All Forum Posts by: Kyle R.

I spoke to an asset protection planner (part of an asset protection company that has attorney's and CPA's) and I got completely confused about how to set up a business entity for asset protection. So I'm wondering what do I really need?

I'm a buy and hold investor and I want to start an LLC to hold my properties. The advice that I got was to set up a holding company LLC in Wyoming that holds my other LLC's that are in each state that I own property in. Since I bought the properties in my name and have financing in my name, I was told to use a revocable living trust to hold the properties in, which will own the Wyoming LLC, which will own the individual state LLC's. The revocable living trust will prevent the infamous due on sale clause from being triggered. This seems like overkill. Is all of this really necessary to protect myself from a lawsuit? I should also mention the cost to set all of this up is outrageous.

From what I understand, the purpose of the Wyoming holding company LLC is for privacy, asset consolidation into 1 yearly tax return and the laws of Wyoming will override the individual state LLC's. Wyoming laws are favorable to business owners. (Again, I am still confused about all of this, so I may not have all my facts straight.)

I'd like to simplify if possible, but not too much that I'm not protected in the event of a law suit.

Can't I just set up an LLC in each state that I own property in, transfer title to the LLC (even though there is a risk of triggering the due on sale clause, but it seems like that rarely happens anyway) and call it a day? I know that will mean more tax returns but who cares?

What have other buy and hold investors done to protect themselves?

I'd love to get a 2nd (3rd) opinion from a real estate attorney that can help me set up my business entity (and help me with estate planning).

If you have multiple properties I'd recommend a series LLC. Much easier than setting up a LLC in each individual state where you own property. In terms of cost, all LLCs are not equal and you get what you pay for. Personally, I'm happy to pay a few thousand upfront to avoid a potential lawsuit and mitigate losses.

0 Votes

Originally posted by @Brian Neisig:

So I am new to Bigger Pockets, and I am listening to all the podcasts in order, have listened to almost 200. I have one rental property, a town house i bought in April of 2007 (ouch) for $157k. It's in Eagan, MN, 55122. 2 years later it was worth $90k, of course. Now houses in that same neighborhood, identical to mine are selling for $180k. This feels like things getting fast and loose again, right? But I'm all excited to buy another rental property. I like to buy near me and I live in Rosemount now, so basically anywhere in Dakota County is fair game, but I want to get a good deal, and I have to be able to afford it (planning on borrowing from 401K for down payment, or else being patient and saving up cash). I don't want to screw myself by mistiming the market again. Any advice, opinions, evidence or analysis would be much appreciated. Sit and accumulate cash, waiting or a crash OR buy now? That is the question.

I wouldn't conflate appreciation with a coming crash. Unless you can pinpoint why the appreciation isn't organic, calling a market turn based on price alone is a loose speculation. The variables that caused the GFC (fraud, CDOs, asset liability mismatch programs, etc.) aren't anywhere near as prevalent today as they were prior to the last crisis.

In my opinion, sitting on the sidelines and waiting for a crash isn't a viable strategy. Timing the market is very difficult and few are adept enough to do it. Great deals are still around today, they're just harder to find. I would suggest potentially expanding your search outside of your county. Earlier this year I expanded my search to a 100 mile radius and found my best deal yet. I would also develop parameters as to what you're looking for (price, rent roll, etc.). Once you determine exactly what that criteria is, stick to it.

3 Votes

Originally posted by @Tabitha J.:

@Kyle R. Did you use your personal home address for the LLC?

The LLC is owned by a trust and the address listed is my lawyers. I'm listed as a representative of the LLC as per NC requirements and used my personal address for it.

0 Votes

Originally posted by @Tabitha J.:

@Kyle R. I plan to have several rental units. Can I put them all under the same LLC? Also, When registering an LLC it asks for an address. Should I get a PO BOX or use my home address?

@Terry Miller Thank you!

The series LLC structure enables you to house multiple properties in one LLC but not risk all units if a lawsuit were to occur. Each property is held within its own series separate from other properties in the LLC. Property A is in series A, property B in series B, etc. Think of each series as a separate LLC.

In terms of address, I had to use a physical address and not PO Box. However, each state has different requirements so I can only speak for NC.

0 Votes

All LLCs are not created equal. In my opinion, if you’re going to acquire multiple properties, the series LLC is a great choice. I paid around $2k to form mine and it was well worth it. I’d look in to the various LLC structures and determine which one best fits your needs. As you may already know, if the LLC structure you decide on is not able to be formed in your state, you can form it elsewhere and draft it in as a foreign entity.

