I have a question but before I ask the question, I want to let you guys know my strategy so that you can give me the best answer. First of all I just registered an LLC that I will use to buy properties using the different types of purchase options that I will then sell on rent-to-own basis to perspective tenant-buyers. I will then open another LLC (should have been an S-Corp but my investigations shows that to open an S-corp one has to be at least a permanent resident, might need to investigate that more) that I will use for my rehab flips, shortsales and properties I wholesale because those will be more on a shorterm basis. Mind you I plan to have the Original LLC be the owner of the future one (kind of like a series LLC but the current one has the future one under it.)
Now to my question. I found out that LLC’s are great for holding title because they protect your personal assets but they do not infact protect real property and hence leave it partitionable, and subject to liens and encumbrances. Therefore there is a need to place the property into a land trust, then take title in your LLC.
My question is how can I do that whereby I place the property into a land trust and taking title in my LLC?
Please remember I want to end up selling the property over time to a tenant-buyer on a rent-own program.
Your entity structure is confusing. I don’t see what advantage you get from this plan.
Essentially, you have a dealer entity doing lease option flips, and a subordinate entity doing wholesale flips and rehab flips. If both entities are flipping property, then why complicate your life with this entity structure?
I agree with Dave on the structure. sounds unnecessarily complex.
You don’t take title in the LLC through the trust. The trust takes title, and the LLC is the beneficiary.
Nothing will “protect” real property – a property owner can always be sued whether it’s a Trust, LLC, whatever. the idea is to let the property owner take the hit and not yourself personally.
what if I create a trust and have the property owner be the beneficiary and in another document have him assign his right to me or my LLC. Will that be a good thing, if it is can someone who has done that explain it to me in detail?
Well read what another investor told me and I want to see your take on his strategy. I had asked him how I could I place a property into a land trust and taking title in my LLC?
"You are on the right track. I’ll explain how I do it. You just have to make sure that when you purchase a property subject to, you set up the trust for the seller/settlor in his own name. He will transfer 90% beneficial interest in the trust to you which you can take as an individual or your LLC, RETAINING a 10% interest himself. This keeps this transaction exempt from the DOSC.
Then, when you find your Tenant/Buyer, you lease the property to him/her for less than three years on a rent-to-own basis. I usually assign a 50% interest to the Tenant/Buyer who is then eligible for the tax and interest writeoffs. If your MAV (Mutually Agreed Value) with the seller was $150K, you may want your MAV with your tenant to be say $165K.
At the end of the lease, your Tenant/Buyer brings in financing to purchase the property. First, the mortgage is paid off and the settlor receives the money to which he is entitled. He dismisses his 10% which becomes yours. Now, you and the Tenant/Buyer each have 50% and you proceed to finalize the transaction, receiving whatever funds are coming to you. Your buyer now has full title to the property and the trust ends.