Anderson Business Advisors
Rental Property Investor · Los Angeles, CA · Member since 2015 · 30 posts · 56 votes
I'm interested in talking to anyone that has hired Anderson Business Advisors for help with asset protection strategies. This is the firm founded by author Clint Coons who wrote Asset Protection for Real Estate Investors.
I'd like to hear about your experiences, good or bad. I am considering having them help with the creation of LLCs and land trusts for my buy-and-hold investment properties. They were not able to provide references due to client confidentiality.
Ken - I haven't hired those guys but I'd argue a couple things:
1) Too many attorneys in the REI space $ell fear that you need this or that structure in order to protect your assets.
2) Too many investors get scared off by what appears to be something complex -- forming a holding company (whether LLC, LLP, C or S-corp). It's not that complex.
3) Too many investors are under-insured and fail to frequently review their insurance policies.
Bottom line is this:
1) Find a competent attorney that will give you the holding company structure of your choice (talk to your CPA, not your attorney about what is best for you) documents in a word format. It's all broiler plate anyway. You should be able to reuse your docs for each deal you do without having to go back to the attorney for a new op agreement etc.
2) Forming a LLC etc is easy. Don't get scared by the legalese or the crazy attorneys trying to sell something. A LLC is just a bucket for carrying something around. In our case, it's a piece of property. At the same time, USE your holding companies. Make sure you shift an asset into it. I'm frequently shocked by the number of people who maintain rentals in their personal name. Don't forget to run separate books and bank accounts for your holding companies and have an annual meeting.
3) Review your insurance policies frequently. Make sure you have enough insurance personally (umbrella plus good underlying liability in relationship to your net worth) and corporately (same thing - umbrella plus underlying coverage). This is your first line of defense. Your Wyoming/Nevada/Delaware LLC won't do crap for you if a tenant slips and falls. It just hides the fact that you are the owner.
Anyway, final disclaimer: I'm not an attorney or a CPA. I don't pretend to be one even on the internet. This is my advice based on what's worked for me. Don't get scared off by some attorney. Get out there, write offers and do deals.
I will update you as I continue to learn. Anderson group provides corporate headquarters services for my structure(s), hopefully this will control the overhead. The holding company will be the shareholders of the C-Corp. We will be able to do some creative things with 401k, insurance (100% reimbursed), etc. We will only have one Scheduled K on tax returns.
My next meeting is tomorrow at 2:30pm, then after the holidays.
Curious how things are going working with Anderson. I just attended a seminar this past weekend and am considering purchasing their services.
1st, I am skeptical of any out of State Firm that claims to be a "one stop shop" when they are not licensed in the State you live or own investment Assets. Be very careful. Each State stands on its own as to what is the law and what is not the law in that State. Asset Protection planning and proper Estate Planning overlap and are connected. However, what strategies I establish in Texas may not going to be valid or hold up in say California. Texas is a very strong Asset Protection State. In addition to this Texas was the 8th State to amend its LLC statute to establish Series LLC. Delaware being the first as I recall.
This firm Anderson is marketing itself through the Big Dogs Group in Texas at the current time, Jan 2018. From some posts I’ve read on here at bigger pockets (asking about Anderson) about whether to use them or not, I do not have an opinion but can say a lot of folks posting on this topic need a lot more education on the legal ins and outs of choice of business entities and Asset Protection and IRS election as how you want your entity to be taxed. If you ever get threatened with or served with a lawsuit in your home State or the State where your investment property is located is this firm going to appear in court to defend you or your business entity in you or your properties jurisdiction? Again, I am skeptical.
For one thing a “Corporation” is not a “Company” and they have legally distinct meanings in formation. A Company is a Limited Liability Company or a Series Limited Liability Company. What business entity you choose is governed by your State’s laws. In Texas a potential creditors exclusive remedy (if they win a lawsuit) against an LLC member or member of a Series of a Series LLC or a Limited Partnership or a LLP is a Charging Order. A Corporation’s Assets can have a lien placed upon them or be seized in a turnover proceeding. It’s never ever good idea for a Corporation to own assets. However it can act as the manager of the Asset owning LLC or Series of a Series LLC.
