How to Set Up An LLC for Rental Real Estate | Clint Coons Q&A

that's right excellent we are live just put this on do not disturb can you jump on another machine or maybe deborah's to make sure that's coming across because i got one person i think two people cool people are joining him and it's running through my um so it's live in three minutes so it's still not up that's why because it's since it's scheduled you will go hot at two okay i see people showing up over here cool oh cause that's the facebook side right both youtube and facebook cool nice all right guys if you can hear this we're going to get started in a couple of minutes right on nick chichia you've been following for a couple weeks down your hook appreciate that yeah it shows that it's live on my end anyways refresh and for me it says 33 waiting for brother denny good to see you um three minutes so that's it won't go until uh how are people logging in then they're waiting they're waiting in the waiting room just like i am oh so they can't hear me well the facebook people might god awesome bw still has his uh california llc owned by the wyoming llc okay great oh thanks mad dog for letting me know that you can hear me perfect great wendy excellent guys hey thanks for joining in um you haven't done one of these in a long time and i had my tech team helping me out here and and so i think you can even ask questions and those will pop across uh onto my screen so i can see that if it doesn't work this time around don't worry i'm gonna start doing more of these on different subjects so that uh you can get your questions answered because i know a lot of you that subscribe to my channel i appreciate that and try to be as active as possible on getting those those questions you have answered just because you know the information that i'm prevailing many times leaves little little items that you're unsure of and how it works so what i want to do today is talk about llc's how you're going to set them up for your uh rental real estate actually here's a question i think you have to click on the question for it to pop up uh on your youtube s screen you see like this oh yeah there we go cool ah see i i that's what happens when you're 52 years old you just don't know how to do all this technical stuff anymore anyways so we're going to talk about the uh how we're setting up llc's and what you should be focused on when it comes to structuring which you know i've covered in a lot of the videos but um i think you just can't hear it enough because of the questions i'm getting so i'm gonna go to a white board here let's check this out ipad there we go excellent you know how i like to draw so here's the thing when it comes to setting up your real estate um for for your structuring what we always want to do is determine where is that property located because that's really going to drive the decision as to what type of structure we're going to be creating for this piece of residential real estate and what i mean by that is that you know a lot of people talk in terms of hey let's just set up a limited liability company put that property into the llc and we're good to go but you know depending on where this property uh resides it might be a better structure for that deal that you know you want to avoid any transfer taxes of course so we have to be focused on that you want to make sure that you're putting together a structure that's optimized for what you're doing so you're not having to create a ton of entities possibly if the state permits for a certain type of structure so there's many layers that we're going to focus on when we're determining how we want to own our rental real estate inside of business entities and of course you have to know whether or not you're using financing and how that that plays into this as well so a couple of things to consider here when we're we're thinking about structuring where is a property located here are the states where we're typically not going to use a traditional limited liability company structure so i just want you to know that florida is one so if you own real estate in florida and it's encumbered by a mortgage we're not necessarily going to be using an llc for that property unless you can buy in the name of the in the llc but if you have buy in your own name because you're using financing you currently have it has a mortgage on it we're not going to be um using an llc in florida another issue that we run into when it comes to structuring is going to be pennsylvania so if you're thinking about investing in pennsylvania one of the issues we have there is that again if you own the property in your own name and you're not buying in the llc they pennsylvania will tax you when you transfer that property into your limited liability company so we need we need a different type of strategy for that state if you're buying in california all right california the issue 800 a year for any limited liability company is set up so let's minimize that fee uh for those limited liability companies or come up with a structure that does not impose that on us and then if you're investing in a siri state such as texas um you know wyoming oklahoma there's there's a if you look at my series videos i have all those states that recognize this type of structure if you're going to invest there maybe we look at then using a series llc so we can minimize the number of companies we have to create for our properties so that's something i focus on when i'm looking at where the investment property is held and so this is some of the key metrics we're gonna we're gonna we look at now before we talk about the exact planning along there i'll just throw this out if you're using florida then we're gonna use a land trust typically for for those investments that's the type of structure you're going to be using there if you're investing in pennsylvania you're going to use an unrecorded deed uh into a into a limited liability company we'll typically use an unrecorded deed there in california i'm going to be using a statutory trust a wyoming statutory trust so sorry about that here i would use a wst wyoming statutory trust in california for california investments or if you're a california resident investing outside of california you're going to use that so you can avoid the the franchise fee and then if as i say in these states here we're going to use a series limited liability company okay so i see a lot of questions coming in right now um what i'm going to do is i'm going to go through some of this and then i'm going to jump back in i'll start answering your questions after i lay out some of the structure in here guys so yeah definitely throw them up and then we'll get into the questions because then we'll get more information as well that'll help so so when i look at someone that came to me and she comes to me and they have these types of assets i'm looking at where the properties are located so once i've determined where your investments are located then the next question you want to ask yourself is do you want anonymity for for your structure so that if somebody looks at your property for example if i had this uh llc set up and have a rental property in there if somebody were to look at this company right here pull up that that llc with secretary of state's website are they going to see me associated to it so you see hey clint owns this llc do we want that type of information out there that was speaking to an individual two days ago on this exact topic they said well what is the value clint in having anonymity for my limited liability company i mean i really don't care if people know that i own it because if they sued the llc is going to protect me so that's one way to look at i told them i said the other thing to think about is that let's assume that the tenant doesn't have a claim against you so they're not going to sue you because the attorney won't take the case if the tenant is disgruntled what could they do well they can figure out where you work and and cause problems for you at work by calling up and harassing your employer making false statements about you get online and try to destroy you on social media so there's things that they can do that you don't have much recourse for especially if they go online i don't know if anybody's ever been through that process before if you want to have those posts removed comments that people are making about you it's extremely difficult to get that stuff taken down so i think that from from a landlord's perspective i want to keep my my ownership private i don't want people to know that i don't own the asset i'm going to use anonymity because i don't want to give them any additional leverage points against me because people will use it if they know what's available in certain circumstances not everyone but it's just why run the risk so if you want anonymity then what i suggest you do you've heard me talk about this many many times is we start with an llc