All Forum Posts by: Jeffrey S. Breglio

As an attorney and escrow officer, let me add my two cents. I really doubt an escrow company will draw that up for you. I certainly will NOT as an escrow officer. I don't want the liability of deciding who is to get what. As an escrow officer, I won't accept percentages either. I make the client tell me, to the PENNY, who gets what. Further, and this is my soapbox, it's NOT my job as title/escrow officer or company to do your bookkeeping. It's not my job to send money off to every one involved. Title co's do not like to do that. Just saying.

In an estate sale, whoever was appointed the administrator or personal representative should set up a bank account for the estate. Then, title sends proceeds to the ESTATE, since that is its legal requirement. And then the administrator divides up money and pays people or creditors or heirs or whoever. That's the administrator's job, not the title co.

A lawyer certainly can draw that up, but the administrator can as well if they know what they're doing. If the administrator is uncertain as to who is to get what, then they should seek the advice of an attorney to read the will or trust or state statute to decide. If the administrator screws that up, he or she can be liable to creditors or heirs.

Hope that helps!

Jeff

Thanks for the post Nicole! Eviction laws vary state by state, and sometime a lot. And can be a bit complicated and if you don't follow the rules exactly, it can delay things. While you can learn the rules and do it yourself, I always recommend an eviction attorney. I'm an attorney but don't do evictions (I'm an asset protection guy), and I hire a lawyer to do it for me! It's more efficient and cost effective because that's all he does. And I know it gets done correctly, and mosts importantly, it takes me OUT of the eviction loop for safety matters. Last thing I want is my tenant coming after me for evicting him. 

(Side note, a long time landlord here was shot by friends of a tenant he evicted! They showed up at his house and shot him point blank when he opened the door--so please be careful, use alternate addresses on your leases and corporate paperwork, never say your the "owner" of the house to tenants, just that you're just a hired manager, etc.)

Most states have an "apartment association" (for landlords big and small). Ours here in Utah is very large and very helpful. I speak there a lot. 

Weird about the comment that your eviction company wouldn't do it for you because of your LLC structure. That's very incorrect everywhere. Glad you educated yourself rather than just accept their answer. :)

Jeff

The LLC is the buyer on the REPC. Whoever owns the LLC is obligated on the REPC. But there are things that can change that, like fraud.

We have many forms for wholesaling. You need a Membership Interest Purchase Agreement to sell the LLC.

Disposable LLCs and trusts are great ways to submit offers in short sales, REOs etc.

For a more detailed explanation, please call the office and set a consult with my admin. :)

Jeff

PS. There is also the corporate veil protection that ALL LLCs have, including single member ones that are run correctly. It is often mischaracterized that single member LLCs have NO protection. They do. Corporate Veil. They just may not have the charging order. Those are two different kinds of protections for two different kinds of liabilities.

J.

Brandon, you're correct. It's the charging order that we're looking for. A few states are providing that for even single member LLCs. Most still do not. And I'm not a huge fan of "forum shopping" (that is, setting up an LLC out of your home state just for corporate law reasons) because you still generally have to register the LLC in your home state. And when I teach asset protection, it's a recipe of 50% structure/documents and 50% maintenance. How you run the LLC is as important as having the proper structure and documents. A court will look at everything! It's much easier and likely for someone to screw up the maintainace of a single member LLC than a multimember. What you want to accomplish is that you TREAT the LLC like a partnership in ALL aspects. When you have a partner, even a spouse, you're sort of forced to treat it like a partnership. It's because of the "partner" that you get the charging order protection. Also, I'm not sure how courts will apply charging order to single member LLCs. So in the asset protection world, it's the more the merrier! With clients that have a large amount of assets, particularly cash, we set up an actual partnership (usually a family limited partnership) that includes kids and even a Corporation as the GP. The FLP then owns the LLCs that own the properties. But this is an advanced asset protection tool. :)

that help?

Jeff

PS. We need to grab coffee the next time I'm in DC! I'm starting to invest there!

A lot of posts, but I'm an RE investment and asset protection attorney and been doing this for 15 years. So here goes...

Always put an investment property in an LLC. And it's not because I'm an attorney. Yes, I hear the debate all the time about whether to. There are multiple layers of protection that it can provide. Use it in conjunction with insurance. If the LLC is holding a long term asset, like a rental, then (in most states) you absolutely want more than one member of the LLC. Again, additional protection. This of course means that you must file a partnership tax return. More accounting costs. So here are solutions that I provide clients all over the country.

