Single Family Home Investor

Protection Strategy for 2 to 100 properties

ASSET PROTECTION STRUCTURE, THE FOUNDATION OF YOUR CASTLE

We recommend a two-company structure with a Series LLC and a Traditional LLC. The Series LLC can be set up in 20 different states. We recommend setting the series up in TX due to strong charging order protections in place and the low annual fees. It can then be used in any state, regardless of where the Series LLC was formed, due to the full faith and credit clause.

The Series LLC is the vault that holds all of your assets, including real estate, syndications, stocks, vehicles, digital assets, and more. This entity will hold all of your assets compartmentalized one from another so that if there is a lawsuit against one asset it won’t affect the others. This is the same protection as individual LLCs but without the cost or complexity. The Series LLCs utilizes on set of books, one bank account, and only has one annual maintenance fee—as opposed to if individual LLCs were used where you would need separate accounting, one fee per LLC, etc.

The Traditional LLC is used as an "operating company" that owns nothing but does everything. It will be your public facing entity that you will use for all public operations so your Series LLC can remain hidden from public view. It will enter into leases, sign contracts, send emails, etc. It is our “fall guy” that if there is a lawsuit they can’t maintain a legitimate suit against you or your asset holding company.

The Series LLC is a cost-efficient system. Costs associated with the Series LLC include the initial formation cost and one annual maintenance fee. Child series of the Series LLC do not require state filing so forming a child series can be a low-cost experience. The only fee for the child series would be the drafting fee from your provider."

SERIES LLC

Entities

The Series LLC enables you to separate assets into their own child entity for an additional layer of protection.

TRADITIONAL LLC

Entities

Limited Liability Companies (LLC) are a legal structure that legally separates you from your business.

BENEFITS OF THE STRATEGY

1 Bank Account, EIN, Number and Tax Return

Infinite scalability

Save you thousands in legal fees

Stops lawsuits before the start due to the anonymity and strong protection

A friend of mine lost over $3,000,000 in real estate from a single lawsuit and he was very well insured. The mistake? Holding property in his personal name. When you hold assets in your personal name, or all together in a single LLC, you create a big pot of gold for an attorney filing claims to come after. The solution is the Series LLC which puts each asset in its own bucket so if there is ever a suit, you lose little to nothing.

HAROLD GRANT
Real estate lawyer / Our client since 2017

ANONYMITY, THE HIGH WALLS THAT DETERS THEM FROM EVEN TRYING

Anonymity is an important part of your asset protection plan. When all of your assets are hidden from the public record, and it looks like you own nothing, the attorneys filing claims don’t want anything to do with you.

The best protection is achieved by making sure you are not a target. When people think you or your company don't own anything they won’t sue because there is no money to satisfy a judgment. 

This is what anonymity does—it stops the lawsuit before it starts. Additionally, if the lawsuit were to even be filed against an asset, i.e. a piece of real estate because Grandma fell through a rotten staircase and wants to sue the property owner, the parent Series LLC structure stops the losses at the lowest possible dollar amount. Only the asset in that specific individual child Series will be at risk, not all of them.

Creating anonymity is effective when done with a trust created through a law firm. In this way your name is removed from the records to disguise the ownership. 

A trust is a privately held document meaning it is not a searchable document on the internet. As such, the components of a trust are private. To create anonymity, a trust is created in which you are the trustee and beneficiary of the trust. This provides you with full control and ownership of anything held by the trust. The trust will then be listed as the owner of your entity. Therefore, on public records you entity will shown that is owned by a trust but the viewing party will not be able to ascertain who is involved the trust thus obscuring your connection with the entity.

Anonymous Land Trust

Real Estate

Anonymous Land Trusts are a little-known legal tool that offer smart investors a way to hold property anonymously.

TAX FILINGS

Your tax filings could stay exactly as they are now, and it is extremely flexible for any changes or special elections you would like to make. If you are an individual or married couple, you can treat the entities as pass-through and file the income on your personal return. 

If you are unmarried partners, then you will issue one set of K1s regardless of the number of children in the Series LLC and file one partnership return. See what I mean? Absolutely nothing changes except that your protection is much much higher.

OPPORTUNITIES FOR TAX SAVINGS WHEN BETWEEN 0-20 PROPERTIES

Paying taxes is for the uninformed. A lot of people get this wrong and it’s one of the most powerful tools out there. I’m talking about growing your money in retirement accounts like Self Directed IRAs and Solo 401Ks. You put yourself in control of your retirement funds. Between these two tools you can shelter about $63k (at the time of this post) of your income from taxes every year. 

