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Why I Recommend 1 Property Per LLC (DO THIS NOW!)
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- Опубліковано 18 сер 2024
- I always tell people to put one property per LLC and often get questioned on making this recommendation.
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So many people fall into this trap where they set up a limited liability company, and rather than look at what the LLC is gonna do for them, they tend to look at the cost of the setup.
Forming an LLC for your real estate investing is extremely important when it comes to maximizing your asset protection and minimizing your tax liabilities.
Why I recommend one LLC per property is covered in this short video.
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ABOUT CLINT COONS
Clint Coons, Esq. is one of the founding partners of Anderson Law Group, Clint has grown his legal and tax firm to over 400 employees by assisting real estate investors with creating and implementing solid entity structuring plans. His success in these regards is in large part due to his personal investing experience. A successful attorney, real estate investor, and speaker, Clint has used his innovative and dynamic strategies coupled with knowledge borne from experience to help thousands of people save millions of dollars and build real wealth.
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The information provided in this video should not be construed or relied on as legal advice for any specific fact or circumstance. Its content was prepared by Anderson Business Advisors with its main office at 3225 McLeod Drive Suite 100 Las Vegas, Nevada 89121. This video is designed for entertainment and information purposes only. Viewing this video does not create an attorney-client relationship with Anderson Business Advisors or any of its lawyers. You should not act or rely on any of the information contained herein without seeking professional legal advice.
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I put 1 property in each LLC for this exact reason. Creating LLCs is pretty simple, inexpensive in PA, and each one is a copy of my other ones in a Holding/Operating Company structure.
Excellent.
You're awesome Clint. I find your videos more informative and true than most other.
I appreciate that!
You're a smart guy Clint. Thanks for the video. Great jacket choice btw.
Thank you kindly!
Clint! I'm reading your book rn! Asset Protection for Real Estate Investors! It's awesome! Super informational and right to the point! As soon as I pay off my student loans and start looking into buying life insurance, and getting involved in a living revocable trust, I'm signing up as a member for Anderson's! You got any other books that you've written that you'd recommend?
I am working on one now. Hope to have it wrapped by June.
@@ClintCoons Did you finish that book?
@@billytheweasel With editors now. Probably be released in October.
Thank you for the Great Information. I live in CA and have rentals in different States. Per
Awesome video!
Love your videos Clint. What if you put each property in a land trust then that one LLC as the beneficiary. Would that still protect the other properties? I think you’ve mentioned this in a previous video, wondering why you didn’t mention it on this one. Specific reason for that?
Land trusts, with the exception of Florida, do not offer asset protection. If one comes under assault then all of the trusts held by the LLC are at risk.
Thanks. in this example, you mentioned: 42k/yr Cash Flow. 10yrs, 420k at risk. However, each year, if you withdraw the money out of the LLC Bank and transfer to you personal Bank account, then, you reduce the risk $$$$$ inside the Bank LLC, right? when people sue the LLC, they can only take the money inside the LLC, right? So, as long as you take the cash out of the LLC's Bank often, reduce the overall cash balance in the LLC Bank Account all the time, then, there re not much risk in term of CASH Flow by combine multiple rentals under one LLC, right?
I am referring to the cash flow generated from the property not the money in the bank.
Clint, how about the strategy of placing all the properties in a "holding LLC," and then creating an active Property management LLC (with no assets) and establishing a contract between both LLCs where the active LLCs absolves all liabilities from holding LLC, at that point the only thing at risk is the management fee... right? The equity and cash flow to the holding LLC is protected, right? Key is to have a well written pm contract and tenant lease contract.
I like the thinking, but ultimately the property owner is liable, and an aggressive attorney will go after him or the entity. I had a client go through this exact scenario, and the property owner got tagged. I like the strategy, and I think it provides excellent protection most of the time, but there is always the rare occurrence that breaks through the barrier.
Watches video to be informed on LLCs, learned how to make Meth. Thanks Mr. White!
I have heard put properties on a series
Yes, series LLCs are great. Check out some of my videos on the series LLC.
How much does it cost to edit my Wyoming to a holding LLC so it could own my Ohio LLC?
Now could you still set up a series LLC (correctly of course) and use that as an alternative to creating tons of LLCs? I believe that's what you discussed in some older videos. Do you have a preference between the two?
Thanks, Clint!
If you are investing in a state that recognizes the series LLC then yes I would set it up a Series. About 18 states recognize the series LLC so you could be limited on options depending on where you invest.