in wyoming right here this would be a wyoming llc and the reason why we're going to set up this wyoming limited liability company is because i when i set it up in wyoming i don't have to list anyone as far as the members or managers are with the secretary of state so i'm going to be be the one running this company so i'm going to make this one manager managed i'm going to be listed as the manager and i'm going to be the member down here of my my llc if i'm married i'm going to bring my spouse in as well and so she's going to be on this llc as a member she may also be a manager why not let's put both of us are going to be managers and members of this llc and so when we set this up to make sure that we have anonymity okay you can't set it up on your own i clint couldn't go to wyoming and set this llc up on my own because if i did that when i file it i'm gonna have to list myself as the organizer and so i got this question the other day on the youtube channel somebody was asking you know clint can i set up a wyoming llc for anonymity i said yes you can but you can't do it yourself you have to hire someone to do it for you because when you submit the filing if you're the one doing it you have to put your name there and on an annual basis you want that same person to file the annual renewal i have a client that i've been working with out of texas and he created an llc before he came to us in wyoming with another party and then he came to us and started now now he's working with with anderson here for structuring and i saw his existing wyoming llc and i said hey before we get going any further we may want to create a new one for you because on the annual renewal statement that was submitted because he had it set up for for over a year i said you filed that the person you originally used to set it up you didn't have them file it when you filed it your name got listed there so if you want anonymity you want to keep it in place you can't be making any of the filings or else you'll you'll destroy it so anyhow you set this entity up first then once that entity is created we need to look and determine where your property is located so if this property here was located in florida then what i would do is i would set up a florida land trust for that property because assuming it has debt if it's debt free you could use an llc but if it has debt on it then i would use a land trust because transferring real estate in florida into a land trust is not subject to a transfer tax whereas if you transfer real estate that's encumbered by a mortgage into an llc it's subject to a transfer tax so i want to avoid that florida offers asset protection for their land trusts so great i'm going to have asset protection with this land trust so if anything happens with the property i'm protected so i would set up a florida llc make the benefit or florida land trust and make the wyoming llc the beneficiary let's say i pull another investment over here and this one uh this property happens to be located in i don't know texas well if i know that i'm going to be continuing to invest in texas i'm going to be buying more properties there then what i would create is a texas series llc that is member managed by the wyoming llc and so what that's going to do for me is that when i file this texas series and i set it up with texas it's going to ask for who is the member of this limited liability company the member manager and i'm going to put on there the wyoming llc okay so then everything points back to here and nothing points to me individually now for this property it's not going to sit directly in the parent because this is a series llc if you're not familiar with it what a series llc allows you to do is create little cells and each of these cells operate like a separate limited liability company but the difference is is that you don't have to pay the fee to set up a whole new llc to get that protection all you have to do is register it with the state of texas you go to the secretary of state's website we we file we file the cell dba for it i think it's 15 it takes about three minutes and then you have this structure created that can hold real estate so you put your property into that cell and then if you buy another property you put it into the other cell like that and then all these cells are owned back here by the parent llc that you have in texas so that's a unique strategy to texas they may be saying well clint i don't live in texas my investments are in north carolina great if they're in north carolina then what we're going to do is we're going to create a typical standard north carolina limited liability company and it's going to be owned back here just like we did these other ones by this wyoming llc and then that would hold your north carolina property like this so now you have anonymity there now when we're setting these up not all states collect information on on the llc's as far as the members or managers are as far as the managers are concerned so when i tell you that we're going to make this llc member managed by this wyoming llc i'm using that very generically because when i set up the structures one of the things that i want to make sure of is that the client is put in a position where they have a parent authority over their limited liability company what do i mean by that well if you went and you're working with a lender you're working with a bank and they ask for a copy of your operating agreement they want to see your name somewhere on that operating agreement many times so if i drafted a north carolina limited liability company and i stated that's member managed by wyoming llc when they look at that operating agreement they're going to see the llc's name listed as the member you'll be listed as the manager but you won't be listed there as any type of direct relation to that north carolina limited liability company so what you can do then to give yourself uh additional flexibility in setting these individual structures up is you can appoint yourself an officer so for example if i was setting up an llc in washington state for myself and i wanted anonymity i'd make it a member managed llc by my wyoming company so on the filing with the state of washington it lists my wyoming limited liability company that's it they won't see anything else now on my operating agreement it's going to list me as the president so i'll list myself in the operating agreement as a president so then when i take that operating agreement to the bank they see that like oh it's owned by wyoming llc but clint's the president of this company so that remains private because it's only in my operating agreement it's not registered with the state now if i'm setting up an llc let's say in ohio and ohio doesn't collect any information on the managers of a limited liability company well this was an ohio llc i would set it up as a manager managed llc with clint as the manager and this wyoming llc as the member why because none of that information is going to be disclosed anyway so now i have my llc operating agreement that lists me as the manager so again if i have to provide that to someone they say hey yeah this is in control by clint and the reason i'm telling you this is that i want you to understand that there's nuances you know it's not a one-size-fits-all approach and then when you're setting it up if anonymity is what you're looking for in your structuring then you should be aware that we're going to use different techniques based upon where the asset is located to make sure that we're able to achieve you know asset protection for you no transfer taxes i'm moving the asset in and then at the same time you hear me always talk about that business planning component making sure that you can effectively run this business and you're not going to run into to little roadblocks along the way because you're working with someone who doesn't understand what it is you're doing so their safe space answer is always oh you can't do that why because i mean what type of hell of response is that you know give me give me an actual reason why okay so this is how um we're typically going to to create those and you just keep building them out now the key here in setting this up is that all of these structures up top whatever state you're investing in these are all going to be disregarded if it's just you if you don't have any other owners it's just you they're going to be disregarded for federal tax purposes so you don't have to file a tax return for any of these entities okay now the blue box down here i like to treat this as a partnership so it will file at 10.65 and if you watch a lot of my videos i talk about the benefits of this is that in filing a tax return for the blue box the holding company you're going to change how that income hits your 1040 and what it's going to do for you is if you're going to be working with traditional lenders and trying to you know increase the size your portfolio through debt