1. If your state allows Series LLC. Use that. It separates the liability within a single entity. Its also allows one bank account. There are some special hoops to jump through but we provide education to our clients on how to run a series LLC.

2. If your state doesn't allow series, and you have multiple properties, or are planning on multiple properties and want to separate out the liability (recommended), set up a Holding LLC with multiple members (like you and a spouse, it will file one tax return). Then set up an individual "child" company (wholly owned by the holding LLC) for each property. These child companies will not file a tax return but will separate out the liability. This, of course, means a lot of bank accounts, and legal fees. But will cut down on accounting fees.

3. Final option, and one I recommend for newer RE clients, is set up one multi-member LLC and put your first property in it. Learn how to run it properly. Then stick your second one in when you get it. As you go down the road of investing, keep meeting with your team (Attorney, CPA, Insurance agent, etc), and make changes as you progress. You can (AND SHOULD!) always make changes to your business model as you progress in in real estate and your business grows. Nothing wrong with that.

I can tell you there are lawyers who will sell you on BIG packages of tons of different entities that you may not need starting out. Also, make sure a lawyer (not a CPA) actually sets up your LLC (a CPA cannot create an operating agreement or they'd be practicing law without a license). And make sure the attorney truly understands RE investing!! Don't go with just a corporate attorney. And ASK QUESTIONS!

Hope that helps and happy investing!

Jeff

BE VERY CAREFUL HOW YOU MARKET YOUR WHOLESALE DEAL! Every state has licensing rules and some states are very aggressive in enforcing them. In most states you CANNOT market for sale a house you do not own without a license. If you market the house on websites, bandit signs, etc., you are sending a big signal to the division of real estate that you are acting as an agent without a license. They can fine you, and it can be stiff. You "generally" can market the contract you have, but NOT the house. In essence, you're selling a "contractual right" not a home. But rules vary state to state. Please check with a knowledgeable investor or attorney in your area to understand the rules in your state! Once you know the rules, just play by them. 

Jeff

1. Yes. All you need is year end. Personal tax return. Possible entity tax return. Probably between $250 - $500 a return.

2. You need an entity. Other commenter is from CA, very different there because of a high yearly renewal. that's the exception to the rule. But even my clients in CA have an entity. $400 would actually be pretty cheap. You need a good one if it's for asset protection, and one done by an attorney who understands real estate investing, not just someone who sets up business entities, and not an online source. There are different entities for different reasons and if you mix them up, you can hurt yourself. You need solid advice in the beginning and it will save you in the end. Probably looking at $500 - $1000. It's worth it and is one time investment.

3.Quickbooks is great. Or bookkeepers are $15-30 an hour in most places.

4. RE license is up to you. But there are yearly "association"  and "board" fees as well. Here in Utah, it's about $1000 a year to maintain the license. It can save you a TON of money, however, if you're buying and selling your own properties! Most investors do get it at some point, or establish a strong relationship with an agent. I wouldn't say it necessarily adds extra liability, but definitely some extra hoops, and a little more scrutiny from the state division of RE. Working with a good broker is important and he/she will carry an insurance on you.

5. Definitely do every REIA you can. Cheap education and networking.

The rest I think you can answer. You're smart about getting a handle on costs. I'm actually presenting to a REIA this week on the "hidden" costs of RE investing. Here's just an outline:

Legal (entities, transactional, consultation)

Accounting (tax prep, possibly payroll)

City business licenses

Taxes (SE tax, Cap Gains tax)

Closing costs/title insurance

Homeowners insurance

Bookkeeping

Property taxes

Agent/Broker fees

Property management fees

Hard money fees

The opportunity cost of money and time.

That's just a short list. But.... Don't let it scare you. Not all this comes at once!! Start slow, start wisely, and grow from there. You're on the right track wanting to get as much info as you can upfront! You'll do great.

Jeff

Specific questions about liability depend on too many factors to generalize a response. But a few notes on your question. First, the Utah REPC is NOT assignable as is. You must include assigning language in an addendum. The option around this is to utilize a trust or disposable LLC, which many client use. If you're using a simple contract that does not prohibit assignments, you can assign it with any additional disclosures. HOWEVER, regardless of the contract you use, I ALWAYS recommend including language in every contract that you have the right to assign it, as well as protective language and other disclosures for the wholesaler for your protection.

Hope that helps.

Jeff

Hi, I'm a 15 year veteran investor and RE attorney. So I'd be happy to help! :) I also do a ton of investor title closings, seller fi's, trusts, wholesales, etc. You can PM me for contact info and I'm happy to spend some time chatting about how I help you out.

Jeff