@@ClintCoons
Thank you for the excellent reply! Fortunately, I'm in Texas and I believe they still recognize series LLCs! That being said, I think a Series is the route I'll go, alongside creating the trust and managing company to make sure it's set up the correct way. I really appreciate the reply! Very helpful!
Thanks a lot, Clint! Have a great week!
Thanks Clint. I am new to your channel and learning. I am looking at buying your books to begin with.
I started in real estate rental investing only a year ago. I put 3 properties under one LLC (single member). I will need to retitle 2 of them to their own LLCs. To avoid tax complications, questions:
a. Do I need to retitle first to myself and then the new LLC or can I retitle directly from old LLC --> new LLC?
b. Are there IRS complications during 2022 tax filing? Can I simply move over any cost basis, depreciation captured (although very small, since it is relatively a new business) from one LLC to new LLC. Or do I need to 'close out' taxes for that property and next, restart at new LLC with new, current cost basis?
Welcome any high level tips to help me appreciate the effort I am looking at and if it is worth it. Thanks.
Yes you can move them over to a new LLC provided the original LLC is not treated as a corporation. I like to use a land trust to facilitate the transfer. Transfer the property to a land trust then move the land trust to the new LLC.
@@ClintCoons Thank you for your prompt response! 🙏
If a property owner has heir property and married, can owner deed the house to the spouse to be placed in a LLC?
Yes
Hey Clint, quick question when you get a moment. Let's suppose for example in year 2021 - I earned $10K in rental income from my rental. Suppose I owe $4k total in taxes and after depreciation lets say I owe $3K now in taxes. My question is - If I buy another rental property and put that entire $10k of rental income to acquire another rental property. Can I legally show the IRS I made no profit since I put all my rental income towards the purchase of another rental property? Hence I owe $0 in taxes on the $10K rental income? I know most likely the answer is no anyway this can be done legally though? maybe if I am a real estate professional perhaps?
No. The money you invest to purchase real estate is not a deduction. You can deduct taxes, expenses, depreciation, etc but you can not deduct your purchase (you depreciate it over time). To accelerate deductions consider suing a cost segregation.
@@ClintCoons thanks sir this makes sense!
I am a foreign owner of a US LLC in New Mexico. If I were to buy my main resident property in my country, Should I buy it under my business LLC or create a new one?
Under a new LLC if your current LLC is engaged in business activity.
@@ClintCoons I know we can deduct the rent as a spend, but what about the purchase of a personal resident under the LLC, can we deduct that too?
@@maiza666 Tony you can not deduct the rent you spend unless it is a business expense. You can not deduct the purchase price of real estate. Real estate deduction comes from depreciation of the investment when it is placed in service.
What if each of the 6 properties in the one LLC all had loans against them?
The point I wanted to get across is you are protecting the cash flow from the real estate with one property per LLC. Loans do not change the analysis unless your thinking of the "due on sale" clause and in that case I do not see it as an issue.
@@ClintCoons Yes, you made an excellent point about the properties being a source of cash flow. But by having loans, the properties don't have the equity anymore because they are leveraged. A lawyer would be less likely to go after a property with only 20% of the value available in equity.
To put in an llc, it would need to be a commercial loan?
I’m having trouble switching mortgage over to an llc without risk of due on sale clause.
Yes if it is a freddie/fannie conforming loan but the "due on Sale" should not be a concern. I have a video coming out this week or next on this issue.
nailed it
if i have 30 properties in seperate llc , so that mean that i need 30 different bank acount and card ??🤔🤔🤔
No way. Set up a management entity and run everything through it and the holding LLC.
@@ClintCoons THANK YOU THAT WAS VERY HELPFUL !!! Do you have a video explaining how to setup a management entity and what it is and how it works??
@@nelsonfuentes4506 ua-cam.com/video/07-RjMBX4t8/v-deo.html
Where do you get deals cashflowing $900/mo for $30k equity?
Tough absent house hacking. Yes I was quick with the numbers just to illustrate the point. 😀
$900 a month cash flow per property?! Where in the world are you finding that kind of return??
In a
fairy tale I guess) The whole math there is just a fairy tale...
I make that in upstate ny for the past 14 yrs...its not fairytale/myth..its called buying at the right price.
Hey clint, if funds are low but want to have you guys set up the 1st LLC on my house, is it something you guys would do with a possibility of setting up a game plan to incorporate the tax services etc into it eventually?
@@No-gd1lj Someone who's inherited a property that's clear of debt and only has the expens costs could be making that or more.