How you elect to be taxed is pursuant to Federal tax law. That is an election to be taxed as a C-Corporation, S-Corporation, Partnership, Sole Proprietorship. The Texas SOS and the Texas Comptroller's office have no idea how you elect to be taxed if you are an LLC or Series of a Series LLC nor does it care.
So Asset Protection is a broad term used to cover a lot of areas but basically means to segregate your non-exempt personal assets and business assets away from each other. Also you should categorize what is a risky asset from a safe asset. A risky asset is one that can cause harm or damage and can create liability. A safe asset cannot create harm or damages but can be the target of a bogus creditor. Hence you want to segregate your risky assets away from your safe assets and your personal assets.
Insurance. I have read posts on here by I assume insurance agents looking to scare their clients into paying large liability insurance premiums year after year. Beware. Always have modest amount of insurance but do not over insure as you merely put a target on your back and assure you get named first on any future lawsuit against your or your business. A proper Asset Protection plan segregates your assets from each other and away from the claims of bogus creditors. You do not need huge liability policy and even larger umbrella policy. Large policy limits can make sure you get named in the lawsuit. Moreover, I have personally seen plaintiff’s attorneys tell their client to take the modest insurance policy limits when they discover my client’s has previously established a strong Asset Protection plan segregating non-exempt Assets.
Hey all
So for those of you who have gone w Anderson, do you think it's been worth it so far?
My strategy has been to take out leases and sub-lease short-term on AirBNB – high cash flow and high liability. I am looking to shift this model more into buy-and-hold investment properties also used for short-term rentals. Do you think Anderson would be a good fit? I am in aggressive expansion mode, and need to shelter my future assets from risky assets I hold in AirBNB in NYC (breaking a sublease clause). Sounds like you think they may be a bit gimmicky, so can you recommend a more affordable route? I think my position is a bit more complex than your average investor since:
1) I am brand new and have been shopping for a good CPA to no avail for a month.
2) I need to shelter risky assets as best as possible (which may include anonymity)
3) I am looking to aggressively expand over the next 12 months into different states for short-term rentals, which have volatile regulations.
4) My expected income for 2018 has a very wide band thus leaving room for the need for constant advice and dynamic planning
Thanks so much for any thoughts. Very much appreciated.
Noah
Quentin,
I too am a real estate investor interested in asset protection. I am interested to know how you currently feel about the Anderson group. I just listen to some of their information online and was thinking of contacting them. Also, if you still are willing to share those emails with the documents I would very much appreciate it. I hope it has been going well!
Hello,
I am also a newbie from overseas. Reading all the posts I am getting more and more confused about how to set up my structure and who to go with. Honestly I don't trust posts from people who wrote a total of 3-5 posts on BP and praised anderson frantically without any other comments. That seems to be pure marketing.
So I am wondering: Can anyone recommend a good book on asset protection (other then Clint Coons's book).? I want to take things into my own hands and educate myself before I pay thousands of dollars to smart lawyers who use great marketing for themselfs...
And also : Can anyone recommend any other lawfirm then anderson just for comparison purposes?
Thank you in advance!
