All Forum Posts by: Sean Morrison

The land trust concept is really overrated. First, you can always simply ask your lender if you can transfer to an LLC. Some allow it, which will avoid tons of legal fees and headaches. Second, the whole point of the LLC is liability protection. But if a court sees that you're playing games going back and forth with beneficiaries, they're going to see it as fraud and pierce the corporate veil. And if your lender learns about it, they may do more than just call in the loan.

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

What you're describing is equity stripping. However, you can't do it with your own entities. First, it may be considered a fraudulent transfer. Second, any loan must be legitimate, meaning cash is transferred and a mortgage is controlled by a real creditor. If you're in control of the lending organizations, they will pierce the corporate veil and you'll get in more trouble than it's worth.

Having said that, there are equity stripping strategies that do work, but they require giving up control over the loan. You'd need trusted people or a commercial lender to make it work.

One thing people forget is that in most states, putting a primary residence in an LLC will lose your homestead exemption.

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

One of the definitions of an accredited investor is an entity in which all the equity owners are accredited investors. So a family of three coming to invest would probably each need to be accredited. How you verify that depends on what exemption you're filing, as some require verification and others allow self-certification.

The general rule is that once you have partners, you need to be working with an attorney. Keep in mind that lending rates for an LLC will be higher than a standard residential loan. And it's always best practice to have separate entities for rentals than for flipping, as they are different types of income and are taxed differently.

Based on the question, I would answer yes.

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

All partnerships need a written agreement. Business breakups involving close relationships (like family) are inherently messy and expensive. This is especially true if one is bringing money and the other labor. If you're doing multiple projects, you can create an LLC for each project, or a joint venture agreement.

Keep in mind the tax implications of a partner doing labor in exchange for equity. The IRS taxes that as earned income.

It's a heated thing because most mortgages have a due on sale clause. There are ways to sneak it past, but it's far easier and cheaper to simply contact the lender and ask if you can do it. If you can, it's just a matter of a deed plus updating your insurance.

Unfortunately, each clerk will have a different system. Many of those without electronic filing still offer fax filing. Might be worth checking if that's available.

You can live in one state, and have an LLC in another. You'll need a registered agent in the LLC state, but there are companies that do that for about $100-200 per year. As a general rule, it's better to have an LLC in the same state as the property regardless of where you live.