All Forum Posts by: Mike S.

The LLC insulate the properties from each other. If you have a problem into one LLC you can loose up to the whole content of the LLC. You ultimately will decide how much you are accepting to loose. You can put many properties in one LLC or only one property into one LLC. I estimate that recurring cost of a separate LLC is a cheap insurance. Do you want to save a few hundred dollars per year by risking loosing a few hundred thousands of dollars? That's your choice. Some people won't even use LLC and only have a liability insurance (by the way, an LLC is not a substitute for an insurance, it is in addition to it). At the end of the day, you decide what will make you sleep better.

@Martin Nowak

First, if you want to refinance, do it while the property are under your name. It would give you better lending conditions.

Second depending on your state, the outside protection of single member LLC may be less than adequate. It is often suggested to get all of them owned by a WY LLC that would give you charging order protection and anonymity.

Last, you can create the LLC yourself online, however I would suggest that the operating agreements be drafted by an asset protection, real estate attorney working in agreement with a CPA.

You can get free initial phone consult with most of the big guns in that field that would at least guide you towards the proper global structure of your entities.

It all depend on the kind of investment you are talking about; If you are investing in a syndication, they would probably need an ITIN a time of subscription. If you are buying your own real estate property, you will have to go through some anti money laundering disclosure before closing, but I don't believe that an ITIN would be necessary at that time. You will however need one shortly after for tax purposes.

You can anyway already request an ITIN on the IRS website. That will put you ahead of the game.

Also I would suggest that you get in touch with a CPA and a lawyer who are versed in the subject, as it may be advantageous for you to create a US LLC to hold your US investment. I believe that you will gain some tax advantages going that route (FIRCA being one).

Originally posted by @Justin Kushner:

I am going to deed two properties out of my name into an LLC, that is owned by my Holding Company LLC (Wyoming).

I have been told by the underwriters at the Title Company that my title insurance will not carry forward to as my name is not a Member of the LLC, but rather, my WY LLC is the Member.

You should transfer the title to your LLC with a warranty deed (or possibly a special warranty deed if there is still a mortgage).
If later on there is an issue with the title (that would be anterior to your initial purchase anyway), your LLC will "sue" you for the title problem, as you gave a warranty that the title was clear.
You in turn, will be able to go back to your title insurance to correct the defect that was anterior to your purchase, as you were basing your warranty on the initial title search done by your title company.

If instead you use a quit claim deed, your LLC has no recourse, unless your LLC bought a brand new title insurance with a title search. If you use the same title company that did the prior title search, they may give a discount as they already have most of the title chain on file and will only have to update it.

Originally posted by @Theresa Harris:

I agree.  It cost me under $400 to do my will and about an hour of my time.

A Will is not enough. You will still have to go through probate. The Will will only indicate to the probate judge what were the intend of the deceased. He may follow it or not. The probate process will take months to complete anyway and cost a lot of money. Also if the asset contains some real estate property in multiple states, a probate should be started in each different state. More cost and delay...

What everyone need is a living trust that is properly funded (so many people create the trust but don't title their asset to the trust). The living trust will bypass probate and the asset will be transferred to the trustee without delay or fee. You will still need a Pour Over Will to take care of everything that you forgot to transfer to the trust. Also even if the asset left over out of the trust is minimal, it is often advised to have a probate anyway to extinguish any possibility of unknown debtor coming back later. But as the asset going through probate will be minimum, the fee, delay and annoyance will be also minimum.

Last check if in your state it is wise to title your principal residence to the living trust. In some state you may loose some homestead or medicaid benefit. In the states that have that option, it may be better to deed the property with an enhanced life estate (Lady Bird deed) so the property will be automatically transferred only at time of death to the living trust.

As a side note, if you are concerned about estate taxes, there are some options available to mitigate them with the use of some other kind of trusts that could be crafted for your specific situation. When you are creating your will and living trust, it may be wise to explore those at the same time with a savvy attorney and CPA.

Did you declare the miles that you got as income in your prior tax returns?

Originally posted by @Jennifer Gligoric:

@Mike S.  That last bit was our response from one of our lawyers when I showed him my last reply to your post just to make sure that I wasn't missing something. It's very important to me to give the most factual and correct responses I can here on BP and so I often will ask my team if they have anything to add as well.   He is very versed in this and has his advanced masters (L.LM in this field (Real Property Development).  

I am not a lawyer and I am not playing one on TV, but what you wrote goes against what I learned from my study of the subject and what I understood from my conversation with my lawyer who set up my first land trusts. I'll be interested if you can develop more as I am now getting extremely confused.

The "Illinois type" land trust, to the contrary of most other trust, convey the legal AND equitable title to the trustee and transform the beneficiary ownership into a personal property. However, the beneficiary retains total control and duties of the property. So my understanding is if the beneficiary was the grantor, there is no change of right of occupancy, unless as I wrote earlier, that you decide to add such limitation in the land trust agreement itself.

Originally posted by @Jennifer Gligoric:

The truth is that a land trust on its own does not defeat due-on-sale because a land trust invariably contemplates a transfer of rights of occupancy—so due-on-sale provisions remain effective and enforceable.

I disagree with that last statement. If you are still the beneficiary, I don't believe that a right of occupancy has changed unless you add such a limiting clause in your land trust. And as such the protection of the Garn St Germain Act should apply.

Originally posted by @Ryan Green:

@Mike S. That’s really helpful to know if I were to structure it that way. Just to make sure I’m following...

If I were to have the management Corp contracted to properties with, let's say a 1% fee, and rent collection going through the LLC, then the taxation on the corporation wouldn't be much to worry about and the CCROI from rents could be reinvested more easily?

If you were using a third party property management, you would still receive the rents and pay taxes on these rents in your LLC (or as pass through on your personal taxes in case of a disregarded entity).

When you own a C corp that is doing the management, that is the same principle. The C Corp is not getting any income from the rents. The rents are owned by the owner (aka the LLC). The C Corp is merely acting as fiduciary on behalf of the owner and will issue a 1099-MISC to the owner about all the rents collected and remitted.

The only income to the C corp is the fee that it is billing to the LLC to manage the property. That could be a fixed fee, or a percentage of the rent. But that fee is payed by the LLC not the rents. The C Corp is merely holding the rent money in escrow and transferring the surplus to the LLC.

On the podcast front: "The real estate CPA podcast" and Toby Mathis podcast and youtube channel