financing then you want to ensure that you're going to get credit for every nickel you bring in in rental income and if you don't have a structure set up that treats the income through a partnership that is you own the real estate in your own name or you hold it through disregarded entities then if the lender you're working with is a freddie fannie lender that is they're writing a loan using freddie fannie guidelines they're going to hold back 25 of your income and that's going to create problems for you on your debt to income ratio so you we want to think down the line uh when we're creating these structures to make sure that we're maximizing the structures overall benefit for our plan going forwards and so that's why i would treat this one as a partnership in my structure so what you should get out of this is that whenever you're setting up an entity or or an entity to own real estate if it's rental real estate then that entity needs to somehow be tied to the state where the property is located now on occasion you may run into this scenario let's assume that you have a a closing texas is a perfect example for this structure right now in texas it's taking about 13 days to file an entity florida at the beginning of the year was taking up to 18 days to get an entity set up now if you ever run into an issue where you're trying to close in the name of an entity or you just need to get the property transferred out of your name but you don't have the time to wait for the filing to record you know with the state of texas or say florida my example then you might want to consider doing this setting up a wyoming llc up here for purposes of closing on this property down here in florida this is exactly what i did for a client at the beginning of the year he had a closing coming up he put in an offer uh it was a cash offer 14-day close called me up said clint i need to get a new llc set up in florida right away i said there's no way i'm going to be able to do this for you florida is just they're backlogged right now you won't have it for closing well that's not what he wanted to hear i said here's what we're going to do instead we'll set up a wyoming llc for you you'll close in the name of the wyoming limited liability company so we'll close that way after we've closed then we'll take that wyoming llc and we'll either domesticate it or foreign file it in florida so whether you domesticate it to florida which means we'll move it to florida or we'll foreign file it in florida doing business there because it owns real estate rental real estate in florida and a point of fact he went to closing and the title company refused it first to close in the llc and he's up one of our platinum clients and you know i'm working with them and he goes what do i do i said get get the title company on the phone with me let's do a three-way call i'll talk to him and sure enough i get this represented the title company on the phone i said why aren't we closing the llc she goes you can't i said why can't you because it's a rental in florida i said yeah i know but show me in the code where you can't an out-of-state llc can't own real estate in florida her next response is but he's doing business there so it needs to be registered in florida i said that's not your problem you're hired to do one thing and that is to close on this property whether or not my client chooses to register as llc is between him and the state of florida not between him and his title company that's hired for a closing would you disagree with that statement and then of course she backed off and said all right yeah we can take care of this so you'll run into situations like that okay if you if you use this strategy just got to push through it okay it's because they're not accustomed to seeing it and so they're trying to find reasons not to do it rather than reasons to do something all right so that's that's the one um uh situation where you might use an out of state entity to close on a deal in a different state is when you can't get your entity set up in time that's why many times i tell people if you know that you're investing in a specific jurisdiction like we do a lot of investing in north carolina we will actually set up multiple north carolina llc's i'll have 15 of them just sitting on the shelf i call them shelf limited liability companies because i'm going to be using them for closing on my next pool of properties or whatever whatever we're acquiring because we're constantly buying there and so if you're in that scenario you're doing a lot of acquisitions in a certain area set up five or six llc so you have it ready to go when that next deal comes along so you can actually if you if you're buying for cash you can put the offer in the name of the llc as well all right so let's check out some of the questions here um let me see so mr james say it's what if i already have let me just move this out of the way a little bit here uh i've already started my llc before i found your channel it's in my name do i just get rid of get rid of it and start over in georgia okay mr james this happens a lot okay people come to us and they've already um set up there let me just reposition this stuff up here makes it easier they've already set up an llc in a particular state they want to have anonymity and they want to know what should i do with that existing entity that i already have well the thing is is that if you already owns real estate so if you came to me and said clint i've got this georgia llc set up here owns a piece of property i want anonymity going forwards i would tell you this set up a wyoming llc here and this assumes that you're going to keep investing if it's just one property i wouldn't mess with this but if you i assume you're going to keep buying more properties then i would create a personal property trust right here and have this llc owned by this personal property trust so a personal property trust it's like a land trust we can create it excuse me so it offers you anonymity so people don't know that that you're involved with it and then what you'll do on the annual filings with the state of georgia is you're going to take that llc and you're going to list the personal property trust as its member manager going forwards so now you're still in the chain so if somebody looked back in the history they would find you but if they ran a current search and most searches on secretary of state's databases only search the current information so if they ran a current search they wouldn't see your name because we've taken your name off and we put this personal property trust it doesn't provide any asset protection all it does is protect the information on this entity get your name off and then we have the personal property trust owned by the wyoming limited liability company so we stick that into the wyoming llc and now by doing it this way you didn't have to dissolve your existing limited liability company we just kept it in place and then going forwards you'll create your new ones directly into the wyoming llc so why did i do this because many times you already have your utilities your bank account you know everything's already set up properties in the llc and to shut it down and create a new one is a lot of effort so i would rather we use what we have and the reason why i have to use a personal property trust and not just move it directly into the wyoming llc is because you're in that chain as i said so mr james you're listed back here in 2021 as the member and then we change it in 2022 to this ppt or no excuse me we change it to the wyoming llc if somebody does the search and they see you here in 2021 and then they see the wyoming llc in then once they're gonna be able to tie it together so oh mr james set up a wyoming llc and he moved his interest in that would be my assumption oh so you got this new blue box set up what does the blue box own oh it owns these other llc's and so then they're going to know that you're associated with these new companies that ordinarily they would never know about so that's how i would uh structure that deal all right another one here my rentals in florida are on a are each on their own land trust do i need one llc in florida another in wyoming or can i just have one wyoming to be the trustee and the beneficiary at the same time all right so here's what this uh person is asking of us what they have is some rentals in florida now how would i structure this with my land trust i would create a land trust as i talked about for each of these florida properties so if anything goes wrong that liability is going to be contained now when you transfer real estate into a land trust you you do it in the name of the trustee so for people that are setting up or investing in florida will typically use a wyoming llc as the trustee of all of these land trusts so one wyoming llc can serve as a trustee of all of your trust that you create so when you transfer the property into the green box