All Forum Posts by: Dan N.

@Dan N.

Sorry, that doesn't make sense. If paying for the LLC is the least of your concerns, then the Due on Sale clause is a moot point. The LLC would have its own mortgage, and you can afford it. What refinancing issue would you have?

Out of curiousity, what sort of legal/legislation do you focus on?  I ask since I just noticed you are marked as the "#1 Legal & Legislation Contributor" on the Board right now.

@Mark S.

Oh is this what the OP is going after? I thought he just didn't want to pay for having the LLC.

This is why the boards keep saying to be careful about the LLC... Too many reasons / ways how people do not operat the LLC correctly.

Certainly, consult a qualified professional... But, you need to separate the accounting / taxation from the legal aspects. Yes, the IRS disregards the LLC entity only for single member LLC. But, that is only for taxation purposes. Just think about it --- the IRS has no way of rule that a State formed entity no longer has legal standing.

Or, did you realize that LLC's can elect to be taxed as a S Corp or C Corp? Partnerships too. Does that "give them" limited liablility? I believe not since their underlying formation hasn't changed with the State.

Another example... We've had threads where investors have said 'their accountant lets them deduct tons of expenses so they pay no tax' etc... So, their accountant is playing fast and loose to hide their income, but in fact they are helping to pierce their client's LLC's corporate veil. The limited liability is a legal matter, not an accounting matter.

I hope this helps.  I'd be happy to chat if you'd like.

IF you decide to close in a LLC...everything you do from a lending perspective moving forward is done in the LLC's name. There'd be no need to put it back into your personal name for anything mortgage or lending wise. 

Hi @Dan N.. First I'm not an attorney, so I'll offer no thoughts about whether putting it in a LLC provides adequate liability protection. As an investor and Mortgage Broker I personally put our properties in LLC's so the my personal debt-to-income ratio isn't impacted. We use DSCR loans which allow unlimited properties that can be closed in a LLC. Conventional loans also allow you to close in a LLC, but you will run into limitations as far as the number of properties you can finance. Closing in a LLC with a DSCR loan is so much cleaner and easier. There's no need to look at or verify any of your personal income, debt, bank statements or anything of that nature. Ultimately...there's no right or wrong way to close the loan However, it's whatever is best for you.

I strongly suggest strong asset protection through the use of legal entities such as LLC's. An umbrella will do nothing to protect you in the event someone brings suit. While umbrella policies are a great idea, you need the legal protection an LLC provides. My advice and take it for what it is, establish a holding company in Wyoming, Nevada or Delaware where asset protection is strongest. Establish the property LLC's as a subsidiary of the holding company. If you really want to build strong asset protection, have the holding company then pencil up to a trust. I would not recommend any asset staying in your name. An LLC provides a corporate veil of protection to you. Yes it's true, by transferring deed from you to an LLC could trigger a due on sale. However, go ask an asset protection attorney how many times that's actually happened. A risk worth taking in my opinion. The alternative is leaving yourself exposed and say someone brings suit to you personally which has ramifications for anything in your name. Conversely, if someone were to go after your property and you are listed as the owner, you would be exposed personally which means anything in your name including bank accounts. Protect yourself.

I'm always surprised to see the number of experienced investors saying no to LLCs.

It just goes to show there are MANY ways to go about this business.

One of my best friends is a RE attorney that specializes in construction litigation. He says owning property outside of an LLC is financial suicide. Granted, he has seen the worst of the worst. He has repeatedly told me that it just takes one lawsuit to wipe out your life's work.

Everyone mentioning umbrella insurance is spot on, and I 100% agree with getting an umbrella policy. It's an insurance policy though, and what do we know about insurance? They will attempt to not pay in anyway they can. Insurance doesn't cover everything. You can get sued for 10 million other reasons that won't be covered by insurance, but that someone will have a claim to your assets. 

In my state of TN, it's not expensive to open an LLC and it's not expensive to maintain one.

It is nothing more than a LAYER of protection. LLC is a "limited" liability company, not an "eliminate liability" company. It's just another layer....

I would not own property outside of an LLC. Even as a single member. If you maintain it properly, don't co mingle funds, then it's a legitimate entity. When you co mingle funds and don't maintain it properly, a judge is going to look at it as an extension of you and basically void the protection it's supposed to provide.

I am all about as much protection as possible. Insurance + umbrella insurance + LLCs and Trusts! 

Happy investing

Speaking as someone who has 45 LLC's I recommend them. Wyoming was the first state to ever offer LLC's and yes for a one person LLC you do have benefits and protection. It's called COPE (Charging Order Protection Entity).

I have 5 LLC's outside of Wyoming.(3- Colorado, 1- South Dakota and 1- Alaska). 3 Holding Companies in Wyoming. 37 LLC's.

Too many benefits too list. They offer a lot of information at wyomingcompany.com and they can even help with trusts.