All Forum Posts by: Mitchell Zoll

Quote from @Chris Matos:

Quote from @Mitchell Zoll:

Hey @Chris Matos

Hi Mitchell, yes I chose series LLC based off my goals and attorney's fees. I working for 20 units within 2 years (duplexes, tris/quads) here in DFW and would like total privacy/anonymity.

WY holding cost me $1,000 flat fee.

Option 1: WY holding LLC that owns TX LLC for each property

- Because I want around 20 units which if all duplexes would be 10 actual properties. The attorney I went with charges a flat fee for TX LLC of ~$800. If I obtained all the property this would cost a little over $7,000 in just TX entities over time.

Option 2: WY holding LLC that owns TX Series LLC each cell then owns 1 property

- The series flat fee was $3,000 and each cell would be around $250. Using same property amount above 10 properties which would be 10 cells would cost me around $5,600 over time. 

Option 3: WY holding LLC that owns 1 TX LLC which would own all property (about 20 units)

- This was definitely the cheapest option and works for plenty of people. One TX LLC $800. However, for me I am not remotely comfortable hanging all my property on a blanket insurance policy. It seems insurance makes money by not paying out which is great for them but not a risk I want to take. I went into this "assume the worst, hope for the best." So if I plan on being sued I do not want insurance as my only back up.

Option 4: TX Trust owns TX LLC (Could be wrong but I believe this was the overall structure)

- I was least familiar with this options because of the trust. The Trust ranged from $1,000 - $5,000 and "could quickly approach $5K" according to my attorney. Again assuming the worst, $5K plus a TX LLC $800 total around $5,800. Since a trust is an entity I could always add in the future I elected to hold off for now.

All in all typical LLC vs Series I was not worried about banks because they are out there and it just takes some phone calls to find them, nothing crazy. I went with the Series LLC option because it was slightly cheaper than option 1 and I would actually like the experience of working a Series LLC. Additionally I called several title companies and lenders (private/hard$) all of which had no issues with Series. Hope this helps some folks out there!

Sounds like you have done a lot of thinking on the cost structure and you are working with an attorney to help you analyze the options. Remember that a new LLC filing fee is $300 and a series registration is also $300. So those should actually be a push.

But you are talking about this in concerns for lawsuits. Make sure you are ready to defend suits in Wyoming if the claim warrants it (your llc members are Wyoming- so no complaint you are not “from” Wyoming, right?). You aren’t anonymous-You’ll sign checks, contracts, etc and discovery will get the members of an entity if need be. Also make sure to consider the questions in my post above. You are smart to consider the costs up front… but ask your lawyer about how it plays out in litigation. What can you expect from a discovery request based on 101.602(b)… how’s your record keeping?

You have a lawyer and so I’m sure you are getting these questions answered. Just making sure others know these are important considerations. Good luck with the investing!

Hey Gloria - I'm an attorney in Austin and I am happy to help if I can. I don't have a salesperson so you always "talk with the lawyer." Real estate investors often want to set up an LLC to "protect their assets," but the lawyers and the investors never discuss what that actually means. Sometimes an LLC is the right answer, but not always. I have litigated/defended premises liability cases (death/injury at rental property) in multiple states, and I use this experience to help my clients understand what really happens when something goes wrong. There are many lawyers on Bigger Pockets and I am sure we can all address your questions. But before you get into a complex web of LLCs, Series LLCs, and entities in states where you have no connection, please ask the lawyer (not the salesperson) for their personal experience litigating the cases (that's why you are setting this up, right?). What were the claims? Who were the defendants? What was the discovery like and what rulings did the court make on any discovery battles. THEN ask how the entity structure they are recommending worked in those situations or would have worked... and why. 

Hey @Chris Matos

Hello Julie - I am an attorney in NW Austin and happy to discuss the legal side of the LLCs with you! 

Yan - I represent small and midsize businesses in entity formation as well as buying and selling of business entities and their assets. I am in Austin, Texas if the area matters.  Happy to help if I can. My firm is Zoll Firm, PLLC.  Please feel free to reach out if you don't already have help. 

I think the real lesson is that lawyers have differing views on entities and structures, and that is why it is best for you, the investors and owners, to talk to YOUR personal lawyer to get guidance based on your investment profile and experience (and I bet your lawyer will likely have a THIRD opinion). This is why forms off the internet or DIY services aren't recommended (by lawyers of course). There are many questions to drill down, and there is a lot of learning that goes on before you simply "check a box". I understand the desire to save money and go it alone. That isn't wrong if you already know what you are doing. But if you are just starting out (or didn't take the education step from the start), call a lawyer. Ask them about their experience with forming entities. Ask them about their experience buying/selling entities and litigating disputes (that's what you are protecting against, right?). Then call another lawyer and ask them the same questions. Then, choose the lawyer that is the right fit for you (no lawyer is a good fit for every client) and use them to help you learn.

Quote from @Fernando Martínez:

Quote from @Keaton Frieberg:

Hi Fernando, 

Depending on how many properties you plan on acquiring, you should definitely check out the series LLC that Texas offers. Our clients typically use a separate management LLC as an S Corp but do not elect S Corp status for the LLC Series holding company.

Disclaimer: I am an attorney. This is not legal advice, just friendly information.

Hi Keaton,

Can you elaborate on checking out the series LLC in Texas has to offer?

Are there CPA's in Texas that you would highly recommend to use in regards to real estate?

Are you a real estate attorney, just curious in case I would go with your services. What area of Texas do you operate out of? If not do you recommend any?

Thank you for your time.

Please slow down and really look into a series LLC before going that route. The benefits are not often there compared to the risk, especially if you are only investing in a few properties.  Texas LLCs are only $300 to form an entirely new entity and you can better separate properties and assets into LLCs if you need to (and you might not even need to hold that many LLCs).  

Chris - the answers above are correct. In Texas, a quitclaim deed conveys only the grantor's rights, if any, in the real property. A quitclaim deed contains no warranties of any kind and does not establish title in the person holding the deed. It says "I'm not saying I own it, but if I do, you can have what I own." I can quit claim the pennybacker bridge to you if you would like (for a fee of course!) To preserve title, get someone to draft you a deed that conveys the property in a way the title company will support in the future. It is simple and you can electronically record it to convey title from your LLC back to you.

My pitch to the builder is that they shouldn’t have to be a bank (floating advances or waiting for their subs to get paid). My pitch to owners is that it avoids surprise liens, unpaid vendors, and gives visibility into costs and details. It’s a win-win, and I’ve had really good parties on both sides of the deal agree to those terms- but maybe it’s just me. I agree with you that contractors in this market can chose the deals they want to take. 

Quote from @Chris Schorre:

Hi everyone, I have a project coming up that involves construction of a 1,400 sf addition in Central Austin. Nothing fancy, no special requirements. I am wondering if anyone has a sense for what percentage markup a GC would charge for a project such as this. 15%? 20%? I have worked with a GC before but that billing process was a bit opaque (big surprise). Trying to avoid that this time...

Having worked with contractors her in town there isn’t a set % (This is called a “cost-plus” contract) not all contractors do a cost plus and many prefer a flat fee with change orders. A lot will depend on what trades they already have on their team and what they have to get from general subs and that also changes by their workload. One bit of advice- pay your own bills. Vendors, suppliers, even subs. The general contractor should get paid for their work (and in Austin they are getting paid well!) … but you should have direct visibility into the underlying costs to avoid surprises and avoid liens.