All Forum Posts by: Jerry W.

@Molly W., welcome to BP. First I would NOT transfer property from yourself to an LLC using a quitclaim deed. Use a warranty deed to preserve title insurance. Next it is possible for a bank to call a note due for transferring it to an LLC. It is pretty rare, and the few times I have heard of it transferring the property back to their own name resolved it. Finally I have never heard of the veil being pierced because the mortgage was in the name of a member of the LLC not the LLC only. Maybe that has happened, but in the last 3 or 4 classes I have done on this topic not a single one even mentioned it as being a factor. In my experience it is common for members of an LLC to put the money into the LLC to start it, that includes putting in property. The most common reason to pierce the veil is fraud, one of the next most common is undercapitalization. LLC do provide protection if operated in a reasonable correct way. The protections can vary from state to state. My view may be skewed because my state gives very powerful protection to LLCs and their members.

@Andrew White, my first thought is that you don't need an umbrella policy if you only own one policy. It will be cheaper to just increase the insurance on your one property. Umbrella policies are designed to add coverage for multiple properties at a cheaper rate than increasing insurance on every single property. Next I would hold off on doing a change to an LLC until at least 3 years after you have moved out just in case you decide to sell it and want to claim the $250 capital gains exemption from it being your primary home for 2 out of the last 5 years. After that you might consider if you want it in a corporate entity to reduce liability. Congratulations, and best of luck in your investing.

@Jake Kraft, adverse possession in Wyoming is 10 years.  It requires open, notorious, hostile use under color of title for a continuous 10 year period.  I would check with Tony Wendtland in Sheridan, he has handled several of these and is local.  Next the best way would be for you to buy it from the owners.  Finally hostile use can tack on from prior owners.  It does not require that you have all of the adverse use yourself, adverse use by prior owners count.  Wyoming is big on making you prove that the owners were just nice folks who didn't really object to you using their property, they may just be nice neighbors.  It normally requires a use that deprives the other owner of their use.  Being land locked is not by itself enough.

@Pero Konjevich, first I would make sure that you have a working carbon monoxide detector in the house, and upgrade it the kind that also checks for other gasses.  Just doing that might detect if something is there, but most likely it will just provide protection for you.  I would also at least have a plumber run over and do a check.  Even if he finds nothing have him document that in the bill to also cover yourself.  Sometimes they actually find something.  If your tenant really smells something it deserves to be checked out.  If your tenant is just being a jerk and you check it out it takes away a lot his ammo to break the lease.  Some people are also very sensitive to certain odors or chemicals.  What other people don't notice can be pretty bad for my wife.  So, make a good faith effort to check it out either way.  If it isn't resolved then unless there is a big reason not to, release him from the lease.  I would do it in writing to protect yourself.  Give a period of time like 30 days or 60 days to cancel the lease, then if not done it will remain in effect.  Just my thoughts.  Best of luck either way.

Oh I almost forgot.  I did have on case where the city wastewater plant (sewer plant) would do something that made the neighborhood smell for a few hours then go away.  That smell would linger for about 12 more hours inside the house after the smell went away outside.  Just a thought.

@Doug Frisch, welcome to BP bud.  First I agree, consult with a tax accountant on what form of taxing is best for you.  Next the only thing you file in Wyoming is your annual report.  It is usually $50 a year unless you own a lot of property in WY.  Wyoming does not have any state tax.  Best of luck in your investing.

@David Johnston, welcome to BP bud. First where to file will have lots of opinions. Since this is your first property I would just file in the state where you will own the property. Next if the property is already in your name then you simply do a deed from you to the LLC. If there is an existing mortgage on it the lender could call the note due because of the due on sale clause, but very few do. If they throw a fit just deed it from the LLC back to you. I would suggest doing a meeting with minutes showing you are transferring the property to the LLC as a capital share for you, just like you would put cash in to start running a company. If it is just you or you and your spouse that should do it. If there is another different member you should probably set the value and how you will be paid back for it in the future or if the LLC closes. If you wish to buy using an LLC you will need to find a bank to lend you the money to buy in the name of the LLC. All banks I have dealt with make me sign a personal guarantee Typically I pay about 1% higher interest
for the loan for a loan to a corporate entity than if I get the loan in my personal name.  Often when I make an offer on a property I put the offer in my name and add or an entity I have an ownership in.

I would suggest that you open a separate bank account for the LLC that all income and all expenses go through. It is the correct way to operate and it will make your accountant very happy. LLCs are not magic, but they really do help reduce liability. A lot will depend on the nature of a claim or lawsuit and how personally you were involved to see how effective it is. That protection can vary a bit from state to state, but they are authorized by statute so judges follow the statute unless there is a clear violation of how they are operated.