The best part? With the Solo 401k you can loan yourself back up to 50% of your vested account balance of $50,000, whichever is less. What’s even better? You and a friend can each loan each other money as well with the remainder. The net result? Having more cash on hand with the ability to use pre-tax dollars for your investing and living your life.

FLOW OF MONEY

Picture how a normal business would run with an owner, property manager, and tenant. This is exactly how this structure works for payments. The tenant pays rent to the landlord, which is the Traditional LLC. The Traditional LLC is acting just like a property manager. The Traditional LLC then turns around and pays out the money to the property owner. In this case the property owner is the Series LLC. 

When you are ready, the Series LLC can distribute the profits for you to pay taxes (unless you're using one of our tax savings strategies!).

BANKING

Streamline you accounts. You will only need two bank accounts for your asset protection structure—one for your Series LLC and one for your Traditional LLC. The exception to this would be if you were to add new partners to individual child series. For every child series you have that includes a partner who is not a member of the parent series, you would need a separate account to ensure your partnership funds are not grouped with funds the partner does not have an interest in. 

The Series LLC is able to utilize a sole account as long as you maintain accurate accounting records for the income and expenses associated with each child series of the Series LLC. This is usually accomplished through simple tagging in Quickbooks for each child series. However, you can use whatever accounting method you like.

INSURANCE

Always be well insured, but just don’t plan on a profit seeking corporation who makes money by collecting premiums and denying coverage to protect you. Your insurance should stay exactly the same way it is now. Simply add the land trusts to the existing insurance policies as an additional insured. Some clients still like to have an umbrella policy. I think it’s overkill, but I love insurance and I pay for that policy just because it gives me extra peace of mind.

PRO TIP

You may be able to save thousands in taxes paid with the appropriate structures and strategies in place by Royal Legal Solutions.

Tax Savings

Reviews and Filing

We’ll show you exactly how much you’ve been losing and give you advice on how to optimize your portfolio and tax strategy moving forward.

Self-Directed IRA

RETIREMENT PLANNING

Your IRA isn’t limited to stocks, bonds, mutual funds and bank CDs! The Self-Directed IRA lets you grow your retirement savings with shrewd real estate investments.

Solo 401k

RETIREMENT PLANNING

A Self-Directed, or Solo 401k—or what the IRS calls a one-participant 401k—is a versatile retirement account that lets investors and business owners grow retirement savings tax-free.

Insurance

Asset Protection

Get a personalized plan suited to your portfolio and choose from over 75 different carriers all competing for your business.

Do you have asset protection questions? We can help!

GET A PRICE

PROPERTY MANAGEMENT

Use your Traditional LLC in all instances whenever possible when contracting. Your Traditional LLC will serve as your property management entity through which you will operate. Alternatively, you can elect to have the title owner of the property, which would be a land trust connected to your asset holding company, directly contract with a 3rd party property manager. This is less secure, but sometimes it’s the only way they will do business.

SELLING AN ASSET HELD IN THE STRUCTURE

Selling can be quick and easy with proper preparation! The asset will legally be held in a land trust that is connected to your asset holding company, and you, as trustee of the trust, have full control to sale the property. 

There are two ways to accomplish such: 
(1) You can sale directly from the land trust. The complication with this option is that you would need an EIN for the land trust and a bank account in the name of the land trust as the title company would cut the check to the seller, the land trust. Therefore, it would require you to set up a new bank account if you do not have one in the name of the land trust. You title company may have also have additional requirements for selling directly from the land trust. 

(2) Alternatively, and most recommended, directly before selling the property to a third party, you would transfer the property from the land trust into your name. This would allow you to then sell to third party from your name and the check would be cut directly to you.

ACQUIRING MORE PROPERTIES

Make your money first. You will always want to get the cheapest financing you can, which means maxing out your first 10 conforming loans. Acquire the properties in your personal name, and then transfer the assets into the Asset Holding Company by deeding the property into the land trust. Because it is deeded to a land trust, this will avoid the Due On Sale Clause and will often times will avoid transfer taxes and other fees assessed by the state. One of our specialities is in avoiding those fees to make Asset Protection as affordable as possible to as many people as possible.

Do you have asset protection questions? We can help!

GET A PRICE


© 2022 - Royal Legal Solutions