@@ducrogers302 someone who inherited... has something more than 20k in equity)
Can you recommend a lawyer? I need to put my rental into an llc
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900 times 6 = 5400$
😂😀
If you only have 20-30K equity in each property, you're definitely not "cash flowing" $900 a month per property. I think you mean revenue per month, but I'll say that you're doing good to "cash flow" $200 each on each property. Those numbers were very misleading. There's no way you're cash flowing $900 per property with that much leverage on them.
I agree with your assessment but accuracy of the cash flow was not the main point of the video. He was emphasizing the idea why you should not have multiple properties under one LLC.
@@kashchange4289 Well, he did emphasize protecting the cash flow in addition to the properties. When that's one of the emphasized talking points, that type of disparity is a big deal if that's going to influence the decision one way or another. I just don't think the info should've been put out there as a blanket principle for structuring. Here's an example, I'm buying properties averaging around 60k, that cash flow an average of $400 per door. Being that my strategy is to buy as many of these as I can, for me it doesn't make sense to create that many LLCs. Not really due to the initial costs, but then you'll have to have that many bank accounts, book keeping, etc. I'm choosing an asset amount per LLC understanding the risk. This topic can be very case sensitive based on the individual and strategy.
@@kashchange4289 And also, the other layer of protection is your insurance. People can't take mortgaged properties, all they want is money, and your insurance is usually the first line of defense against that.
Jonathan, you bring up great points and should be considered when putting together an overall structure. In many of my other videos, I emphasize this type of planning is not a one-size-fits all. The video explains why an investor should consider using one property per LLC. Granted, if you are buying a pool of properties with a portfolio loan then this is not an option. I have found that people who hold fewer properties, need the extra income to make ends meet - send the kids to school etc., have more to lose than the experienced investor. Consider this. You lose 5 props that is 24k in annual income using your numbers. If you have 30 other properties generating 400 each you still have 144k in annual income. 24k is a hit but it's not going to seriously impact your lifestyle. The other investor may have just lost his life savings because he was banking on the insurance to cover his losses. I have met hundreds of investors who have been wiped out over lawsuits that blew past policy limits. Are these individuals in the minority - absolutely but they are not outliers. If I were betting I would definitely put my money on not getting sued but I sleep better knowing if tragedy did strike I will sill wake up to the farm.
I appreciate your comments and the perspective you shared. It adds to the conversation and gives the viewers different perspectives.
@@ClintCoons Yes sir, I get it, and being that you're an attorney, I'm sure you've seen the worst case scenarios. I'm just speaking from the perspective of someone piecing together their investor education via things like UA-cam. I've seen your other videos, and that's how I have a better context. I've learned a lot from you, and I purchased the platinum or titanium package from Anderson with unlimited LLC formation. I wasn't disagreeing that you were wrong, but just that it's all in an individuals context and strategy. I appreciate you taking the time, and your content.
Blond and Brilliant 👍
😂😀
900 Times 6 = 5400 Not 3600 . Very Simple Maths ,Dear Clint.
😆
@@ClintCoons Yes, you are blonde, lol
If all six properties are assets only to be held and flipped in due course, then 1 llc is enough. Also why in the hell would you not enforce better tenant rental policy agreements if you do lease? Your meth sample tenants-relations cannot sue you if they violated the rental policy to begin with!
I would suspect your liability would depend highly on the laws of that particular state. That and the legal lottery, which is really what the family is hoping to win at your expense.
Here is the issue - they violated the policy but you did not have working smoke detectors. One is a contract and the other is a law. Just because a tenant violates his rental agreement it does not give the landlord the ability to violate the landlord tenant act. Granted the tenant disabled the smoke detector but in our legal system its about money and the family is arguing the tenant did not disable the detectors. The legal system has lost all common sense.
In your own video, you recommend against putting one property in each LLC starting at 27:40 - ua-cam.com/video/XdSp5GXbiE4/v-deo.html
I think I was talking about risk tolerance level and how some investors elect to structure their real estate. I have also modified my structuring over the years. For example, I no longer look at equity as the determining factor and instead focus on cash flow. I am more concerned about losing income than I am wealth. I can always build more wealth if I have the income. Thanks for watching and brining up this good point.
@@ClintCoons Possibly taking those old videos down or reshooting them with updated information. it can confuse people or give the impression of you flip-flopping.
900 x 6= 5400. just saying
😳
Lol...
Your math is way off brother.
Yes that was pointed out. Had a blonde moment. :)