All Forum Posts by: Jerry W.

@Klemens N., keep in mind that if you are the Trustee and they tenant sues you that they absolutely can get to the trust property regardless of any powerful language. They cannot get to any money you have already paid to the LLC unless they can pierce the corporate veil, and if you run the LLC correctly they will not be able to do that. they can take any equity in the property or even have the property itself sold to satisfy the judgement. To be honest I worry less about frivolous lawsuits less than real lawsuits. A slip and fall will usually be covered by insurance if it gets that far, but a carbon monoxide leak and kill a few children in a family and all of the layers of protection and anonymity will strip off within a few months, and the final question will be were you at fault or not? Those are not fun.

@Will Sifert and @Ned Carey, all of the tax sales I have been to required that you be there in person.  Most would let you use your company name to buy taxes, but you only get to claim one, not one for you and one for each company.  there are no bids, only random draws, then you are out until at least everyone present has drawn.  Most of the tax sales are at about the same time so you can only hit one or 2 counties a year.  Some of the ones that were not redeemed were like a former dry cleaners shop that had a caved in roof and lots of mold.  No one actually ever filed for the tax deed because of the potential toxic waste dump liability issues.

I did see an attorney I know scam the system once.  Please forgive me for the following, I am not racist, but the facts are accurate.  In a neighboring county the guy apparently went down to the local park where a lot of drunk Indians from the reservation hung out and hired about 20 of them to come and sit in on the auction.  He promptly paid for every tax property they won, and I suspect that he had them sign an assignment to him in blank before he ever took them into the room.  He ended up with a lot of properties, but I never did hear if he got any that turned into ownership.  Perhaps he wanted a particular property because he had insider information, but knowing Mike I assume he just tried in hopes of getting a large tax purchase and better odds of winning them.

I know the County Treasurer was not impressed at him running in a score of barely sober/ not really sober guys from the park into her drawing room.  Unless the rules have changed every guy there could be buying for the same company, but you had to have an actual breathing body for each chance to win.  A lot of retired husband and wife teams travel around trying to do this as vacation/ travel/ maybe get lucky thing.  Kind of like using the metal detector on the beach.  You don't get rich, but might make a little money and have fun on the beach.

@Karina Ruiz, I have not dealt with this in years.  Many years ago I tried to get a guy to post in the thread the exact numbers for a named insurance company that I could call and verify the numbers with.  He kept offering to do it offline, but never online, so I called him out on it.  As I understand it the benefit is based mostly on the fact that the over funded life insurance policy will earn you like 7% interest and the life insurance company or a bank will loan you money at 2 or 3% interest to invest that money.  Why would a life insurance company pay you 7% interest on 85% of your fund and then loan the money back to you at 3%.  I just don't see them doing it.  Why would they pay you 4% more in interest on your money while they loan it back at a lower rate?  It does not seem logical.  I have not done any research in the last few years to test out their claims.  If it seems too good to be true it usually is.

All of the things you said are pretty spot on @Will Sifert, the odds of getting a property for taxes are extremely rare.  Maybe in a case where the owner had no relatives and died and there is no one to pay taxes.  Most of the time the folks scape up money after awhile and pay them off.  The good part is that you get 15% interest on them until they pay it and a 3% penalty.  I have bought about a dozen over the years and have never gotten a property.  I am aware of one or two times where a decent property was eventually converted to ownership, but often the ones who go 4 years are pretty derelict properties.  Abandoned houses on super weird lots on the side of a hill or in an alley, etc.

Often the taxes are only a few hundred dollars so even at 15% you don't make but $45 a year.  there is still the hope that you will strike it rich.  I cannot speak to other states.

@Klemens N., hmm your LTs appear to be very different from the normal family trust.  My experience with land trusts in WY are massive grazing trusts that keep large groups of land locked up for grazing so no one can sell it off to movie stars to build homes.  If fact you have to actively run cattle in order to keep your shares.  Your land trusts are massively different.  In my experience if the Beneficiary is not the settlor and has full power and control over the property then the trust is dissolved as the beneficiary and the trustee power has been merged.  I have heard of a new Delaware statutory trust that is very good but have not found the time to read up on it.  You are correct that trusts can own property across state lines and do not have to register as foreign entities like LLCs do, but the laws of the state they own property in will apply then.  You might not want to own property outside of CA unless the other state has similar laws.  I would be really careful about the CA franchise tax.  It is worth talking to an attorney in CA who specializes in this stuff.

I have a concern that might come from not knowing CA law, but I am very familiar with WY law. Naming an LLC as a beneficiary has no legal significance or impediment to liability in WY. The owner of a trust is the settlor, not the beneficiary. I could form a trust and my myself and family the beneficiaries, however I could change that to another person the next day, then to a company the day after etc. The beneficiary has no authority over a trust unless he is also a settlor. I see absolutely no liability protection for the property as Trusts provide no liability protection.

Next someone has to file for taxes on this or it is tax evasion. My understanding is that the real owner, the Trustee is filing on his personal taxes, is he doing by virtue of being the trustee or by virtue of the single member LLC? If liability occurs on the property, say a slip and fall, they sue the trust via the Trustee. Then they depose him or hit him with an interrogatory and bang he must say who collects the money, where it goes, who made the decision not to replace the sidewalk that the bad crack in it and boom the Trustee is now added in his personal capacity.

