All Forum Posts by: Scott Smith

@Gary Fare,

Yes, I frequently transfer titles for my clients from their personal names to LLCs (In particular, Series LLCs for investors like yourself who hold multiple properties). As I've written about before for BP, this structure provides superior asset protection.

As an attorney, I get a lot of questions from clients about the loan issue. You'll be happy to learn there is a workaround! To get around the "due on sale clause," all you do is buy the property in your personal name, as you have, and then transfer the property to a land trust. Your LLC can then take control of the land trust without violating the due on sale clause, and you're back to business as usual.

Hope this helps. Feel free to inbox me if you have any additional questions.

SDIRA's are fairly simple to set up. Kingdom Trust is the cheapest provider for Custodian services 

@Mark Webb:
You CAN do the former, but it isn't the smartest thing to do. Ideally, you'll transfer each individual property into the TX Series LLC. That way, each asset is protected and anonymous. Bonus: You get to stop paying any fees related to the FL LLC.

Hi @Ryan L Grinstead. 

The company that holds the assets shouldn't be doing business directly with anyone, anywhere. That includes collecting rent, signing contracts, etc.  

Ideally, you should collect rent through a separate LLC which will become your personal property management company. If you don't have a separate LLC or cant afford one, collect the rent personally, and then transfer it into your asset holding company. This also means you will need a property management agreement between you and your asset-holding LLC OR your property management LLC and your asset-holding LLC.

So in short, you don't really want to do either of the things you suggested. The other poster got the gist of business v. personal correct, but the best way to avoid "comingling of funds" isn't to simply open a business account, but to structure your LLCs in such a way that your assets are protected.

@Anna M., ideally your trustee should be your attorney. That would mean the address that shows up is their business address, which would protect your anonymity. Grantors are private; the only thing that can possibly appear on public record is the Trust Name and Trustee.

As far as county records and the Tax Assessor's Office go, the Tax Assessor gets their info from county records. This information will be updated automatically as soon as you deed it, so you won't need to re-record the title or any of that yourself.

Finally, whoever is listed on the deed is who will receive tax documents. Here's one last reason that the attorney is your ideal trustee; he/she would receive those documents and forward them to you. Hate to tell you, but you're right about needing an attorney for this one. It's going to be a lot easier and cheaper than trying to nail the process perfectly yourself, and as you've learned, a good trustee that isn't an attorney is hard to find.

Good luck to you.

@Jasmine C.--

Short answer: It really depends on which state the LLC is formed in.

Long answer:
Here's one way it could be done and afford you excellent protection, even as a single member.

1. Form a Texas Series LLC. Why? It can hold as many properties as you want. There are no yearly fees. Texas is, as far as asset protection goes, on par with Delaware and Wyoming. Regardless of where you live, Texas allows the formation of this type of LLC by a single member.
2. Deed the property into a land trust OWNED BY the LLC.
This will provide anonymity, which is critical to protection simply because it is very difficult for someone to sue you without knowing exactly what you own. 

Together, this structure will protect you personally from lawsuits, as well as keeping your investment properties isolated should legal problems come up down the road. I don't know which states you are referring to originally in your question, but you do not need to be from or in Texas to form an LLC in Texas. Good luck!

@Joan Liut, the short answer is "yes."

The slightly longer answer:
The home equity is your money, so you can do whatever you want with it. This includes buying investment properties inside of your asset-holding LLC. You could do it directly with the HELOC, but you could also put the money into your LLC first. Either is fine, so it really comes down to your personal preference.

@John R ables, the info @Brian Eastman gave above is accurate.

I would recommend simplifying the process like this:
1. Form an IRA-owned LLC. You'll have to contact a third-party to do this.
2. Transfer the properties from your IRA to the IRA-owned LLC.
3. Profit!

How? You'll save on all the custodian fees, but the trade-off is that you would be managing everything yourself, or with the help of a handy dandy attorney.

@Steve G., it sounds like you have multiple properties based on your OP. You're off to a good start collecting rent under an LLC for your newest property--and yes, you can absolutely do this when you own the property yourself. But if I'm reading this correctly, it sounds like you have other properties that you're holding in your personal name. This is a BIG no-no.

What you may want to consider is using a Series LLC structure. Series LLCs use a parent-child structure, meaning you start with one "parent" LLC that allows you to set up as many "children" LLCs beneath the parent as you like. My clients tend to use separate "child" LLCs for each asset. So if you have three rental properties, each property would collect rent under its corresponding LLC. A lawsuit involving one property cannot touch the other properties, so it is the best Asset Protection you can buy at no additional costs. The bonus to this structure is you can easily add any future properties with some quick paperwork from your home computer. A qualified attorney can help you set this up and make the entity easier for you to manage.

You aren't set up for a "tax nightmare," either. For your set-up right now, you can complete your taxes the same way you always have -- what you would do is file a schedule E along with your personal return.