you know that holding real estate in your personal name, increases your chance of being sued astronomically.
It’s undoubtedly better to avoid being sued at all. Insurance companies typically settle with a claimant before it even goes to trial because it’s cheaper than paying a team of attorneys. And then your insurance costs will substantially increase.
Most people think they're protected with the real estate within an LLC. Well guess what, that's a false feeling of safety.
Firstly, the owners name is still on public record. Anyone can go to the Secretary of State website and see your name as the managing member of the LLC. That means everyone knows exactly what you own.
Secondly, the courts have in many cases ruled that a single member LLC is simply just the individual themselves. This is known as piercing the corporate veil and occurs when the investor fails to follow corporate formalities like using separate business bank accounts.
A holding company in a state with good asset protection laws and anonymity is an excellent method for keeping your personal name off the public record. If someone goes to the Secretary of State website in the state where the property is located, they’ll see the holding company as the managing member, not Joseph James. Jospeh James is in fact nowhere to be seen and doesn’t have a penny to his name as far as prying eyes can see.
An investor can set up an asset protection structure at any stage, even post acquisition. It’s very simple if the properties are owned outright. If they are financed, there’s a few extra steps.
You need to seek written permission from your lender to transfer from your personal name to an LLC. Your lender may require you to refinance with the LLC as the borrower and probably at a higher interest rate as a commercial loan.
Don't transfer directly to an LLC without written consent. Most mortgages have a "due on sale" clause, which means that if you transfer ownership of the property, the lender could require you to pay the full mortgage amount.
Alternatively you can transfer the property into a land trust without consulting the lender. You will then start an LLC to be the beneficiary of the trust.
Whether transferring property into a land trust or an LLC, you will need to deed the property into that entity. Most people say a quitclaim deed is fine but a warranty deed is a smarter option to strengthen the chain of title.
Deeding property isn’t too hard. It just requires filling paperwork and recording with the county recorders office. There are some small fees to be paid.
Asset protection attorneys will do this all for you for a hefty fee. I was able to do it myself with my paralegal completing the paperwork because I don’t like filling out forms!
Feel free to PM me if you need any help.
@Dave A.
I know many attorneys in this area.
Maximum of one million dollars inside one LLC. Each LLC is owned by a WY Holding Company.
The subsidiary LLC's are disregarded entities and the income flows back to the holding company for consolidated banking and tax filing. The holding company can be any entity you choose (c-corp, s-corp, LLC) and should be selected after a discussion with your CPA.
There is no 'one size fits all entity or structure', however the above structure is an excellent asset protection method for real estate investors.
Maximum of one million dollars inside one LLC. Each LLC is owned by a WY Holding Company.
The subsidiary LLC's are disregarded entities and the income flows back to the holding company for consolidated banking and tax filing. The holding company can be any entity you choose (c-corp, s-corp, LLC) and should be selected after a discussion with your CPA.
There is no 'one size fits all entity or structure', however the above structure is an excellent asset protection method for real estate investors.
This is interesting info, @Nat Chan. I have a portfolio of properties in/around Miami, that are past due to receive this kind of asset protection treatment. Additionally, I am under contract for an additional acquisition. I am imagine it is during a time of addition/change like a property purchase, that there are strategies involved specific to this change, yes?
Do you recommend any further resources for reading up on/education myself on this stuff? As I grow in portfolio size and value, I feel the need for more protection and sophistication in structure and approach.
@Joseph James
It sounds like you are holding the properties in your personal name. Some people think this is completely acceptable if you have adequate insurance. Well did you know that holding real estate in your personal name, increases your chance of being sued astronomically.
It’s undoubtedly better to avoid being sued at all. Insurance companies typically settle with a claimant before it even goes to trial because it’s cheaper than paying a team of attorneys. And then your insurance costs will substantially increase.
Most people think they're protected with the real estate within an LLC. Well guess what, that's a false feeling of safety.
Firstly, the owners name is still on public record. Anyone can go to the Secretary of State website and see your name as the managing member of the LLC. That means everyone knows exactly what you own.
Secondly, the courts have in many cases ruled that a single member LLC is simply just the individual themselves. This is known as piercing the corporate veil and occurs when the investor fails to follow corporate formalities like using separate business bank accounts.
A holding company in a state with good asset protection laws and anonymity is an excellent method for keeping your personal name off the public record. If someone goes to the Secretary of State website in the state where the property is located, they’ll see the holding company as the managing member, not Joseph James. Jospeh James is in fact nowhere to be seen and doesn’t have a penny to his name as far as prying eyes can see.
An investor can set up an asset protection structure at any stage, even post acquisition. It’s very simple if the properties are owned outright. If they are financed, there’s a few extra steps.
You need to seek written permission from your lender to transfer from your personal name to an LLC. Your lender may require you to refinance with the LLC as the borrower and probably at a higher interest rate as a commercial loan.
Don't transfer directly to an LLC without written consent. Most mortgages have a "due on sale" clause, which means that if you transfer ownership of the property, the lender could require you to pay the full mortgage amount.
Alternatively you can transfer the property into a land trust without consulting the lender. You will then start an LLC to be the beneficiary of the trust.
Whether transferring property into a land trust or an LLC, you will need to deed the property into that entity. Most people say a quitclaim deed is fine but a warranty deed is a smarter option to strengthen the chain of title.
Deeding property isn’t too hard. It just requires filling paperwork and recording with the county recorders office. There are some small fees to be paid.
Asset protection attorneys will do this all for you for a hefty fee. I was able to do it myself with my paralegal completing the paperwork because I don’t like filling out forms!
Feel free to PM me if you need any help.
@Joseph James
It sounds like you are holding the properties in your personal name. Some people think this is completely acceptable if you have adequate insurance. Well did you know that holding real estate in your personal name, increases your chance of being sued astronomically
It’s undoubtedly better to avoid being sued at all. Insurance companies typically settle with a claimant before it even goes to trial because it’s cheaper than paying a team of attorneys. And then your insurance costs will substantially increase.
Most people think they're protected with the real estate within an LLC. Well guess what, that's a false feeling of safety.
Firstly, the owners name is still on public record. Anyone can go to the Secretary of State website and see your name as the managing member of the LLC. That means everyone knows exactly what you own.
Feel free to PM me if you need any help.
Nat Chan,
Thank you for the wonderful reply. I appreciate it. PM sent, and thank you again.