Patricia, like you, I chose to educate myself. I learned a lot watching several of Coon's teachings on YouTube and I've also read the comments and appreciate each perspective. As for me personally, my investments are in single-family rental properties. Based on good legal counsel I did the following for each property; I set up a two-member LLC ($100 filing fee), Quitclaimed each property into the name of the LLC and recorded it with the county, applied for an IRS EIN for each LLC, set up a separate bank account in the name of the LLC, secured $1M liability insurance coverage and had the insurance company identify the LLC as the "primary" insured, hired a property management company identifying the LLC as the client, made sure rental contracts are in the name of the LLC and I file Form 1065 tax returns for each LLC. NOTHING is in my name of the name of the other LLC member. My assets strictly follow the legal structure for which LLC's were created (to limit the liability of its members). I'm 55 and throughout my life I've learned to consider risk assessment, and I've determined the structure I've carefully followed minimizes my liability and protects my assets. "Minimizes" being the key word, which is the same word Anderson uses on their website. It doesn't say "remove." Ultimately, the question I asked myself is this; if LLCs were set up to limit liability then why do I need to go with an additional Turn Key service facilitated by a third-party to accomplish the same thing, or what my attorney will do to protect my assets if challenged – as long as I set up the LLC correctly and made sure nothing is in my name by which the "veil can be pierced." I recommend this link for your review;
@Patricia Smith - I spent numerous hours researching from multiple sources the whole LLC question and asset protection matter and all the rabbit holes it opens. I gathered all my notes in a 50+ pages document touching on formation and maintenance of LLC and business structures, transferring assets, protection strategies, trusts, anonymity, insurance, levels of protection, etc. including when you should do it, how many properties per LLC, due on sale clause, selecting an attorney, fees, checklists and resource materials.
There is no absolute answer and unique tool/strategy in anything real estate. You need to learn how to use all the tools available to you (financing, insurance, management, etc.) and to understand how they fit together in your toolbox, as none will give you everything (e.g, insurance is required and it will cover you for many situations, but not always; asset protection (LLC) is litigation insurance and complements regular insurance, by minimizing the target and making it unappealing).
If you are a new investor, probably you will not have a lot of assets and/or equity to worry about (but even that is relative and subjective to each person tolerance to risk) so I would not worry about that till you pass that risk threshold (in my opinion 100K+ in equity, maybe 50K if you are really risk adverse) and you should be primarily concerned with finding good deals and growing your business first. Regardless, you need to implement insurance and proper management procedures, regardless of how many assets and equity you have. So, learn about that first - and a good point to start is a Nolo book (https://www.amazon.com/Every-Landlords-Property-Protection-Guide/dp/1413307000/) mentioned in the doc, it will explain about insurance, how to evaluate insurance, and then about property management, property code, proper leasing and all the way to LLC and hiring.
My notes file are primarily on asset protection, and primarily for buy&hold, but they touch on many other rabbit holes that opens from that (insurance, property management, DOS, transfers, etc.). It should save you many hours of research and hopefully clarify a lot of concepts (or at least I hope it does :>) as to why you want it and when and how. Let me know if you are interested, and I can send them to you - just send a colleague request (to exchange files need to be colleagues) or your email.
@Matthew McNeil - you made one possible mistake - you quitclaimed the deed to the property - operation that usually doesn't carry the title insurance. It is the cheapest of the options for transferring the property, but there is a reason for that.
Hello Costin, hello Matthew
thank you soooo much for your fantastic answer! I am truly speechless how much effort both of you put into it and can't thank you enough for your detailed points. I will definitly look into the book and I would be more then happy to get your notes, Costin.
And what you wrote, Matthew: It sounds really right to me how you set up your structure! This would be also my strategy from what I have read so far on different websites. Also I was thinking about putting up a land trust that functions as an umbrella for the LLC's. Do you have one as well, Matthew?
I am a firm believer in keeping things simple so that I can fully understand what is going on with my assets.
Since I am so new here I can only show my gratitude with a book recommendation. The book is a bit older but timeless: The unofficial guide to real estate investment, by Spencer Strauss. My hubby an I love it. Maybe it can be of some use to you.
Hello All!
Thought I would jump in here as a new investor who is also looking into asset protection strategies and have come across both Anderson Business Advisors and another business that offers similar services. I have not made a decision yet on who I might use, but both have different costs and both differ on their viewpoints of land/grantor trusts, for example.
@Patricia Smith, with that said, you might try having a free consult with either first (I'm not sure if I can name the other business in this forum discussion, so I suppose you can message me).