if if this company here is abc llc then i'd say abc llc trustee of green frog trust just like that so that's how title would appear on that property now at the same time the question is can i turn around and make the trustee llc the beneficiary of of this land trust you could if you wanted to you could do that i prefer to keep things separate i don't like to have my trusty the same as my beneficiary i like to keep them separate so i'd have a separate beneficiary down here so this would be wyoming llc number two the reason why has to do with what's referred to as the merger doctrine where if the trustee and the beneficiary are the same title doesn't transfer we've had it's it's an old legal doctrine that's adopted in some states or still in effect so i would keep them separate um a separate llc down here for the beneficiary and a separate llc for the trustee i think that's the cleanest way to go when you when you're putting this together all right um i have a disregarded let me see this one here i have a disregarded wyoming llc holding my personal savings and investment accounts when the irs asked i choose to open bank accounts was the right choice since they don't plan to have tax on it okay so here's another question then on this what about your savings so i was talking to a client today who has two brokerage accounts and the total of their brokerage accounts is about 1.7 million and then they have some cash as well and they said what do i do with that i said well you've got your real estate structure right here so so we talked about creating you know llc's like this and then i said we should create a separate llc in wyoming over here and inside of that company we're going to put your your cash and your brokerage accounts why would i make that recommendation well i don't want to mix the real estate llc holding company with the what i call safe assets over here which is the cash i want to keep them separate because if anything happened here and somebody was able to pierce the veil of this llc and they came down here and they got into this real estate llc i don't want them to find 1.7 million payday so i'm going to separate that cash out and then he asked me goes what happens when i have you know 30 000 in rental income generated that have flown down to that company how does it go from here to here well you take a distribution you write yourself a check or do it online and then once it hit your personal account you just contributed over here this entity here is disregarded means it doesn't file a tax return so you set it up it gives you asset protection you put your you open a bank account in the name of it if you have a brokerage account you open up say uh say you're with fidelity you open up a new account under the name of your llc and all your existing positions roll into there your crypto anything like that would be sitting inside that one limited liability company no tax return here this one should be a partnership so you file a tax return right here so in this structure you see four entities but there's only one tax return that would have to be filed all right okay so here's a question for those of california affected by prop 19 how should you use llc's to pass rentals to our heirs what are the risks and complications are there california experts in the firm to help me with this okay yeah so i'll tell you this with with prop 19 not our area when it comes to passing them on and using llc's you'd want to find someone local in california that has that level of expertise and is up on the prop 19 for your personal residence in order to get it passed on i mean prop 13 with the california reassessments not an issue as i stated if you have real estate in california we would move it into a wyoming statutory trust that's simple it's not subject to reassessment when you place it in inside of that that trust and you get the asset protection without the 800 a year um franchise fee okay um my sister which lives in south america is my land trust trustee she's she does not have assets or bank accounts in america is there any risk for her being a trustee but i recently got a claim yeah you should not have someone who is not a us citizen serving as a trustee of your trust plain and simple so either use a business entity or somebody else but do not have her um as that trustee because there could be negative ramifications for you with estate taxes when you pass in addition to that complications as far as trying to get a hold of her to deal with with any legal claims that come up against it what i would probably do is have her resign and have her give you a trustee's deed appointing you as the trustee of this trust or an llc that you created and get all that fixed with the county recorders office so that she's off there all right can a florida land trust collect rent and send it directly to a wyoming llc bank account yes so luther if you had a florida land trust set up right here okay and it's collecting the rent then when you say send it you're talking about the beneficiary yes you would just move the money right down here into this llc this is one of the reasons why i often tell people if when you're opening your bank accounts let's say you like you have your personal account with wells fargo then i would open up a wells fargo account for this llc and a wells fargo account for your land trust so whenever you need to move money you just log into your app and you would just transfer the money here and if you need some money you would transfer the money out of that limited liability company directly to yourself all right l wants to know is a is illinois a series llc state it is illinois is a series llc state we set them up there all the time with in illinois you have to register your cells when you're setting up a series llc that means you have to make a specific filing with the secretary of state in illinois for that series llc all right um oh so this is a follow-up you handed your claim and uh to your insurance adjuster and he told me that he'll deal with him but he's never had a claim and it has me very worried okay so this is a follow-up to your question having your your sister who lives in south america as your trustee you know one of the things that i want to touch on this is that when you transfer your properties into these structures right here remember you want to change your insurance okay have that entity listed as an additional insured under your policy or better yet name it as the named insured then you could be an additional insured for that real estate a group that are two two groups that i know that that do this one is national real estate i think it's uh n r e n-r-e-i-g national real estate insurance group and the other one is chub i think there's two b's in it both of those companies work primarily with real estate investors so when you have assets inside of entities it's not a problem they'll even give you an umbrella policy over all your entities so they don't have to do it on a per entity basis like some insurers will do so you might want to check them out all right rents do with the california land trust and a wyoming llc rental structure work the same way okay so rents do i i like that poster i've got that exact same one in my op in our office here great so the way this works um is that you'll take let me get this off here if you have real estate in california you could do this if you're not using a statutory trust you could set it up in a land trust and then have a wyoming llc as the beneficiary now what's different in california than florida is that in florida you could actually have several llc's all rolling into the same i mean several land trusts all rolling into the same limited liability company now in california they do not have a land trust statute like florida offers meaning that if something goes wrong with the property the beneficiary is liable whereas in florida if something goes wrong with the property the land trust is liable so there's asset protection in florida there's none in california so in california what you have to do is you can definitely use the land trust to a wyoming llc but you have to have it one to one like this so that if anything goes wrong here this whole thing is at risk and everything over here remains protected because if you stuck all your land trust into the same wyoming llc if something goes wrong with this structure right here they're going to get both of these as well in california not in florida but in california they would so yeah you can use that structure in california but i prefer to use a statutory trust in california now or a disregarded limited partnership i mean in order of preference the reason why i like it that way is because i think it's simpler just one entity that i have set up there okay um kevin says happy's able to catch us live oh it's rockstar oh thanks kevin uh i couldn't read it it's a little small um will there be notes given after this live event to recap now kevin