Now if you had a property manager you could pay him 10% and say you had no control, but EVERY property manager agreement I have ever read says the owner will hold them harmless. Now if the LLC itself owned the property, you seem to have massively better protection. I just don't see how the trust is of any help other than to try to avoid CA franchise tax. If you actually disperse money to the trust you can argue that money is protected, but I don't think the land is protected.

If you guys want another update a federal Judge in the District of Columbia has also ruled the moratorium is unconstitutional.  His ruling says that the moratorium violates the Due Process clause of the Constitution as it prohibits a Landlords right to access the court system which is guaranteed by the Constitution.  There are several other cases pending in other places.  Once the panic is gone I hope that the courts see reason again.  I feel it is a violation of the takings clause that prohibits the government taking property without compensation.  After the Japanese bombed Pearl Harbor the government rounded up all the Japanese in CA and took their land with the blessing of the courts.  After the war and the hysteria ended the courts later ruled the government was wrong.  Even judges can get caught up in hysteria.

@Hegsdery Gret, I am going to depart from what most of the folks selling asset protection say. First a Trust is absolutely useless for for protecting assets, and is extra expense. You must hire someone to be a trustee and do all of that work, if you do it odds are they will likely think you are really the owner and in charge. Next if you really wanted to sue you would file, then do interrogatories or a deposition and simply find out who is making the decisions. I use LLcs and corporations, but never dream of having a separate entity for each property, however if my properties worth one million each I might do that. Everytime you add another LLC or Trust, you add a lot of money and time. You are required to keep separate bank accounts, books, expenses, etc for every entity. I probably have about 2 dozen properties. I could not manage 2 dozen bank accounts, 2 dozen sets of books, 2 dozen sets of annual reports, 2 dozen sets of minutes every year, etc. Who do I put my business expenses on? Who pays the phone bill, utilities, stamps, etc. You can create a management company or parent company to own them all, but you will never really achieve anonymity unless you pay others to run your business. Who can afford that? As a beginner who negotiates the purchase, gets the loan, opens the bank account, signs the checks, shows the property, signs the leases, takes the complaints, hires the plumber, etc. Will you really pay an attorney to do all of that for you? I charge $200 per hour and live in WY so maybe you pay that or more likely $600 an hour to do all of these things. Where does your profit go? You best cash flow at least $1K a month per property if you want to pay an attorney to do these things. Do a simple LLC and run it properly, add a managing or parent company if you start doing well and it won't hurt your pocket book. Finally ask yourself this question, do any of the really big players on BP use this kind of structure of anonymity? Not a single one of them that I know of. Don't listen to the guys selling asset protection, listen to the guys who are making it happen in the trenches.

There are a lot of great things in here, many I don't have.  Firsty any violation of the lease is grounds for immediate eviction.  Don't pay utilities?  You can be evicted for it.  I require them to water and maintain the lawn and grounds.  Failure to do is grounds for eviction and Tenant will be responsible to to replace all lawns, trees and shrubs that are killed or damaged by failure to water.  I have had arguments with tenants who won't water much because it costs money.  I tell them they can leave in 3 days and I will take over watering.  I have recently added a clause that says they waive any rights they have to invoke the non eviction due to Covid.  They specifically that in the event they fail to pay rent or violate the lease that they can be evicted immediately.  I have not heard of any rule imposed yet that prohibits the waiver, HOWEVER some states provide penalties to landlords who put in waivers to rights given by rules or statutes, my state has not yet.  Do not include a clause like this without checking with a local attorney familiar with landlord tenant law.  I am sure doing this in CA, NJ, IL etc. would have horrible things like fines, confiscation of house, possibly jail or even worse being required to go to all political speeches given for 30 days.  You usually cannot require a tenant to waive a basic right given by statute, however the CDC moratorium is to prevent the spread of Covid supposedly, not to be a permanent basic right.  It is likely a court may over rule the clause in the lease, my thought is to remove it as an excuse of the tenant to not pay rent and think they can get away with it because of Covid.  It may be risky to use this in many states.  Keep in mind that my state allows a landlord to not supply running water if agreed to in advance.

The laws in CA are so massively different than most states I hesitate to make many suggestions.  In my state if a Sheriff were  to refuse to serve a writ or Order I would file what is called a Writ of Mandamus.  It basically is a request to make a government official do their job.  It is not allowed to force them to do something discretionary, but serving orders is a mandatory duty, not a discretionary.  Refusal to obey that order could result in a fine, imprisonment, and possibly removal from office.  I cannot say what it might mean in CA.

Whatever you do, please keep in mind the position the Sheriff finds himself in.  Having to be the person to pick up an ill possibly disabled person and physically put them on the curb knowing they cannot take care of themself would be heartbreaking.  I get that is something that is not fair to put on you.  The deadbeat relatives or friends should step up.  It is not easy being the bad guy.  I am sure his thoughts were when he became an officer was arresting dangerous criminals, taking down drug dealers, etc., not throwing a sick disabled person out on the street.