Also, regarding your idea of a land or grantor trust as an umbrella for the LLC's, what is your intent here?
Costin, you wrote; " -you made one possible mistake - you quitclaimed the deed to the property - operation that usually doesn't carry the title insurance." I was not aware of that and I need to bring this to my attorney. Owning rental properties places us on a continual learn curve.
Hello Jonathan,
thank you for your advice. I didn't know that you can get a first free advice from a lawyer. About the trust: I read quite a bit on it on Scott Smith's website. He is an attorney located in Texas, specialized in working with RE investors. He appeared on the Clayton Morris Podcast and talked about Series LLC's. Here is what I got from his website (it has quite some info) :
"Land trusts offer a way to hold property anonymously. The benefit of anonymous ownership is that it can stop a lawsuit from happening in the first place. This type of structure hides your ownership from the public eye, thereby prevent potential lawsuits."
Let's say you have all your property held in an LLC and want to transfer each of those properties into individual trusts.
The first step toward developing your asset protection plan is to establish an irrevocable trust. You can hold property in the name of this trust instead of your LLC or personal name. Now that the trust owns the property, you or your LLC are merely beneficiaries. This entitles you to the income from the property without exposing you to liability.
In a dispute regarding the property, the opposing party will only be able to collect against the asset of the Trust, the Trust property, which hopefully has limited equity. Why do I hope that the Trust property have limited equity? The lawsuit that is filed against the Trust is limited to recovery against the Trust property.
If the mortgage on the property is close to the value of the property, then there isn’t enough equity in the property to justify a lawsuit. Remember, the litigation attorney only gets paid after he auctions off the property and pays off all the liens including the mortgage. And it just so happens that there are several ways to hide the equity in your property.
If you want to read more about it, this is the link: Land Trusts explained
I hope I could provide the right answer to you and I hope I understood the role of a land trust correctly. There is so much info about it but I would say it is a protection in a protection. An other wall to break through in case of a lawsuit.
@Patricia Smith, I've heard of using trusts to provide anonymity, but I've also come across a viewpoint that highlights their potential pitfall in this other podcast by Joe Fairless. Also, I'm not sure why Scott Smith uses in his example, an LLC that holds 10 properties and how the irrevocable trust is a solution. I ask because in that case, why not hold each property in their own LLC for more isolation?
Also, I thought I would highlight this other thread for you if you have not already read it.
@Matthew McNeil Check your documents and with your lawyer, but that is my understanding - beware of using a quit claim deed for property transfers. It might be too late, or not worth to move it back and forth just to repair this error - this is called "paying tuition" and, yes, investing is a continual learning.
@Patricia Smith & @Jonathan James Look Land trusts offer anonymity, and other benefits, but no litigation/liability protection. They complement LLC as a tool in asset protection strategy - do not confuse them as a replacement.
The number of properties per LLC should be based on a number of different factors: equity, number of units, cash flow, location of real estate, and tenants. For example, you might own 4 properties with a sum total of 50k in equity but one of the properties generates $900 per month positive cash flow. In this situation you would structure it so the cash cow property is held separate from the other 3 rentals despite the low overall equity. In other words each person/situation is a case by case scenario. Or use a Series-LLC if you have that option.
Costin:
Regarding the Quitclaim concern. Your comment prompted me to seek advice from my attorney and the Title Company. The Title company told me the Lenders policy remains intact. My attorney stated; "As with a trust, Lenders do not exercise the "due on transfer/sale" clause when real property is transferred to the same individuals in an official capacity i.e. when the LLC members are the same names as the names on the house sale." In my case, my LLC is in the name of my wife and me; 2-member LLC.
My attorney also advised that we use an updated Quitclaim format permissible in Idaho;
“This transfer is being made subject to the terms of an existing mortgage against the property that contains certain terms and provisions. As such, to the extent this transfer is ever deemed to violate any “due on sale or transfer” provisions of the mortgage or related loan agreements, this transfer shall be deemed void and title shall be recognized to remain in, or otherwise automatically revert to the Grantors, personally. Grantee shall execute any necessary instrument to implement such reversion, as needed.”
