Bomb Proofing Assests: Ron LeGrand but I need explanation

[bwitzed]

I listened to Ron LeGrand's CD on Bomb Proofing Assets.  This is what I got out of it:

You should never deed a property into your own name but deed it into a (land) trust.
You should use a separate land trust for each property.
The benficiary should be an LLC.  Probably a different LLC for each property.
The Trustee should be a nevada C corp so you can name an unknown trustee.  :o

But I don't really understand it.   Could someone please explain how this works, when to use it and when not too, how to use it and how to do it?  (I live in Tucson, AZ, if that makes a difference.  If the best thing is to consult someone, should I just go to the firm Le Grand recommends or is there someone here in tucson who knows both asset protection and tax planning in the legal aspects?)

Thanks for any assistance you can provide.  

BMH  

[propertymanager]

That would be a LOT of work and expense -  putting each property in its own trust and with its own LLC for the beneficial interest.  If you are only planning on having one or two properties  --  maybe, but it would be prohibitively cumbersome if you own a lot of properties.

State laws govern who (or what) can be the trustee.  In Ohio, the trustee MUST be a living human being  -  it CAN NOT be a C corp.  Also, if the company is owned by an out of state company, you may be required to file as a foreign corporation or foreign LLC in your state  -  EVEN MORE NEEDLESS EXPENSE AND HASSLE.  

Obviously, you need to consult someone who knows the law in your state.  Personally, I would NOT use the LeGrand model.

Disclaimer:  I am not a lawyer and don't want to be one (and wouldn't be too upset if they all suddenly disappeared from the face of the earth)!  If you need professional advice, consult an appropriate professional.

Mike

[bwitzed]

Have you actually listened to what LeGrand has to say about this and so are talking from experience?

[propertymanager]

No, I have not listened to what Ron Legrand said.  He lost me when he started preaching "the less I do, the more I make".  

However, I am speaking from experience on the land trust/LLC issue.  I have a bunch of rentals and they are set up with land trusts and LLCs.  

If you like the Legrand model, then go for it!

Good Luck,

Mike

[AzonPM]

In MA an LLC costs $500 a year to the state.  PLUS its almost like you are a king because, only Lawyers and CPAs can do work on your behalf.

EXAMPLE:  I was buying a 48 unit rehab that was in court for multiple reasons.  When I showed up to represent myself and speak with the city, judge, lawyers etc.  I was told go home we CAN NOT talk to you, you are an LLC.  Since my lawyer was unavailable they postponed the hearings.

My bank requires a certified (by CPA) financial statement every year on my LLC since the properties are in an LLC.

SO basically I have all my properties in one LLC.  Some people may disagree but all my lawyers say its ok.  I just can't image spending the time and money to start a new LLC on every property.

[kdhastedt]

That's because it's the original "People's Republic"..."who's your daddy?"..

Keith

[NoMoneyDown]

I just can't image spending the time and money to start a new LLC on every property.

Before this year in Texas, there was a law that limited having one LLC own multiple properties (it didn't outlaw it, and didn't make it difficult, it just added a franchise tax on some dollar amount an LLC had - revenue? profit? assets? - I can't remember which).  Anyway, I was talking with my CPA a few weeks ago, and she said some new laws changed this.  I was there to talk to her about other stuff, so we didn't go into detail about it.  I have a meeting with her this month to go over my taxes, and I'll talk to her more about it.

Bottom line is make sure you know ALL about the ramifications of holding properties in one or more entities (or even which entity) for your specific state.

[John_in_NC]

Hey mike, how many properties do you have in each trust? I seem to remember you saying you just put your apartments into them. I'd love to hear your theorys or logic behind using trusts and LLC's.


Sure would love to find a 500 dollar course on land trust use under my pillow. But until then it's what I can find on this wonderful site.

[propertymanager]

Sure would love to find a 500 dollar course on land trust use under my pillow. But until then it's what I can find on this wonderful site.

What I try to do when I buy any course is decide if the course will either save me money or provide something that will make me money (that I can't find elsewhere cheaper).  I think I mentioned earlier that I paid about $500 for Pat Tarr's course "Armour and Camouflage".  I did that because it had all the information that I needed (including all the forms) to be able to set-up the entities myself.  With the information, I would be able to set up as many land trusts and LLC's as I need.  The alternative is to pay an attorney or an entity company to do these for me and needless to say, that would cost MANY TIMES the $500.  I have absolutely no interest in or relationship with Pat Tarr, in case you were wondering.  She wouldn't know me from the man-in-the-moon.

To answer your question, I only have 1 apartment building in each land trust, but I have 2 land trusts with the same beneficiary (my LLC).  

I only have my apartment buildings in land trusts.  I do this because they are the highest risk rentals.  I don't have everything in land trusts, because I don't want all of my properties owned by a trustee (not me).  My SFHs are divided into different LLCs, I started out with 5 SFHs per LLC, but am increasing this to 10 per LLC.  I don't want to have too many LLC's because they each have a check book, separate account for bookkeeping and tax purposes, etc.  It is too cumbersome to have too many LLCs.

Hope this helps,

Mike

[John_in_NC]

Very much, you set up all your own LLC's and Land trusts? Great savings....is it pretty easy?

[propertymanager]

Yes, it is a piece of cake!

Mike

[dwj469]

yesterday I just sent out my yearly (minimum) $500 new york state fee for having an LLC n new york state. Lucky me right?

[bwitzed]

I just went down to the Arizona Corporation commission office and it is only $50 to register an LLC plus publication fees once I receive it in a month. ($85 for 1 week, think its worth it?)  Once I establish the LLC, I can then get credit in the name of the LLC (though I will have to personally guaranteee the money in the beginning. 

The other defect of using an Arizona corporation is that I as a  member is listed on the website.  I have an authorized agent who is also listed.   I have considered using a Nevada LLC because then the members cannot be disclosed, but Arizona requires all corps to register, and if I am a Nevada LLC I have to register under Foreign Entity.  Not sure what all this mean so I would love advise.

[aak5454]

a foreign entity means a company domciled in another state.  basically it means you get to register and pay twice.

starting an LLC for every property is the talk of gurus who do not really operate properties.  I own more than a dozen and having an LLC for each one would be an accounting nightmare; not to mention the added expense ($800 in Calif).  Land trust are good to use as they get your name out of the public record and basically free to use if you know how to set them up.  There are several different shades of how to do a land trust, but you probably need to get trained prior to using one.  Yes, you can buy books, but some of the details can be trikcy depending on your state, situation, etc.

IMHO, don't get too wrapped around the axle about how to hold properties, etc.....the point of REI is to learn how to do great deal.  Figuring out how to do complex corp. structures does not yield a monthly rental income check.  It's important but should not be primary focus.

[propertymanager]

bwitzed,

I agree with everything AAK said,  In addition, you should consider that the Trustee is the legal owner of the property.  The trustee can legally sell your property or do anything else he'she pleases with it.  The trustee is on the deed!!!  Therefore, the trustee MUST be someone you know and trust.

I would bet that Legrand is recommending this company becasue he's probably making money from it (or maybe even owns it).  There is an entire industry of these entity companies who make their money charging newbies for things they don't really need. 

If there is someone (with a different last name) that you trust enough to be your trustee, then you might want to consider putting each property into a land trust.  I certainly would NOT have a separate LLC as the beneficial interest of each property (unless your properties are all larger apartment buildings).  I have several dozen rentals.  Could you imagine what a nightmare it would be to try to balance dozens of check books; pay the accountant to do dozens of tax returns; etc?  Pay the Nevada company a small fortune each year to be the anonymous trustee?  Ridiculous!

Mike