Land trusts combined with a LLC

[Ohioinvestor]

Well, I’m an RE investor in the Central Ohio area (Columbus) and I stumbled onto your site. I really wish we had one set up in the Ohio area like this, I love the ability to share ideas and help with others projects as shown. I do have some questions of my own I could use help with.


Background: Real estate investor for 5/6 years but just in the last 1 1/2 to 2 I’ve become a full time landlord instead of selling my properties. I am looking to expand my keepers a few houses (2-4) more a year (currently 20) but nowhere near the pace I did in the past. I am also looking to add 2-5 Lease Option properties a year and of course hope for the cash out time every so often.

Goals: I am looking to protect my assets and if possible (doubtful) receive any tax benefits that are available to me. I've been reading on this site and just today ordered some books regarding land trusts. I have also visited my state website and downloaded LLC setup information. My fee in this state (Ohio) to set up a LLC is $125.

I am interested in hiding my assets from public view as I have had to evict some horrible tenants and I don't want future people knowing where I live. I also do not want to be dragged into a lawsuit by people so I don't want my true value to show anymore. I am interested in protecting my properties from lawsuits and my privacy by using your advice.

Per your books link I have ordered from amazon.com these books

Landlording: A Handy Manual for Scrupulous Landlords and
Landladies Who Do It Themselves (Landlording, 9th Ed)" Leigh
Robinson,
 And
"Land Trusts for Privacy & Profit" Mark Warda;  

I am also interested in your 2 courses labeled

http://www.texasrealestateclub.com/courses/boddiford/personalpropertytrusts.html

And

http://www.texasrealestateclub.com/courses/boddiford/wealthprotection.html

Reasons being they are reasonable in expense and seem to be filled with the information that I need. I'm really attracted to your packages from William Bronchick but have a hard time justifying 250-350 for his sets. I'm not interested in the "russ whitney/carlton sheets" style programs at all and fear he may be similar to their setup.


Mainly my questions to you guys are how would I combine properly the land trust inside the LLC or vice versa to achieve maximum protection in all forms. What is some of the details often overlooked and pitfalls to avoid? Please be as wordy as you can, I will most definitely soak up any knowledge you are willing to share with me in these subjects. If there is anything in return I may answer for you just ask.

[Admin]

Hello,
Thanks for joining us and welcome to the club.

Entity recommendation is too iffy without knowing your specific state regs.  The LLC fee is very attractive at first glance.  In Texas gross receipts over 150k per year are subject to a 4.5% franchise tax.  Of course, there are exceptions, but this is just to make a point that there are other factors that will determine a good choice for entity.  You'll need localized help on that.

Robinson's Landlording book is excellent.  I've heard Warda's is as well, but I've not personally gone through it.  I've also heard Boddiford's information is good quality.

Bronchick is not from the same mold as Whitney and Sheets.  I have almost everything he has and highly recommend it.  Most of his forms that are included can easily be modified/adapted to specific state law.

What I typically do is have a separate land trust for each property with the beneficiary interest held by an entity.  The purpose of the trust is privacy and that's basically all it does, no asset protection.  The combination of the entity as the beneficiary is where the asset protection comes into play.  I've also heard it makes sense to have a separate entity be a member in your LLC, but I've not gone that route.

You may want to contact a friend, John Hyre, at johnhyre@ameritech.net.  He should be able to advise you since he's an attorney in your state.

Hope it helps...

[Ohioinvestor]

Thanks for responding.

Entity wise i feel the LLC would be the best route. Through all my searches and paperwork sent by Ohio on the subject i've not found any other fees yet at this point.

I emailed the gentleman you posted and I look forward to talking with him. Hopefully, he specializes in this field and would be willing to work with me to set up a land trust and direct me on how to combine the 2 for the most effect.

After reading this
"What I typically do is have a separate land trust for each property with the beneficiary interest held by an entity. The purpose of the trust is privacy and that's basically all it does, no asset protection. The combination of the entity as the beneficiary is where the asset protection comes into play. I've also heard it makes sense to have a separate entity be a member in your LLC, but I've not gone that route"

As an entity and LLC or another corp is what you are reffering to? Then where do you fit into the picture? Here is what i see so far

House 1: Deeded to a Land trust for privacy / Land trust beneficiary is my LLC and I am the executor of the trust / LLC has me as an owner

This is how i think it appears to work. Being that a land trust hides ownership and infact cannot be forced to reveal ownership leaves me to assume that i am protected pretty much
But given that an "accident" happens on a property and the trust executor (me) is hauled into court even though they cannot get the beneficiary official name because of the land trust they can still sue and attach the property for debt.
But since the LLC will be limited to 1 or a few small houses they don't have much to attach? Even if they do then they are due for the taxes on the LLC portion of my reported potential but not received income forcing many to decide to settle for a more reasonable figure or dropping it all together.


Do i have the picture about right? Btw, why would you have seperate land trusts for each house? It doesn't offically prove ownership and the LLC is what protects from lawsuits so why go that route? Is there a benefit i'm  missing?

Thank you for your time btw.

[Admin]

John is a specialist tax attorney and is very familiar with real estate investing.

The additional member of the LLC being an entity is just another hoop.  As with all things REI, what is "best" is not always practical.  I just wanted to pass it on as hearsay.

The land trust just shields ownership and you, or whomever, as trustee can certainly be forced to divulge the details.  If it gets to that point, the trust is essentially useless and that's where the entity protection comes into play.  I'm not an attorney and haven't had to test this theory so take it as you may.

Yes, it's true the creditor might go after a charging order for the LLC and may bail because of the tax consequences.

The advantage of separate land trusts is that all it costs is recording fees.  If everything is held in "Ohioinvestor's Land Trust", then all I have to do is search courthouse records for that and I'll find everything you've got potentially.