I'm not an attorney, nor title officer, nor know the Idaho specifics. That being said, what you are describing is about the DOS (due-on-sale) clause, and the fact that operating the transfer into a trust is not triggering the DOS. Which is great and one reason why one would supplement an LLC with a trust in an asset protection structure.
What I mentioned was about using a quit claim deed instead of a warranty deed - a warranty deed certifies that the property is free of any easements, liens, or other encumbrances on ownership and carries title insurance; a quitclaim deeds contain no guarantees of any kind and does NOT transfer the title insurance. If a title claim arises later (e.g. a long forgotten relative of the seller shows up, or a lawsuit on the whole subdivision because of the wrongful foreclosure on the land before got sold to the developer that built the house 20 years ago) you'll have no title insurance.
So, @Matthew McNeil the question you want to ask your title company is "what happens to the title insurance when you transfer property with a quit claim deed"?
I decided to write another email to my Title Company because I wanted to make sure I wasn't assuming anything or misunderstanding what you pointed out regarding the DOS. I specifically asked if the Lenders insurance is invalidated if I processed a Quitclaim to my two-member LLC, which is in my name of my wife and myself. They replied; " The Lenders insurance is not affected by a subsequent transfer of title via Quitclaim to the LLC in your name." However, this falls under Idaho state law and may be different in other states. Also, the houses I own are relatively new; <10 years old in a bedroom community, and they were previously owned by one a married couple who didn't divorce, file bankruptcy, have liens against the houses, county easements, etc. Your caution, however, is very valid and needs to be on the radar for people considering a Quitclaim, and I wasn't previously aware of it. That's why I appreciate this blog! Finally, each owner needs to carefully research anything related to their properties before they do anything, and not base their model on the points I highlighted to @Patricia Smith
sorry... accidentally hit the "Post Reply" button before finishing. Meant to write that my houses are less then 10 years old in a bedroom community previously owned by single owners. Titles are not as complex here as they may be in larger metro areas. And, the concern Constin raised regarding the Quitclaim issue is VERY important and needs to be researched before transferring a deed. I was previously not aware of it and that's why I apprciate this blog!
Hi Jonathan, I see I still have a lot to learn. It seems easy, but it is not. This is why I love BP. So much great advice. So many viewpoints. I also agree with you about having one LLC per property. In that case Series LLC would be a good option but only in the states that recognize them (such as Delaware, Texas, etc.)
Thank you very much for the link to Joe Fairless. I will definitly listen to it. He was also great on the BP Podcast 227 and shared good advice.
I see it the same way as you Costin. But there's one thing I am confused about. In the Clayton Morris Podcast with Scott Smith he recommends to put each and every single house into ONE single LLC and not just the cash cow. Doesn't it get more risky to put more then one house into an LLC or is it a money matter because if you don't use Series LLC you pay a lot more to set them up? Thanks, Patricia
Hi again,
I was wondering if it would make sense to ask Brandon and Josh to do a Podcast about this very topic. It is great to listen to Grant Cardone or Chris Voss BUT for a newbie investor and maybe also for the experienced investor it would be so helpful to listen to an attorney-CPA-Team explaining how to set up your asset protection structure.
And if they could explain it in an easy way instead of getting one even more confused (see Podcast 269 - how the new tax code affects...) - now that would be a life changer!
What are your thoughts on this?
I'm not a lawyer, nor CPA, so take all with proper dose of own due diligence:
@Patricia Smith: The number of properties per LLC should be based on a number of different factors: equity, number of units, cash flow, location of real estate, and tenants. For example, you might own 4 properties with a sum total of 50k in equity but one of the properties generates $900 per month positive cash flow. In this situation it would be structured so the cash cow property is held separate from the other 3 rentals despite the low overall equity. Or you might have a 4-plex in a C- area, I would keep it separate from my SFR in B+ area. In other words each person/situation is a case by case scenario. It also depends on the structure you want/can put in place and the associated costs, the equity amount you want to protect (50K might be high for me, but you might not blink till higher than 500K), your risk tolerance, all subjective measures.
