Anybody know if there is any stipulation about putting more than one property in the same LLC??? I don’t think so but am just registering my LLC today and have a few properties. Thanks!
Not that I know of, but why would you want to? Spend the extra $50-100 for an LLC for each. It limits your liability each property individually, so the greedy tenant that sues you can’t take all your properties, just one at most.
Set up one LLC for each property. They are all owned by another LLC that finally you own. So this LLC owns no property directly, just other LLC’s, that way you (and your personal $) are just one more step back from any lawsuits.
Thats what my RE Lawyer told me to do, there might be a different/better way to do it in your state.
So as I understand your answer - if I had 3 properties they would be:
- 123 ABC ln LLC
- 456 xyz Dr LLC
- 789 qwert St LLC.
I then would form another LLC, “MY holding Co LLC” that would own the others. which to form first? The individual property LLCs or the main holding company?
Also, in another post someone said the ideal LLC setup would be an LLC with a DBA as something non-real estate related in the title. Is this DBA preferred or is the ‘Holding Company’ LLC preferred?
Yes, you understood it correctly.
You would set up the “Parent” LLC (the main one) first, because when you fill out your articles of incorporation for the “Child” LLC’s (the ones for each property), the “Parent” LLC needs to be listed as the entity/person causing the “Child” LLC to be formed (or whatever the legal jargon is).
About the DBA: I think they are a waste of time. A DBA is just a fictictious name for your LLC. There is NO assest or liability protection, because your DBA is still the same as your LLC, you can even use the same bank account. All they do is give your company another name to work under, maybe just because it sounds better or whatever.
In general, when naming your LLC, try not to use your name–especially on your “Child” LLC’s (a lawyer wouldn’t even need to work to trace it back to you), and some would say not to use real estate, property, holding, etc. I think the reasoning there is that it may be harder to get credit in the business name because REI can be risky (in the eyes of lenders anyways).
Another (and probably better) option is to place each property in a Land Trust, with your LLC as the beneficiary, which I know very little about how to actually form them. This prevents the lender from calling the note, which could technically happen if you transfer your property into your LLC.
Hopefully someone smarter than me (there are plenty to choose from) can help us both on this one.
Yes that sounds like good advice but remember one need to verify with a good tax or R/E attorney as it can be different in each state.
I can tell you regarding the land trust portion you are absolutely correct…
By making an LLC an beneficiary you are in effect circumventing the due on sale trigger with the lender and that is following federal law.
The LLC and Land Trust combination is a pratically bulletproof asset protection vehicle for your real esate investing.
I need to study more on LLC’s though as an investor so I can work into that better.
To setup a land trust entity these being title holding beneficiary directed, revocable Illinois type trusts:
- The seller whom will now be referenced as the settlor or grantor signs the required docs to place or vest the equitable and legal title to his property to a 3 rd party trustee with that trustee being a out of state corporation for the best protection. The trustee can be anybody you designate or that you trust but be careful since if not done properly it can be considered a dry trust. The seller is of course the person so named on the deed of trust.
This is the TRUST agreement
2.After trust is formed the seller now is the settor or grantor assings beneficial interest into the trust to whomever is to become the beneficiary of the trust i.e investor, another family member etc. ( Assignment of benficiaries agreement) This is where you will designate your LLC entitly as a beneficiary in the land trust.
3.Once the beneficiaries are set in the trust then you would just complete the actual beneficiary agreement which stipulates what each beneficiary interest amounts are in the trust. All is negotiable.
This is a basic overview since each trust is different in its design.
In the beneficiary type trusts the beneficiaries all must unanimoiusly vote to direct the trustee in the affairs of the trust property not the trustee.
The asset protection in using these specific title holding trusts is excellent.
You can also trade or sell your beneficial interest to anohter investor if you like.
If you are flipping a property you can use a basic or simple trust to accomplish that thus making your transaction safe, legal and outside public scrutiny…
If I can help regarding land trust investing or how to setup these specific trusst please email me at email@example.com
Good luck to you guys…