we don't have any notes that i'm giving uh that that recap this if you want to see this in more detail uh i teach a an event typically every other weekend i'll be teaching one on saturday a tax and asset protection event for real estate investors myself and my partner toby mathis you can join if you go to our website andersonadvisors.com you should see it right up there click on events and you can register it's free no charge and we go really in depth in in various strategies for for real estate investors okay so how does owning llc's complicate my living trust okay or owning limited liability companies k9 does not complicate your living trust so what is a living trust a living trust is an estate plan it's like a will that is when you pass away it's going to distribute your your assets to your beneficiaries but the difference is it doesn't go through probate so when you're creating structures and we're setting stuff up you got your wyoming llc and it owns several state-specific limited liability companies maybe you have a business that you've set up so you have a corporation over here on the side your personal residence is right here how does all this work from an estate planning standpoint well we'll take all of this and we'll put it into a living trust just like this and so i mean when we place it into the living trust what we're doing is we're changing the member of this wyoming llc to the name of your living trust now that's all i have to change these other boxes that are owned by the wyoming llc we don't have to do anything with them because they're owned by the blue box and so whatever wherever i put the blue box so goes the red boxes maybe a different way of visualizing it for you that might make more sense is like this so you they're nested inside of each other is what we have here so when you have a living trust you want to make sure wherever you show up as a member wherever you're listed as a member you transfer that interest into your living trust now by doing that when you pass away if your business is in the name of your trust your residence all of those assets will bypass probate and so that's the most important tool i tell people every single time when it comes to structuring really that living trust is what you should uh be focusing on and getting set up because you spend all this time accumulating assets into the future if something were to take you out a week from now seven weeks from now what's going to happen to those who are they going to go to how are the beneficiaries going to receive your assets if you have young kids do you want a 14 year old to inherit you know a million dollars in assets how long is that going to last well i know when i was 18 and i got a million dollars i'd be the most popular guy in my fraternity for probably a year and a half because we'd probably blow through it in beer in that period of time so those are things you want to protect against um through your living trust from occurring all right kevin uh here in texas they keep telling me in today's age and technology there isn't anonymity okay so whenever people tell you that that there's no way to have anonymity all i say then if you already have a structure tell me my llc give me information on the llc that i own just challenge them say go find it because i've seen it firsthand how it works i've had clients that have been involved in lawsuits and one client in particular in california not too long ago had to go into a deposition debtor's exam so he had a judgment against him for 1.7 million dollars and he sat down on this this debtor's exam and i'd structured him out and he had a lot he's got a lot of assets and so a lot of entities were set up and all of them were pointing back to wyoming llc's i'm listed as a trustee on several trusts so in the debtor's exam they're going to ask you what you own and so they start asking them what he owns and he starts telling me has some some structures set up and that they said well who set him up and he gave him my name he said there's another attorney in there he starts punching my information in and he sees you know what i do and make a long story short after they got done questioning about me they turned off the cameras turned off the mics so they went off the record and they said listen you probably we're we haven't got into your assets yet but it's probably pretty complicated how about we start with a settlement offer of 500k so they came down 1.2 million dollars by realizing that this individual is working with someone who creates these types of structures and protects the assets and they didn't know what he had yet because he couldn't find anything out when he went into the debtor's exam and they were asking him to tell him everything so it does work i mean i've seen it time and time again uh it successfully kept people's assets in their pockets all right my wife and i own a home and live in california also have one rental in arizona one rental in california i have a rental in tennessee owned by my self-directed ira what structure would you recommend all right so what i would do in your scenario there is california rental i would use a statutory trust for it like that now for your arizona rental um i can't use a statutory trust in arizona because i can't give we can't have anonymity in arizona with a statutory trust so i'd most likely use a limited liability company in arizona like this for that arizona property um tennessee you've got a property owned by your self-directed ira and oh by the way i'd still have a wyoming llc down here for the anonymity tennessee i would use an llc like that held by your self-directed ira because i assume that you still have cash in there and if you watch one of my well if you caught my video i think this week where uh my editor did a pretty poor job uh and it caught some of those expletives that i i dropped because i got frustrated because i messed up my opening um you didn't catch it it's because i my son called me at 11 45 and called my wife and said you got to wake dad up he's cussing on a video and i had to edit it out but the point is is that i talked about one of my clients got sued in his ira because a slip and fall case and so this is why i would structure it if you lived in california make sure that that property is protected through your self-directed ira and then i put all of that into a living trust your personal residence if you want anonymity you may consider using a land trust for that personal residence in california and if you want to get even more creative on that if it has a lot of equity and you're concerned that someone might see that and and be emboldened you can always use a friendly lien against your own property where you record a lien from your wyoming llc against your own house sucking up the equity so if somebody looked it appears you have no equity in your property now in reality the equity is there so if they did come after you and they were really aggressive it wouldn't protect you in a lawsuit it's just a smoke screen is all it is so i see this a lot in california where properties have run up in value and people have you know 800 000 and 1.5 million in equity just sitting there and it makes them a little nervous if somebody sees that as an attractive target so that's what i would do sean um for your california stuff all right in florida what is the cost of forming a land trust and what is the uh versus the cost of the state transfer tax well great question um what is the cost of doing a land trust versus just paying the tax and moving into the llc well the tax is going to be a function of the debt on the property so it could be a couple thousand dollars in tax plus your llc set up land trust it's going to depend on who you're using to create the land trust if you came to us with the filing and getting it all done it's probably gonna run you between a thousand to fifteen hundred dollars to set it up so you know if it's just one land trust it's probably you know it's probably equivalent but if you're going to be creating multiple land trusts then we have actually an unlimited land trust uh package it's 3k to set up as many as you need that's going to be more economical for you if you're investing in in florida for sure so so you're right it's it's a dollars and cents when you're doing that eduardo okay um i guess i'd be looking for a rust estimate how much would be for a texas llc and wyoming llc to get me started please i will need contract work for creative finance like pace morby well before we go there kevin i don't know if you've done a strategy session with us yet if you if you go to my every one of my videos look in the show notes you can set up a strategy session i would first do that to make sure that that's the right type of structure for you i hate to tell people yeah just go ahead and set those llc's up because there's always nuances and i'll give you an example of this somebody sent me an email the other day and they