I don't know why Clayton or @Scott Smith might made that recommendation - could very simple be because where Clayton Morris invest the Series-LLC is not an option.
As for the attorney-CPA podcast, while a good idea if possible, I don't know if it would help you much, because there is simple too much information to cover in a 1hr podcast, with too many ramifications in all kinds of adjacent domains (formation and maintenance of LLC and business structures, transferring assets, protection strategies, trusts, anonymity, insurance, levels of risk and protection, due on sale clause, selecting an attorney, fees, checklists, etc.), and subjective to individual situations and scenarios. In other words, I doubt you'll find an attorney, or a CPA, never mind a attorney-CPA team that will agree on things and speak in specifics, and not in generalities.
But I understand how you are thinking as I been there, and that's why I put together those notes I sent you. I guess, what I'm trying to say is, you have to spend the time and educate yourself in matters of taxation and asset protection. The answers you'll get from the lawyer and/or CPA will be as good as your questions and how you formulate them. The CPA or lawyer that will handhold you in every step and know your situation and goals better than you are rare unicorns (or very expensive ones). If you find such unicorn (especially CPA), let me know, cause I been searching for a long time.
Plus, this is mostly an asset protection attorney matter, or 90% attorney - 10% CPA. Why? Because from tax perspective, you pretty much only have the option for LLC - you shouldn't hold properties in a S- or C- corp (just google "real estate in C corp or S corp" or "holding real estate in a S corporation") unless you are an active investor (flipping), paying salary to yourself, or doing property management, in which case anyway, you should do it in a separate entity from the holding assets entity. And with LLC, for most new/small investors, it would be treated as a disregarded entity, and passed through to your tax return, so there would not be much more in terms of taxation from what you are doing when holding in your own name.
Correction: with an LLC, you'll have to maintain the LLC - more strict bookkeeping, no commingling with personal finances, file (and maybe pay) annual state franchise fee/tax, maybe maintain law office or pay for registered agent, etc. So, there will be some extra costs associated with the LLC, but not much change in terms of taxation.
Again, I'm not a lawyer, nor CPA, so take it all with proper dose of own due diligence.
"Ignorance is bliss. Knowledge is power, but also a burden. The cure for both: action, progress, not perfection."
I just wanted to add my 2 cents to this discussion about Quit Claim vs Grant Deed. If it's a Quit Claim into a revocable trust then the title insurance remains intact and covers the property. This is because the trust is disregarded as long as it is revocable. The land trusts which investors use for asset protection are revocable and not irrevocable.
@Shelly Ditzhazy Can you please elaborate on the basis of your information?
And what you mean by "trust is disregarded"? The trust can't be disregarded as a legal entity, otherwise there would be no reason to use it. It might be disregarded from a taxation point, but that has no bearing on the discussion, method of transfer and type of deed.
The fact that the trust is revocable or irrevocable has little to do with the type of deed - maybe only because with a revocable trust you can change ownership back to yourself and if is not a registered transfer & deed, is basically a transaction that never happened.
A person receiving a purported real estate interest via a quitclaim deed may receive no legal right to the property whatsoever. If the person seeking to transfer real estate with a quitclaim deed has no legal interest, nothing legally is conveyed. In the absence of title insurance--which is not available for a quitclaim deed--the person receiving the quitclaim deed has no legal recourse because the deed itself states that only the interest of the grantor, if any interest exists, is conveyed.
Whether title insurance terminates by transferring real property to a revocable trust depends on the type of policy, and how “insured” is defined in the policy. You take a risk which could result in cancellation of your title insurance and complete loss of your real property without compensation in the event that a title issue regarding your real property arises.
Contact your title insurance company to determine coverage and if your policy does cover transfers to revocable trusts, and when or how.