All Forum Posts by: Costin I.

@Scott Smith might be what you are looking for.

@Scott Kays Another advantage of using land trusts - they give you a layer of anonymity (not liability protection) that works great with the LLC (which gives you the liability protection), and keeps your name out of the public records (supposedly, you still have to be careful, e.g. with the title mistakenly recording the trust documents too).

As I mentioned, be careful when choosing to use a Quit Claim Deed - to maintain your title chain, you have to do it through a more expensive Warranty Deed (which might be another reason to use land trust, just check how they work together):
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 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 , and when or how.

@Scott Kays Buy them in a land trust and just change the beneficiary, no deed involved. 

Otherwise, be careful if choosing to use a Quit Claim Deed for these transfers.

FYI - The Fannie servicing guide, for about a year now, supposedly explicitly excludes a transfer into an LLC you own from the due on sale clause. You still have to close in your personal name, however.
Link: the-due-on-sale-clause-is-now-llc-friendly-sometimes

@Jonathan Trimboli In regards to per LLC Distribution, you should also look into these threads:
- separate-llc-vs-one-llc
- break-portfolio-into-multiple-llcs
- should-you-form-a-llc-for-each-individual-rental-property

You should look into Series-LLC and see if that's an option for you - then you don't need to worry about this question, as you can place a property in its own children Series-LLC that you can form when needed.

As for distribution, you can have one or more per LLC, and that depends on multiple factors:

- property class - you might not want to mix A class property with a D class property in the same LLC, due to different tenant level

- cash flow - you might want to keep your cash flow cow separate from the ones that barely produce

- equity - you might want to keep the one with large equity in its own LLC while you can group the ones with little equity in another LLC (let's say you have one with 50K equity in its own LLC and 3 other each with only 10K in another LLC, till their equity grows to your risk threshold when you move them out in their own LLC).

- number of units (in the case of MF)

- location of real estate

The investor has to decide what mix is optimal for their situation + how-many-properties-do-you-have-in-your-llc

@Tom Canterino Partnerships and joint ventures are tricky. So, my first suggestion is...don't do it.

Read these:
questions-for-capital-partners/
real-estate-partnership-questions/
questions-ask-investment-partners/

How to Effectively Conduct Joint Venture Agreements as a Real Estate Investor
how-do-i-properly-construct-a-purchase-with-a-partnership
create-an-llc-for-first-partnership-best-way-to-do-so
taking-on-partner-s-and-limiting-our-liabilites

If you decide to proceed, I think you should have an LLC formed going in a limited partnership with your(s) partner(s) LLC. There are so many areas where things can go wrong with a simple partnership, and you want to be protected from an asset protection perspective. I can provide you with more info on that and give you a referral to a good attorney specializing in asset protection and partnership structuring.

Before proceeding, I suggest to have all or most of following questions clarified:

Joint Ventures – checklist / questionnaire

Before you can start to set up the legal framework, there are various issues that need to be addressed. These can be summarised as follows:

What are the objectives of the joint venture?
- general trading principles
- what will the business actually be doing
Who puts what in?
- cash
- other assets
- services
- are any existing contracts of either to be taken over by the joint venture
- who actually does / will do what
Will any external funding be needed?
- who will it be raised from
- who will borrow it
- who will guarantee it
Who gets what out?
- sharing of revenue profits or losses
- sharing of capital gains or losses
- is any payment to be made to either other than as share of profits, eg for ongoing services
- will the participants be operating a ‘salary/dividend split’ – ie taking their month by month requirements by way of low salary, balance as dividends?
What, otherwise, will be the policy in relation to dividends – to what extent is it intended to distribute / retain surplus profits?
Who controls what?
- responsibilities for day to day running, in all relevant areas of activity
- tactical decision making (day to day)
- strategic decision making (longer term policies)
what things can only happen if both parties agree
what will happen if you can't reach agreement on some major issue - ie deadlock
What happens if either party 'wants out'?
- on what kind of notice will this be permitted
- does the other have 'first refusal' to take over the whole venture? - if so, on any favourable terms?
To what extent will the parties be free to carry on other businesses
- while the joint venture subsists
- if one party pulls out
Is it intended that spouses/partners should also be shareholders, to allow for tax advantages from a broader split of dividends?
Is there a vision that any others will become shareholders (or be granted grant options to acquire shares) in the company in the future?
- Who?
- Staff?
- Others?
- On what terms?
Participation in dividends?
Voting rights?
Are there any offshore angles:
- Is there potential for overseas sales or operations?
- Does anyone involved in the venture have any overseas connections?
- Does anyone involved in the venture have any plans to live overseas in the future?
Is there yet any written:
- business plan?
- marketing plan?
- cashflow projection?
Is there an ‘exit strategy’? If so, what is it – which of the following most closely hits the mark?
- ‘lifestyle’ business – ie simply intended to be run by and to provide an ongoing source of work and income for the proprietors, no clear vision for the long term future?
- possibility of future sale at some point?
A core object of the venture is to create an asset with a view to sale or flotation in 5 years?
Which aspects of the above do you feel most important at present? Which aspects concern you most? (NB each of you may have a different view here, the question is asked to help understand where each of you is coming from)

If I'm your private investor, I'll want to know what your plans will be when things go horribly wrong. When repairs cost way more than you expected. When you can't find a decent tenant as quickly as you hoped. When the market tanks and prices retreat 25%. When you can't refinance as soon as you expected.

@Aaron DiCaprio Excerpts from our rental criteria:

@Cory Mortensen Anywhere with good schools (above 7 rating).

@Vera B. You should have a company if you do deals with partners. 

Otherwise, the point you are looking for is at the intersection of your risk threshold, enough assets and/or income to protect, when the cost is 2% of equity to protect or the same amount as the property insurance for the same assets and after implementing all the other risk mitigation measures.

If too confusing, here is a diagram to help you on the quest for these answers:

The books co-op library is here - if interested, please check it out, add your books, send your feedback and suggestions,  and happy reading! We have 30+ books and I’m working hard on adding more (as fast as bribing my kids to do it works)

The post here was removed, so see more details on the mastermind group here: https://www.biggerpockets.com/forums/521/topics/733003-reach-mastermind-and-accountability-group.

@Neil Narayan - audiobooks would be good, but don't have any (old school, sorry). But nothing says you and others can't bring into the "library" audiobooks and share them.