said hey clint can i sell property out of a limited liability company okay now i'm sure you all could answer this if we were talking right now i said hey can you sell property i have an llc share you can anybody can sell property out of an llc no problem that's the standard answer a lot of people would give but the response that you i sent back to the client was as follows how many people how many members are there in the llc right how many are involved in this limited liability company and do you want a 1031 exchange you want to set it up so you can do a 1031 exchange so before i give an answer just which is yes you can sell that mlc i first need to have more information to make sure the information i'm going to provide is not only accurate but it's going to be relevant because if they wanted to do a 1031 and there's more than one owner involved in that limited liability company then my next then i'm going to have another question do all the owners want to do a 1031 because if they don't then we have to do a different strategy for you and the answer is going to be no you can't sell it out of this llc we have to do a drop and swap transaction here so so when we i receive questions like that understand that we need to know the nuances that's why we tell you to to get a strategy session um virginia thanks for the comment i appreciate that um all right we got the link there somebody put the link up great for the uh event this this weekend uh if you want to sign up for that i've got it there it's just dot link forward slash clint coons live um i think that's it for the event does california have a series llc with cells no bw california does not offer a series llc yet they they have not adopted that structure in fact in california what they want to do is charge you 800 per cell that you create now could they figure that out no they couldn't but they're just so aggressive when it comes to taxing people all right ryan yeah right i've seen you before um you touched on one of my concerns will your anonymity structure basically help with defamatory comments or disgruntled tenants can it realistically protect your assets against these claims yeah when you have anonymity ryan they're not going to know especially because many of you use other property managers or you've heard me in one of my videos talked about the fact if you're managing your own property then you don't have to disclose you're the owner now i know it ruffles feathers with people they think that that's being fraudulent not telling the um the tenant that you own the property i say right what does it matter it's none of their darn business who owns a property in fact i don't own the property you know who owns the property the limited liability company legally owns that property i own the llc and i am not under a duty to disclose that to anyone that's private information i am is the property manager i am not the owner they tried to insinuate somehow that i was lying to the tenant i'm not lying to the tenant i'm being 100 accurate if i was in court and i was deposed they couldn't say i committed perjury if i was asked that question if i told someone i don't own that property i am not committing perjury because that is the truth of matter so yeah it does work and you know i one of the things i tell people a lot is that the likelihood of being sued okay really small i've had two properties burned down in the last six months because of faulty wiring nobody got hurt i've not been sued for that now could it have happened somebody got hurt possibly and then maybe they bring a wrongful death claim against me saying oh you didn't have a working smoke detector even though the tenant was the one that probably disabled it that's why it wasn't working you would still be involved in a lawsuit but by saying the likelihood of small what i what i'm referring is that i've been investing for 20 years and i've never been sued with any of my investments and you've heard me talk about you know that my portfolio now is well over 300 properties close to i don't know 600 doors different asset classes and so it's not small amount of real estate that i own and you think the more you own the more likelihood you're going to get sued yeah it does go up i've had trees fall through houses before and narrowly miss killing someone but it doesn't stop me from using asset protection the fact that i haven't been sued i still appreciate that there's always that potential i've never once sat down with one of our clients it's being sued and they said hey i knew this was going to happen because if you knew what's going to happen you take steps to prevent it you don't want anybody to be hurt but it's when you get that letter that you know i share i'll share every i'll share this letter on on saturday with you if you if you join me where that ira is being sued you know somebody slipped and fell and so it wasn't even a tenant was a guest of a tenant it's those types of situations that you're protecting against because if they do happen you want to make sure that all your stuff isn't hanging out there why not use the wyoming llc i'm not sure eduardo what that one's referring to it's probably a previous question sorry don't recall brother denny all right can you make an llc to be the trustee of all your statutory trust yes so just like with the land trust danny you can have one you have several w wyoming statutory trust you can have one llc here serving as a trustee and that's how i would set it up just use one trustee llc the organizer of the statutory trust okay so that would be you know anderson if we were setting them up for you you wouldn't be the organizer because you don't want your information uh listed out there all right okay very interested um sorry i'm just oh is it still disregarded if partnering with a spouse okay so nick wants to know this let's assume that i have an llc in wyoming this is this actually nick i'm glad you asked this question because this is something i should have covered as well so if my spouse and i are members of this limited liability company how do we treat it as a partnership well have a partnership you have to have two members so because i have two members it doesn't matter where i live i can now elect to treat this as a partnership now for whatever reason if you didn't want to treat this llc as a partnership if you live in a community property state that those are west coast states texas nevada california washington and there's a few others if you live in a community property state then you and your spouse can still be a member in the llc together and you can elect to treat it as a disregarded entity which means it does not have to file a tax return partnerships file returns disregarded entities do not so the issue that comes up a lot for me in dealing in working with individuals is that there's this scenario here hey it's just me i'm the only owner of this company can i be a partnership you cannot be treated as a partnership if it's just you you have to bring on another party so how do we then fix that scenario because you want partnership tax status for your wyoming limited liability company well one if you don't have a spouse then maybe it's a parent maybe you bring your your dad in or your mom in as your partner now when i say partner up with them they're not going to have any liability here and as far as their ownership is concerned you can have 99.5 ownership and you give them 0.5 ownership there you go you've got your partnership uh it could be another maybe you already have an existing business that you've set up so you have an s corp or something like that you have to s or c corp that you've set up you could give a 0.5 ownership interest to your s corp there you go now you've made a partnership between you and that company so all you need to do is have an additional taxpayer there at a point five percent ownership interest and you can create your partnership if you're if you're single and you're looking to to get that all right um that was a good question nick i forgot to mention that okay how should the holding companies be taxed c or an s the holding companies douglas should be partnership tax status or disregarded in that preference do not make him a c or an s at all for for this structure all right mad dog can you appoint a trust as the owner of the holding company yes you can you can you remember i showed you about the living trust being the owner you can yeah that's where you where you should bring a trust in your living trust should be the member of your holding company question all right um what about delaware try delaware it's up to 120 days um is that how long it is to get something set up there yeah it could take some time to put on the states okay kevin i think in the previous video he states that the holding company should be an s corp no kevin the holding company would be a partnership now maybe in a video i did talk about that i'm not saying i didn't it might have been in