Hey everyone, Im new to the real estate biz. I just purchased a three family in my name…yeah I know, that was a no, no, :-\ you live you learn. I want to create a real estate rental biz, but which entity should I choose?
Here’s a little background: I’m going to be a buy and hold type of guy. dealing primarly in multi-families—that’s my niche. Could someone please help and explain why?
P.S. How can I transfer ownership of the property to my buisness name without the finance co. calling the loan due?
I am not an attorney, however I have several entities in which I work. From one for private lending, a few for buy/hold of properties and another for Wholesaling/Flipping.
I attended a presentation about a year ago at which Donna Fox, an attorney, spoke. She gave a very informative and detailed presentation about utilizing multiple entities to keep the tax advantages and liablity positives off all forms while all but eliminating the negatives of each entity.
You can get the audio to that presentation, I believe called PREMES, at this location: http://www.wcrt.org/?Link=education
The ideas made complete sense, and I think it is a worthy item to have.
Hope that helps!
Do a land Trust
A land trust is a document we create that allows your property to be held privately so your name does not appear on the title in the public records.
What is a Land Trust?
The land trust has four components: Number 1 is the settlor. That is you because you are having the trust created. Number 2 is the trustee. The Trustee’s control is limited by the terms of the trust. This can be a sister or an in-law, trusted friend or family member. To enhance your privacy, it is best to choose someone without your last name. All trusts need a trustee but with this kind of trust their rage of control is dictated by the trust. Number 3 is the beneficiary. That is the one who receives all of the benefits of the trust. That is YOU (or one or more individuals or companies which you designate). The beneficiary can have all of the control. The beneficiary can direct when property is bought and sold. The beneficiary is the one who can refinance the property or can collect the rental income from investment properties. Finally, number 4 is the corpus of the trust. The corpus is the capital or principal (items of value) within trust.
Benefits of a Land Trust?
The great thing is that all the top tax benefits remain in tact. With a properly structured trust, when you sell your house the tax benefits remain. If you’ve resided in the home for two out of the last 5 years you don’t have to pay taxes on the profits when you sell on up to $250,000 of profit for single person or $500,000 for a married couple, when structured properly.
What you have achieved is privacy of ownership.
What Will the Lender Say?
The Garn - St Germain Depository Institutions Act of 1982 specifically allows one to place one’s property into the type of land trust to which we refer without triggering the due-on-sale clause. That means that one can transfer mortgaged property to a land trust without interference from the bank. This is the case as long as the borrower remains a beneficiary, the trust is revocable and does not convey rights of occupancy to others.
Wow, thanks for the advice. Can you recommend a professional that will help me put my property in a land trust?
What entity do you suggest I place my business under?
recently I listened to an asset protection audio on another site. I am not a lawyers, but a newbie investor with a thirst for knowledge. Any lwayers we have on the site can correct me if I am wrong in any area. Found out that from the lawyers point of you yu nee 3 items. LLC/LP for properties. a C corp and a living turst. You would have to do more research to understand how three entities would work. HOpe this heps you