I don't know how Ohio works.  Is title required to be held in the trust name, or the trust and trustee, or perhaps just the trustee?  Here I don't even record the trustee's name as it's not required so each title is "123 Main Street Smith Trust" or something similar.

[Ohioinvestor]

Tim you have been a great help. I have already heard from John and am hoping to meet up with him on Monday evening. I'm not 100% on your question, but i believe it is the trusts name that is required and the trustee isn't.

If at anytime you have anything further too share please post. I'm very interested in these topics.

[StacyKellams]

I thought I'd throw my two cents in here. Seems like land trusts are all the rage and the guru's run around whipping everyone who doesn't have on into a frenzy.

All a land trust does is keep your personal name off public record. A land trust won't protect you if you get sued. It will just make it harder for them to figure out what you own.

The guru's like to say "they can't take what they can't find", but that's garbage. One of the first things a good attorney will do is subpoena your tax returns if and when you ever get sued. Once they get your tax returns they'll see everything you own and control. The land trusts will be useless then. That's when you'll need to rely on your entities for protection.

[Ohioinvestor]

My LLC's will help protect my properties, and the trusts will keep me out of public eye. I evict some horrid people sometimes and my name/addy is all over the place so they can easily find me without much effort. I also do not like the ability of people seeing my #'s of assets and maybe getting an idea to sue.


I am going to form 1 llc to have control over the trusts. Then 1 seperate trust per house with the LLC the Trustee. Then form a few more llc's (2) to be benificiary over most of the trusts (spliting equaly).

My goals are to hide my name from public eyes, and to make the people who really want my info work for it. Keep my homes protected from each other regarding lawsuits as much as possible. In a large health issue, if i go down they don't all go down. Etc.

Any opinions on this setup?

[Lisa Arthur / Houston]

Can you recommend an attorney in Houston to setup LLC.  I have 5 SFRs and want on LLC for each property.

A friend told me they  paid $2000 per LLC, which is way too expensive to be feasible.  What fees should I expect to pay?

[StacyKellams]

Lisa,

I would recommend joining the RICH club if you aren't already a member. In their monthly newsletter they have a section for advertisers and you can find an attorney that way. I would ask around the RICH club to find out who everyone likes/dislikes. Not all attorneys are created equal.

I would never do this for my own portfolio because to me it would be an accounting nightmare. Are you going to have a separate bank account and check book for each property? Are you going to keep a separate set of books for each property? Things to think about.

What you can expect to pay depends on the quality of the attorney you use. I would guess anywhere from $1000 on the low side to $2000 on the high side. The Texas state filing fee for an LLC is about $200.

Just out of curiosity, why do you feel you need a separate LLC for each individual property?

[Lisa Arthur / Houston]

Stacy- thanks for the comments - hadn't really thought about the book keeping -- just about the liability.   Each of our properties is worth about $300K and we were thinking that it would be good to set each up as a separate company so that we couldn't be sued for an accident that occured at one, and end up losing everything.

Is there any attorney that you would recommend.  I started to join RICH Club, but one of the members, an ATTORNEY who remain nameless, gave me some legal advice in a very offensive manner that was just flat out wrong.  It really rubbed me the wrong way.  Guess I should give it another chance?

[quote
author=StacyKellams link=; date=0]Lisa,

I would recommend joining the RICH club if you aren't already a member. In their monthly newsletter they have a section for advertisers and you can find an attorney that way. I would ask around the RICH club to find out who everyone likes/dislikes. Not all attorneys are created equal.

I would never do this for my own portfolio because to me it would be an accounting nightmare. Are you going to have a separate bank account and check book for each property? Are you going to keep a separate set of books for each property? Things to think about.

What you can expect to pay depends on the quality of the attorney you use. I would guess anywhere from $1000 on the low side to $2000 on the high side. The Texas state filing fee for an LLC is about $200.

Just out of curiosity, why do you feel you need a separate LLC for each individual property?[/quote]

[Ohioinvestor]

500/700 would be a more appropriate figure. In ohio if you grab a attorney out of the blue they may try to charge 1000+ but if you look for a qualified tax and/or realestate attorney they will have more experience in setting it up so they would charge much less.


You can easily set up your own LLC. Its quite simple, our state has a website we can contact to get papers and instuctions to file for the llc. It is not challenging and is only $125. Once you get your LLC papers back from your state just set up a checking account with a few hundred in it in the name of the LLC. Being an LLC with 1 person won't create any headaches come tax time as the income just flows through to you (no additional paperwork). If you have 2 people or more in the LLC then it's 1 additional form stating the net $ payout to each partner.

You can easily set it up yourself in about 1-2 hours for read time and filling in the blanks. Or pay an attorney for 1 and learn from the example and do the rest yourself.

paying someone 1000+ to file an llc is attrocious as it is only a few  papers (4 or 5) of which you can't really fill anything in wrong unless you don't know your own names or what percetages you are awarding to each partner.


Paperworkwise you also will want to create some basic things to make IRS happy in the event of a audit, and keep the judges happy in the case of a lawsuit.
Grab Realestate loopholes of the rich or Own your own corporation from the rich dad poor dad series if you want specifics but for general you will want meeting notes from at least a few meetings throughout the year 2or3. seperate checking account with minimal funds. Flowthrough of deposits and payments from that checking account throughout the year. Everything else is pretty much the same paperwork wise. Keep your receipts etc

Hope it helps, also try to find a real estate investors group in your area and join for awhile. You may make some friends that will help you along your way in avoiding issues. Also DO NOT put your personal residence in your LLC if you plan on selling it later and cashing out a large bit of equity while using your 2year 250k per person exemption on your personal residence. The LLC will cause you to lose your exemption. There are other ways to protect your personal residence.