relation to a specific type of strategy maybe it was a flipping strategy not a buy and hold um and and i was looking at that but generally speaking they're going to be a partnership or disregarded entity bradford wants to know can you have a trust as the member of your holding company yep we already covered that so we'll go past that one um the llc's can't be disregarded when being owned by a partnership llc no the llc's that you're setting up here brother danny they are disregarded when held so when i set up a several llc's like this in fact this is exactly what i was working with the physician before before we i started this today they had this structure created he and his wife she's a real estate professional she claims rep status this entity here is a partnership down here and all of these llc's these happen to be washington state llc's all of the llc's up here are disregarded for tax purposes so none of these have to file tax returns because they have one owner when you have one owner and a limited liability company you can't the only tax status you can elect is is going to be s status c status or disregarded status you can't elect partnership you have to have two owners in order to do that so that's why in the blue box we have both spouses as the members because they wanted that partnership tax treatment there all right all right we talked about that um can you choose a land trust great question here can you close in a land trust then add your llc as a beneficiary at a later date absolutely you can do that now this is where it gets into you know the business planning side again about putting deals together so if you're going to close on a piece of property in a trust do you want to have all of this stuff displayed for purposes of closing probably not i wouldn't what i would do if i was closing in a trust is i would set it up where i am listed as the beneficiary of my land trust if i was going to close in a land trust i'd have my llc over here as a trustee of this so when those docs get sent in the title they're going to see me associated back to this trust as the beneficiary so it's going to make my closing really simple after i've closed and the property is in there now remember the trust is a private document so when they title the property the trust will be titled on property not the beneficiary so they're not going to see my name once i've closed then i'll take my trust beneficial interests and i'll put it over here into my wyoming llc via an assignment of interest that's what you're going to do so great question that's that you brought this up because this is more the mechanical side of you know doing offers and working with title there's certain times you know you can disclose information it doesn't matter because it's not going to be on a public record okay so if i assigned 50 percent of my interest in the california llc from my personal name to a wyoming llc the 1065. will the wyoming llc be required to pay 800 to california it will cost of doing business in california correct all right um rick why not just close in a land trust and your ad your llc is a beneficiary at a later date rick that's just what we discussed okay that's what you would do closing the trust and then bring the llc um at a later date all right here's a good one shin how would you name those shelf llc's okay i'm glad you asked this question because this is what you don't want to do okay you don't want to set up your shelf llc's and do something like this blue ridge one blue ridge two three four five six now it might be simple for you when you're setting all this stuff up but what's gonna happen is when you start using them you're gonna get them confused all right so use different names you know they should not tie together the other thing about this is that somebody's going to know if you see all these blue ridges that they're owned by the same owner and so if you lose anonymity on anyone they're all going to fall and so they're going to realize it's all you so i would keep those names separate and here a great point to to to put a finer point onto this uh actually is about two months ago an individual um that we're working with they had set up this type of naming convention and what happened is that they bought a property in blue ridge 2 that they were rehabbing to flip well one of the members in this deal here shut blue ridge two down because they thought it had sold the property that it owned and it was really blue ridge three that they should have shut down but they got them confused so they shut down blue ridge two rather than blue ridge three now when they're trying to sell this property title company looks to see who the owner is they see that's blue ridge two and blue ridge two has been dissolved so title says we can't close on this deal and then this person calls us up and they're you know they're in a panic mode they said hey i have to sell this property it's got a hard money loan on it what am i going to do if i don't sell this they told me that it'll take it'll take six months before i can resell the property which is accurate because when they turn if they transfer title out of this dissolved entity back to their own name then the lender is going to require a six-month seasoning before the loan against it so they were kind of screwed because they did this and they and they shut the wrong entity down that's why i don't like using the same name with just a different numerical number uh numeric digit up uh by changing these now we fixed it for we found a corrective deed and changed it to blue ridge 3 so they could get the deal done because that was still in existence but you don't want to put yourself in that scenario things like that come up okay can you can a florida trust collect rent and send it directly to the wyoming llc bank account yeah we already covered that definitely you can do that all right um so here's one right here why not just close all investment properties and well we covered that i don't know why these are still popping up let me just scroll down a little bit here guys um definitely want to use a land trust in florida here we go shin um i understand that you've been suggesting using a warranty deed instead of a quit claim deed is there anything we need to be careful of in this process okay shin great question so when you have property right here and you're going to move it into an llc over here many people use a quit claim deed in fact remember i told you i was just speaking with someone before i i started this youtube live event today and i showed you that that structure well um the real estate professional she'd actually transferred real estate into one of her llc she did the deed on her own and she used this deed right here she was a quick claim deed and i said to her hey won't you send that deed to me let me take a look at it and show you what should be using going forwards because when you use a quit claim deed and you transfer title from your name to a business entity especially one that has anonymity like this here's what's going to happen number one you're going to risk your title insurance because when you transfer the quick claim deed you basically sever that policy then so if i move this property from my name into the llc and i later discover there's a defect in title they don't have to cover me because they'll say hey you transferred it to an llc via quit claim deed you didn't offer any warranties therefore this owner can't come back against you therefore we don't have to cover you because you can't be sued for that title defect they took the property with all the defects that's what a quick claim deed means so i don't like to use it from that standpoint but the more important aspect of deeding property is that if i went on to you know data tree first american title and i did an asset search on someone and i saw that shin you had a piece of property in your name you're listed in the chain of title as the owner then i saw there was a quit claim deed from you to an llc i know that it's your llc even though you have anonymity there why because if the roles were the roles were such that i had an llc set up and i was buying the property from you and you said clint i will give your llc a quit claim deed i'd say hell no i want a warranty deed because if i take that quick claim deed from you that means that if there's anything wrong with this property i can't go back against you i have no claims against you i won't accept that lenders won't loan against a quick claim b because you can't get title insurance for that so whenever there's a transaction for the conveyance of property where it's between unrelated parties they're always going to use a warranty deed so when you use a quit claim deed i know that it's your entity because you don't care i mean you trust yourself not to screw yourself so you're going to give yourself quick claim deed and actually you are kind of screwing yourself in a way because of the title