0 Votes

Originally posted by @Diane G.:

I googled the unemployment history of US, and here is the chart... Out of the past 65 years, maybe 10 saw unemployment at around 4%....All other 55 years were higher.... If you are buying RE in today's enviroment when unemployment is 4% and interest rate is 4%, you are buying yourself trouble, in my opinion....

As a matter of fact, RE in the Bay Area is slowing down already, in my observation... My favorite example - Redwood City listing prices is now 15% ish lower than what properties have been selling at in the last 6 months... Big signal to me...

I think you're painting the picture with a broad brush. I have an 80 unit that's comprised of low income tenants. Most receive some type of government assistance to pay their rent (disability, social security, section 8, SSI etc.). It's hard for the unemployment rate to impact vacancies if your tenants are already structurally unemployed.

Also, a trickle down affect seems to occur when unemployment rises. If a tenant paying $2K/month loses their job, they won't become homeless, they'll rent a cheaper place. Vacancies may rise, but they're replaced by new tenants who were previously economically superior. Keep in mind newly unemployed homeowners may lose their home, creating a new renter.

In my opinion, the Redwood City example is an anomaly. We can all find cities with noticeable variances in asking price, but to pinpoint one city and use it as a representation of an entire market is inaccurate. If an investors strategy is to wait for the market to fall, then buy, they're not very adept. I'm closing on a condo tomorrow that I purchased in 2012. I put $15K down, did not materially improve the property, and will net $75k. The same crowd that told me I was going to get wiped out back then is still telling me I'm going to get wiped out today.

1 Vote

Originally posted by @Scott Smith:

Hi @Jonathan West I am an Asset Protection Attorney from Austin, Texas, feel free to send me a message, I will gladly assist you.

I highly recommend Scott. He created my LLC/trust and is very knowledgeable regarding asset protection.

0 Votes

This is a very high level analysis, but let's say you finance the property for 20 years at 5.1% and put down 20%. With a purchase price of $2,040,000 and a NOI of $142k, that leaves you with $972 cash flow per month. Unless there's a fair amount of room to raise rents or cut expenses I'd pass on this deal.

0 Votes

Originally posted by @Janel Page:

@Kyle R. - You're right. You don't have to form an LLC in your home state. It can be helpful to form it in the state you are doing business in, but there are sometimes exceptions, or good reasons to form them in other states. I think you have to pay double the LLC annual fees if your LLC was formed in a state different than the state you are doing business in. So you probably have to pay fees in Texas and in NC? But the series LLCs can be helpful for a variety of reasons (I'm no attorney, just remembering from a boot camp).

Not sure about the double fees, but even if I have to, it's only $200. Might be excessive for some but to me it's more than worth it.

0 Votes

Originally posted by @Janel Page:

@Kyle R.

Since I've received a few votes and kind comments on my earlier post (thank you! :-) , I'll add to it a little.

@Kyle R. re: series LLCs, only some states allow these. Oregon is not one of them (my state). I don't think NC allows them. I think 17 states do allow them: Alabama, Delaware, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nevada, North Dakota, Oklahoma, Puerto Rico, Tennessee, Texas, Utah, Washington DC, & Wisconsin.

I'm loving the comments on this thread. Good stuff!

I'm a student of LegaLees. I don't get paid anything to say nice things about them. I just really like their materials. Before buying educational materials from them, I knew nothing about estate planning, asset protection, different company types, etc. I have put their materials to use, so they have more than paid for themselves. I've been pleasantly surprised how much easier it is to talk to attorneys and my very experienced CPA. The $20 Protecting Your Financial Future book is great for folks to buy. It's a good place to start with. It talks a lot about wills, trusts, probate, LLCs, and creating a plan to make it all work together. The info about the states that allow series LLCs is from their LLC Wizard System, which I am about to put to use to create another LLC!

You don't have to form an LLC in your home state. Mine was incorporated in Texas which is one of the states that allows a Series LLC. It was then registered in NC as a foreign entity. Secretary of State had no issue with it.

0 Votes

All Forum Posts by: Kyle R.

Kyle R. has started 8 posts and replied 92 times.

Post: LLC, revocable trust, holding company...What do I really need???

Post: Timing the Market? Where are we now? Crash coming?

Post: How did you form your LLC? Lawyer? Legal Zoom? etc

Post: How did you form your LLC? Lawyer? Legal Zoom? etc

Post: How did you form your LLC? Lawyer? Legal Zoom? etc

Post: If you are buying when unemployment is 4%, you are buying trouble

Post: Setting up an LLC and a Trust in TX

Post: 34 Unit apartment complex

Post: Different LLC's for Different Multi-Family Properties?

Post: Different LLC's for Different Multi-Family Properties?