Owner Occupy/House Hack in MA - Land Trust or LLC?

4 Replies

I'm currently living in a duplex, and getting ready to rent out my second unit soon.  I will continue to live there with the tenant in the second unit, so this is a house hack.  This is my first and only property, and will likely be my only property in the foreseeable future.

I'm just looking for asset protections should someone come after me.  I've read that LLCs are overkill unless I have multiple properties or planning on lots of flips.  Is a Land Trust the best approach for this in MA?  How long do these take to set up?

HI @David Santore I have helped quite a few people in the Berwyn/Forest Park area house hack, and this is a common question. The answer lies in how you are financing the property. If this is all cash, you can do whatever you want, but if you are using a loan you have to find out what the lender will let you do. I know most lenders are not actually ok with these types of loans going into LLC's. Land Trusts are a different story. I have heard mostly negative opinions on their ability to provide asset protection from attorneys, but obviously you would need to consult an attorney to get a more educated opinion.

Originally posted by @John Warren :

HI @David Santore I have helped quite a few people in the Berwyn/Forest Park area house hack, and this is a common question. The answer lies in how you are financing the property. If this is all cash, you can do whatever you want, but if you are using a loan you have to find out what the lender will let you do. I know most lenders are not actually ok with these types of loans going into LLC's. Land Trusts are a different story. I have heard mostly negative opinions on their ability to provide asset protection from attorneys, but obviously you would need to consult an attorney to get a more educated opinion.

Thanks John - I just spoke with them, and you were correct they are not OK with my loan going to LLC, but I can do a "Living Trust" - the person I spoke with said I need to speak with a different department so I'll clarify Living vs Land Trust later.

@David Santore again I am not an attorney, but I think a living trust is pretty much what most people call a "will". I don't think it does much in the way of asset protection. 

Of course, the other angle to this is to decide if you have enough assets to make it worth your while stressing about this. Most of the people that focus on LLC formation and trusts are protecting multiple million dollars worth of net worth. I decided early on not to put my four unit Lyons, IL property in an LLC. I didn't have tremendous assets to protect at the time, and honestly the risk was and is pretty low when owning in a nice area. A good land lord insurance policy has a ton of insurance built in to help protect you against the proverbial slip and fall type scenario.

Hope this helps as you decide which way to go! If you want to own in an LLC, talk to a local portfolio lender. You can typically get a commercial loan on a small property with 20-25% down, and then you would be able to use an LLC. These banks are hyper local (mine has only a few branches in Forest Park and Oak Park), but they are great partners when you don't want to use conventional financing for a reason such as this.

Land Trust offers little to none asset protection. They are often used for estate planing, and in conjunction with an LLC, they might offer some anonymity or privacy protection (as they might remove your name from a county search on current deeds). I can send you my notes on researching the whole asset protection question, including all the rabbit holes it opens with land trusts, LLCs, transfers, insurance, DOS, etc.

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