Just how dead is privacy? Princess Bride “only mostly dead” — or George Romero “ambulatory zombie dead”?
Real estate investors and landlords have more cause for concern than most over privacy and anonymity. People just love suing landlords — neighbors sue over spicy food. City councils sue landlords who lease to market tenants over Section 8 tenants. Tenants even sue their landlord over the house being haunted.
So let’s say you’re a real estate investor with a handful of rental properties, and you want to maximize your privacy and anonymity. But you don’t want to grow a scary beard and erect an off-the-grid compound out in Idaho with an arsenal of military-grade weapons.
What’s a well-adjusted rental investor with a healthy sense of privacy to do?
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The Easy Stuff: Personal Details
Don’t want tenants, neighbors, or do-gooder crusaders to know your real address or phone number? Easy enough.
Start with a P.O. box or a private mail service. Today’s mail services are far more advanced than the simple drop-boxes of yesteryear. Sure, they can physically forward mail to you wherever you are, but the benefits only improve from there.
They will sign for packages and certified deliveries for you, which is convenient to say the least. They can scan your unopened mail and post it (excuse the pun) to a secure website for you to decide what to do with it. You can have them shred it, physically forward it to you, or even open and scan the contents for you to view, download, and save digitally.
The best part? They’re pretty cheap too, starting around $10/month.
Landlords and investors can also use phone forwarding services to obtain a new, mostly anonymous phone number to give tenants and other real estate-related contacts. Many of these services (e.g. Google Voice) are free and provide another layer of anonymity.
And, of course, anonymous email addresses are free and can be set to forward to your normal email.
Property managers provide another layer of insulation between landlords and an unsympathetic world. A good property manager will not list the owner or their contact information on any documents that the tenant sees. They can avoid disclosing information about the owner unless legally forced by subpoena.
Beyond anonymity, property managers also assume a certain degree of legal liability in all dealings with tenants. If the manager mishandles tenant screening and is accused of discrimination, for example, they have far more liability than the owner.
But there’s still a glaring problem for real estate owners worried about anonymity: public records.
Legal Entities & Anonymous Ownership
The common, sophomoric wisdom is that landlords should simply set up limited liability companies (LLCs) to own real estate with, and then everything is hunky-dory. While legal entities can offer some protection if done properly, it’s not cut and dry.
In most states, at least one founder of any legal entity is listed on online public records for anyone to check with a quick search. Ambulance-chasing attorneys can simply look up the owner and list them personally in any landlord lawsuit.
Sure, your defense attorney will try to object to you being personally named in the suit, but it’s anyone’s guess if the judge will agree. (For more business-friendly laws with much better anonymity, look into Nevada and Delaware, hint hint.)
With that being said, with plenty of money it’s easy to buy real estate anonymously. A privacy-minded buyer can set up an LLC in a “nominee’s” name and after settlement simply have their nominee assign the LLC ownership. The real buyer’s name appears nowhere on the contract of sale, articles of organization, or the settlement documents.
Jennifer Aniston once used this method to buy a high-end Manhattan condo in her dog’s name. Sort of. (It was really her business manager using a trust named after her dog, but never mind all that.)
But ongoing ownership is harder to hide, at least against determined attorneys out for blood.
Deterrence Through Difficulty
Most ambulance chasers want a quick win, an obvious target with plump, juicy assets to go after. You may not be able to completely hide your identity when owning real estate, but you can make it harder on litigators.
If your name appears nowhere on the public records, then the plaintiff’s attorney will need to subpoena the LLC’s resident agent in order to find out who you are. That’s some work for an attorney to just find out who they’re suing and whether they have assets worth pursuing.
Having a high mortgage on the property in question makes you a less tempting target, visibly having no equity to steal. But this sword cuts both ways: The mortgage is on public record, and your name is probably on it. Anonymity busted.
Is Anonymity Practical, or Is Privacy Dead?
Just for fun, let’s try to invest in real estate as anonymously as possible.
Related: Can I (and Should I) Move My Property Into an LLC and Out of My Name?
Lucas is a successful investor who doesn’t want a deadbeat suing him for all he’s worth. An employee (Alfred) agrees to serve as his nominee and sets up a Delaware Series LLC, with a new series business name for each property. Alfred buys these with Lucas’s cash, then assigns them over to a Nevada corporation that Lucas owns.
The Nevada corporation uses a private mail service for its mailing address and an anonymous forwarded phone number and email. Rents could be physically mailed there, or if Lucas is a gambler, he could accept money electronically through bitcoin.
Alfred hires a property manager (who also serves as resident agent), without disclosing anything about Lucas. Alfred provides the anonymous mailing and email addresses to the property manager.
Lucas is pretty insulated, but there are still traceable weak points. Even if Alfred conceals his own contact information, a determined attorney can subpoena both the mail service and the property manager and eventually track down Lucas’s real identity.
All of this is starting to look like a lot of work and expense. Nominees, cash purchases, shell corporations? Unless you’re a billionaire mogul or celebrity trying to hide assets from your spouse, privacy in today’s world is just not very practical.
It may still moan and move like it’s alive, but for all but the ultra-rich, practical privacy is dead.
Let’s hear from attorneys and investors who have worked to build privacy! We all know lawyers don’t make zombie jokes, so clearly I wrote this article as an investor. It’s not legal advice, it’s not detail-oriented, but rather a broad foray into the world of real estate ownership and anonymity.
Leave your questions and comments below!