All Forum Posts by: Savannah Wallace

Hi Sam, 

I usually direct my clients to IRA Club (https://www.iraclub.com/). A little more explanation on the investment you're looking at getting into would be helpful. IRA Club can assist with a number of alternative investments. 

*This is not a direct referral, nor do I receive any compensation for my recommendation

 Great insight, Heather! 

Robert, I'll add that if you do set up an LLC under your IRA, you do not use generic Operating Agreement language. The Operating Agreement needs to be crafted with special language to avoid engaging in a prohibited transaction. I recommend working with an attorney who is familiar with this type of LLC to assist you with drafting.

 Hi Joseph, 

That's awesome! Operating a sober living home is a great way not only to generate income for yourself but to provide stability and security for individuals who may be going through a vulnerable time in their lives.

Connecting with the National Alliance for Recovery Residences (NARR) is a good start. I’d also recommend finding local nonprofits that may be providing this service. Additionally, identifying local nonprofit organizations engaged in this activity may provide you with a connection as well. Many clients I assist establish nonprofits for this specific purpose, yet frequently encounter difficulties in securing suitable housing or face budgetary constraints in purchasing property, often opting to lease instead. A simple internet search for local or NY based sober living nonprofits would likey provide you with some good connections. 

You’ll want to ensure that whoever you end up leasing to has house rules drafted and requires each resident to comply with them. These rules are there not only to protect the residents and assist them on their road to recovery but also to make sure that your house is maintained.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Hi Robert,

I have a lot of clients who utilize this very strategy and this is generally the advice I provide when they are first starting out.

I recommend setting up an LLC under your SDIRA—often called a "checkbook control" LLC. This structure offers several advantages, including asset protection, privacy (your IRA isn't listed on the deed as the owner), and faster transactions as you don't have to wait for custodian approval. Note that the SDIRA must own 100% of the LLC. You cannot personally own or benefit from the LLC, and all income/expenses must go through the SDIRA.

If your SDIRA invests in real estate using a loan, be aware that this can generate UBIT as a result of UDFI (Unrelated debt-financed income). If you want to avoid UBIT on leveraged real estate, consider using a Solo 401(k) instead of an IRA, as Solo 401(k)s are generally exempt from UDFI on real estate investments. Or use only non-recourse loans.

We know that the IRS has strict rules regarding prohibited transactions and self-dealing. You cannot buy, sell, or lease the property to or from your SDIRA, nor can you personally use the property. You cannot take a salary, directly handle negotiations, or provide services (like repairs or management) to the property. All work must be performed by third parties, and all payments must come from the SDIRA. All income generated by the property must go back into the SDIRA, and all expenses must be paid from the SDIRA

Good luck with this new investing strategy!

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Hi Victor, 

For any investment of real estate, I'm going to recommend placing each property into an LLC for asset protection.

LLCs can help shield you from personal liability if a tenant were to ever sue as well as offer protection against creditors in case of a personal judgment through charging order protection, when the LLC has been structured appropriately. With the property in an LLC, if someone were to sue the property the could only go after the assets in the LLC and not anything else (assuming you did not guarantee anything personally and the corporate veil has not been pierced).

Also, depending on the structure, you can keep your name off the public record as the owner of the property and even as part of the LLC. For my clients, I recommend that they place the properties in an LLC that has been formed in the state where the property is located and have the member of that LLC be a Wyoming LLC. This provides for both anonymity as well as charging order protection. Wyoming is one of the few states that provides strong privacy protections for entities filed there. When a Wyoming LLC is listed as the member of an LLC holding real estate, the owner's name is kept off public records. If someone searches the Secretary of State (SOS) website, they will only see the Wyoming LLC listed, not the individual owner's name. Furthermore, Wyoming does not require disclosure of member or manager information in its filings, making it difficult for anyone to determine ownership without extensive legal efforts. This anonymity can deter frivolous lawsuits or claims, as litigants may be less inclined to pursue action if they cannot easily identify the owner

If you do not purchase the property in the name of the LLC and/or have a loan on the property, then you may need to utilize a land trust to move the property out of your name and into the name of the LLC. Depending on the terms of the mortgage, transferring the property to an LLC may be considered a sale, thus triggering the due on sale clause. However, putting it into a land trust first avoids triggering the due on sale clause.

While you can set up entities on your own, I do encourage individuals to utilize professionals to assist with forming them. First, they will be able to draft a comprehensive operating agreement, tailored to your needs. Second, instead of your name being listed as the organizer on the LLC's registration, the attorney or firm that you've hired to assist you will be listed instead. This will help keep your name off the public record in relation to the entity and property. 

Good luck with your investments! 


Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication

 Hi Marc, 
My clients sometimes encounter issues obtaining insurance for their properties when they are held in a trust or LLC. Apart from shopping around for a new insurance company that will be easier to work with, you can also add the entity as an "additional insured," leaving yourself as the named insured or vice versa.

Hi Candice, 
Congrats on this new venture! 

When purchasing a property with another investor, it's crucial to establish a clear and legally binding agreement to protect both parties and avoid future disputes. Two common approaches are creating a Partnership Agreement or forming an LLC.

If you choose to do a partnership agreement, then make sure it outlines the terms of your collaboration, including ownership, profit and loss distribution, responsibilities, dispute resolution, and exit strategies.

Creating an LLC offers additional legal protections by shielding personal assets from liabilities associated with the property, and is generally what I recommend for my clients when doing a partnership. Terms of the arrangement can be outlined in the Operating Agreement, which can limit transfers of membership, include buy-out provisions, as well as include dispute resolution clauses, and outline the roles and responsibilities of each party.

In either case, I recommend working with an attorney to either draft the partnership agreement or create your LLC.



Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Hi Frank,

The process of deeding the property into a new entity is relatively simple, it just requires filing a new deed with the county showing the entity as the grantee. A local title company or attorney can prepare this. I generally recommend using a professional to prepare deeds to ensure they are completed properly. While quitclaim deeds are generally used for transactions between related parties, I still recommend using a warranty deed to provide protection from potential legal and financial risks associated with unclear titles.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Depending on the type of mortgage on the property, if you're looking at moving the properties out of your name and into LLCs, then you may benefit from a land trust,t which is a revocable grantor trust. Depending on the terms of the mortgage, transferring the property to an LLC may be considered a sale, thus triggering the due-on-sale clause. However, putting it into a land trust first avoids triggering the due-on-sale clause. Under the Garn-St. Germaine Act transfers into grantor revocable trusts are exempt transfers and will not trigger the due-on-sale clause. The beneficial interest of that trust would then be assigned to the LLC so that you enjoy the asset protection benefits of the entity.

To whichever entity you move the property to, it will be a transfer, you aren't just adding the entity to the deed. I recommend warranty deeds over quitclaim deeds. Quitclaim deeds simply transfer interest without investigating or guaranteeing title validity, which can lead to complications if ownership disputes or liens exist. Warranty deeds provide greater protection from potential legal and financial risks associated with unclear titles. Even though it's going from your name to your entity, I would still recommend using a warranty deed. 


Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.