insurance issue but you're also given in a way that you're involved there so i would avoid using that in your planning how would i do a charity um do a charity kid trust for orphans i don't know about how you would do a trust a charity trust for orphans i would look more at a non-profit to set up a 501c3 uh and and we occasionally have if you go to our website and look at our events occasionally we have 501c3 events i think we do maybe two or three a year where we talk we show you you know the ins and outs of setting up a 501c3 when it's appropriate when it's not and what it can do for you so you might want to check out our site for that all right drew i bought a duplex back in december 2021 and i'm house hacking with the tenant on the other side the rent i collect goes to my texas llc which is held by a wyoming llc and they're disregarded what do you got to say drew you did it the right way good job um if there was a question there i don't see it but yeah i like what you did oh here's your question will that be an issue if the house is still in my pr issue if the house is still my personal name well drew if the house is in your personal name then i don't understand why we created that llc structure you should have the property inside of the disregarded llc and the reason why you're using a disregarded llc drew and that scenario that you explained to me here is because it's a personal resonance for you and you want to make sure you maintain your 121 capital gain exclusion so that property still shows up on your 1040 as a personal residence that's why it's disregarded now another way you could have done this is you could enter it into a tick a tenant in common relationship if you wanted to make this a partnership because as i talked about earlier and what you would do there is you would be the owner as to one half of the property which represents your personal residence side and the other half would be owned over here inside of the limited liability company so the llc is on title euron title is a tenant in common and then in the deed itself i would indicate that this llc owns this address that because you know the duplexes you have two separate addresses i'd say this address is the portion of this property that is associated to that limited liability company and the other thing you have to be worried about in texas two is your homestead exemption so using entities for residences you can jeopardize that when you when you set them up that way all right um hi clint why not close investment properties in a land trust and using new mexico llc [Music] as a trustee add your wyoming llc as a beneficiary hey rick another way to do it no problem using new mexico llc you're right they don't charge anything on an annual basis uh to to keep it there there's no fee in wyoming in in why i mean in new mexico in wyoming the the annual fee i forget was 65 dollars so yeah you'd save 65 by going with with new mexico um all right is there a way to is there a way to see the conviction sue rate amount paid for rental properties in california i don't know um how you'd go about doing that not sure where that would data would be kept all right even though i do not currently own property oh not a question there a few more questions here guys and we're gonna have to sign off um i'm trying to find some some full questions here all right here's doug when you're transferring your assets cash or needing to sell a property to another one of your companies does the taxation work what is the correct way to do this if you're transferring assets or cash needed um to another company well douglas it really depends on on how your your structure is set up and where we're trying to get the money if you're just trying to get it into an llc like this there's two ways you can do this to fund so this is where i need the money and i'm down here well the first way to get the money up here is through a contribution and what that means is you'll take money from your personal account you'll first move it into the blue box the wyoming llc and then from there you're going to move it into the red box so that's called a contribution is what we're doing there and you would list it as such now the thing about making a contribution is that if something goes wrong up here you risk losing any any amounts that you contributed that means you're an uns you're an unsecure you're not even a creditor you're unsecured there you're an investor so there's no protection for you so the other way you can do this is via a loan and the way you could do that is you could just loan money to the llc directly or you could contribute it here and then loan money to here this way it's probably better if you did it through your blue box so you maintain the anonymity so your name doesn't appear anywhere on that property now if you loan it then what happens is that you would record a deed of trust against that property after closing so you wouldn't want to do it you know until after you've closed on the property because you're probably gonna have a first position lender there so what happens now in this property let's say i bought the property i have a first with wells fargo for 120k and then i have a second with blue box for sixty thousand dollars against that property so the total debt now is 180 k against that now with the debt if something were to happen with that property and the creditor came after this company secured creditors are the first ones to be paid meaning this that if the property was sold at auction and it brought in two hundred thousand dollars wells fargo gets paid back their 120. blue box gets paid back there's sixty thousand dollars and then that leaves 20k to go to your creditor so this way you can make sure that you any capital you're putting into that investment that you're going to be secured in the investment so if something ever goes bad or south with it you get paid so loan alone is another way to to fund a deal rather than just making a transfer of cash directly in douglas wants to know can a spencer trust be used to avoid taxation now spend thrift trust isn't going to avoid income tax you may be able to avoid state taxes but not um income taxes okay did that one already guys gonna do one more here and then we're gonna have to close out um here we go would you still recommend a holding llc over florida living in new york city going to go to florida in 6-12 months either way just or just go the dba foreign qualification setting up in florida let me deduct the cost of the move well it really depends on what you're doing if you're going there to invest and you're buying investment property then we can look at whether or not you could deduct costs but if you're moving there and changing residency that's not going to happen now would i recommend a wyoming llc over florida llc the reason why i would recommend the holding company over a florida llc is because of the anonymity florida doesn't provide anonymity for you the second thing is charging order protections when you set up an llc like this you have charging order protections meaning if somebody came against you here they couldn't take your llc interest so if you're by yourself it's a single member llc if i'm an owner in a single member llc it's a it's a florida llc if somebody sued me they could take my llc and satisfaction of that judgment whereas wyoming they don't allow that and so we set our llc's up in wyoming in a very specific way to ensure that the membership interest is protected from the claims of a florida creditor if it was a florida llc we wouldn't be able to do that because florida law does not provide for the same types of protections that are provided for in in wyoming all right guys i hope you got a lot out of this um as i stated be sure to check back uh if you haven't subscribed to my channel you can definitely uh do that and you'll get notified next time we're going to be doing a live event i'm going to try to set these up for every about every three weeks pick a new topic and just go through there and answer questions for you and um help educate everyone on the topics of tax and asset protection for real estate investors i do want to thank you for for those of you that subscribe to the channel and for for you watching it and keep up those questions and we'll keep the conversation rolling take care everyone thanks a lot

Channel: Clint Coons Esq. | Real Estate Asset Protection

Views: 20,372

Keywords: asset protection, real estate, real estate lawyer, real estate attorney, real estate llc, real estate investments, real estate investing, llc real estate, rental property, llc for rental property, using an llc for rental property, using llc for rental property, the pros and cons of using an llc for rental property, real estate llc for rental property, llc for real estate investing, llc for real estate flipping, rental property investing, clint coons

Id: kdXsKl2RgNY

Length: 82min 52sec (4972 seconds)

Published: Thu Apr 21 2022