All Forum Posts by: Edward B.

I guess you've never heard of derivatives.

You will have to register the LLC in whatever state that you are doing business, i.e. holding property. So even if you form it in another state you will still have to pay the fees in Mass and NH if you own property there…AND the state you formed in.

I've been using Everlance's free version. It's been working fine for me, but I'm not a power user.

@Jared Wengerd, if I understand your question correctly it shouldn't matter. The only way that it would discourage legal action is because there is little to no equity, that fact remains regardless of whether the LLC is on the loan docs. The loan is attached to the property and will show up in a search of the property so the equity is what it is. Regardless of whether there is a judgment against you or the LLC, if they go after the property to satisfy the judgement, the loan will still be ahead of them.

@Kyle Bethune, almost certainly overvalued as you have assessed. I always value the MHP and the park owned homes separately because as @Bill F. pointed out, they are two separate businesses. Additionally, many new buyers make the mistake of capitalizing the park owned homes at the same rate as the park, which significantly overvalues the park. I would capitalize the park based off of the actual lot rents and expenses and value the mobile homes "as is" minus the cost to unload them to owner occupants. I doubt that you will be at even half his asking price then.

@Josh Pitts, you need to talk to a subject matter expert to address your particular situation. The general rule of thumb, though, is to keep your rental business separate from your flip business, i.e. different legal entities. Reason being that the liabilities are different and property is treated differently by each. As an investment in your holding company and as inventory in your flip business. If you keep them completely separate there will not be any question as to whether a property you bought was as an investment or as inventory, just good business.

In terms of your license, I have been told to just do it in your own name. Admittedly I am not very active as an agent so have not fully run that one to ground yet. 

@Bob M., I'd have to see some of the numbers you are talking about. If you have the payment amount (P&I), number of payments remaining, and the purchase price, you can easily determine what your yield will be if they pay to the end. The few that I have looked at from PPR have been in the 11%-13% range. I have not bought anything from them because I feel like I can get the same return on a first with more equity.

My beef with note sellers is when they talk cash on cash return. As if the note payment is the same as rent, which it is not, so that is misleading in my opinion. Also, no one factors in servicing, which is a flat rate. Thus it impacts your return on a note with low payments significantly more than a note with higher payments.

Depending on what the property is worth, what is owed on the note, and what you can purchase it for, it might still be a good deal. 

Well, if you own property in another state then you are doing business in that state. If your LLC is not formed there, then you will have to register as a foreign entity. That means you will be paying the annual fees in both MA AND the state you are investing. It is typically better to just form the LLC in the state where you are doing business to avoid that.

@Andrew Pappas,

Your property manager has no idea what he is talking about and is probably just parroting something he heard once. The corporate veil of an LLC is not easily pierced and it is not pierced solely because you have mortgages in your name on properties deeded to an LLC. It takes much more than just that.

LLCs can offer some anonymity, but I have found it to be very difficult to get full anonymity. To do so would make it extremely painful to run your business effectively. The true owner of the property is the LLC, it is a separate legal entity from yourself. But it is fairly easy for someone to find out your ties to the LLC with just a little bit of digging. Especially in North Carolina. For example, I just searched your name on the North Carolina Secretary of State site and found your company (I'll give you a hint, it has your initials) and much much more. Scary isn't it. I could have done the same thing if I just had your LLC name as well. There are some steps you could take to make it a little less obvious, but like I said, if someone really wanted to figure it out they probably could no matter what you did.

In terms of asset protection, I firmly believe it is worth separating your assets into different legal entities. The law is on your side and as long as you aren't doing anything egregious or outright illegal your protection should hold up. I also believe that it discourages a lot of trivial and frivolous would be litigants. And I believe that if you are in business, you should be doing it separately from your personal life. That's just me. I pay the price. But I don't go overboard on anonymity. I don't have ALL of my property in trusts, I don't have a Nevada LLC with nominee agents, I don't have anything offshore. At least not yet. :)

In terms of taxes, I have thought of filing separately so that my LLCs do not show up on my personal return but I'm not sure why or that it is worth the expense. My last lender pointed out that if you reported significant gains or losses on a K-1 he would want to see those returns anyway. And the loans would show up on the credit pull. And even if the loans were in the name of the LLC but personally guaranteed you would have to disclose it anyway.

So to sum up that diatribe. LLCs = yes. Crazy Nevada/Nexus island setup = no. Benefit to filing separately = debatable but probably not as good as you may think.