Best of luck to you on your journey.

@Caleb Rehg, the truth is that LLCs do provide liability protection if set up and operated correctly. I have seen several attempts at veil piercing fail. However they are not magic. If you drive the LLC owned car drunk while going to get plumbing supplies you will be sued personally, and the LLC will provide no protection. If you own a house and it has property manager and someone trips over an uneven chunk of sidewalk the odds of you being successfully sued are pretty much zero. Now they may sue you personally, but a Motion for Summary Judgement or Motion to Strike is usually enough to end it. I have even had attorneys drop the LLC members from a suit when served with a prefiling of a Motion for Sanctions. LLCs are cheap in most states, (not all note California) and not all states give the same weight, but all states give some.

There are still drawbacks to using LLCs, like more difficulty in getting loans, or higher interest rates, annual filings, keeping minutes, etc.  Now if you look at the really big dogs on this forum, the ones doing multimillion dollar deals, none of them use their personal names.  It is all in various corporate entities, Corporations, LLCs, limited partnerships, etc.  Not one uses their personal name.  They of course have more to lose than most of us.  Seat belts make us all safer, but not everyone uses them.  They do save lives, but not all lives.  I have taken the seatbelt off both the living and dead in car accidents, but I can tell you they save a lot of lives.  Head on a snow plow and the seat belt makes little difference, slide your car off the road and roll it, odds are with a seat belt you live, if you are ejected because you did not wear the seatbelt you most often die.  Same with LLCs they work in most cases, but not all cases.

@Account Closed, most banks can invoke the due on sale clause despite what lots of Gurus claim, the fact is most banks historically have not cared enough to do it.  Now that the original loan was at 3% and their new loan rate is 8%, on a $500K loan that nets them about $25K more in interest per year the odds of calling are dramatically higher.  There are transfers that banks cannot call a loan due on like the death of the borrower or transferring the property to an trust for estate planning purposes.  My recollection is it like St Garn, or ST. Germain Act.  The one things guys selling or buying under these subject to deals need to worry about is what happens when things go wrong.  Then everyone gets sued.  Have I done some of these?  Yes, but there is a real danger.  I saw one go before a bankruptcy trustee once involved he stepped all over the "subject to" and let the bank foreclose under the relief of stay.  If the bank ever gets in liquidity trouble it is real scary.  They will start calling these things due to try to infuse much needed capital to stay afloat.  Yes banks can hire loads of attorneys too.  Subject to is a viable tool, but it needs to be used with your eyes open to the dangers, and not use them recklessly and do huge damage to some poor seller who thought the worst was over and restarted his life and gets hit with a foreclosure on a house he thought he sold two years ago.  You should always have plan B ready to pay off the mortgage if it gets called.  I had to do that just this year on a 2.5% interest loan and I had to replace it with a 9.25% loan ack!  There is still room for profit, but my margins really shrunk.  Unfortunately this bank was very serious about it's clause, but this one required the borrower to live in the house the entire time that the loan was in effect.  None of us involved really believed they would force going into foreclosure, but we were wrong.  It was some sort of community improvement loan.  Perhaps the bank had liquidity problems.  Anyway, use with caution.

@Fakaradin Floyd, it has been very pleasant following your path, thanks for updating us.  Probably the hardest thing some of us ever do is give ourselves permission to risk failure to succeed.  It takes a lot of courage to act, so just remember you also deserve the victory so don't apologize for your success.  Let that propel you forward at an even faster pace.

@Spencer Douglas, so my first advice is always to try to work the problem out.  If that does not work and they were the cause of you losing money you can always sue them another method is to file a formal grievance with the state Bar in your state and the state where they operate.  Lawyers are held to high degree of care in how the handle the business of clients.  If they fail to file things on time they are often punished by their state BAR association if it is proven.  If you paid them, asked for them to file, and failed to do do it timely you would likely have a very good case.  The bar can also order them to pay restitution to you.  This should never be the first step.  Document trying to work with them, and all conversation oral and written.  I know some folks like @Sarah Kensinger have given good reports, but in the over 10 years I have been on here most comments on Anderson were negative.  They are probably good at what they do, but took on too many clients.  There prices are massively beyond what I see many competent attorney's charge, but that is what you apparently agreed to.  It is unfortunately common for attorneys to take on more than they can handle.  Getting new attorneys up to speed takes time and not all new hires work out.  While their online marketing would not have been legal when I started practicing, it is perfectly legal now.  I don't know what to tell you except if you file with the BAR association they do take it seriously, but the case will be decided on the facts, and my experience is they are usually fair.