It isn’t all fool proof, and justice always depends on what the judge or jury eats for lunch, but real estate is the only true form of wealth an individual can make money with – statistically. Carry a big liability policy, use an LLC to manage the property, a different LLC to own the properties, and sleep well at night. As long as the ownership of the LLC is the same as the ownership of the property before it is moved into the LLC, the banks have been unable to call the due on sale clause in the courts.Ĭomment: Frankly, a lawsuit has me so concerned that I would rather sell my 3 rental houses, than risk one.Ī. The transfer of the property technically violates the due on sale clause in the mortgage. The LLC is a company (limited liability company). When you put a property into the LLC make sure you use a warranty deed, not a quit claim deed, because you will lose the title insurance if you transfer to a company using a quit claim deed. Warranty deed or quit claim deed: is one cheaper or better than the other?Ī. It has to be written to meet certain IRS Rules or the Subchapter S tax election will be voided. The trust in my Accumulation and Preservation of Wealth materials is a qualified trust. If you have the LLC taxed as a subchapter s corporation, you should make sure the living trust is a subchapter s qualified trust. The LLC papers at the state should show the trust as the owner AKA member. The membership interests (stock) in the LLC should be owned by the trust, so it won’t be subject to probate at your death. I would put the property into an LLC, owned by your trust. Into which do I put my rentals: the trust or the LLC?Ī. My Living Revocable Trust says to put property into the Living Revocable Trust. My LLC Wizard has all the forms you need to form both LLCS. You (the property owner) should have a contract with the LLC, just like you would with one of the management companies you can hire for 7% of the rent to manage the rental property. The tenant will contract with the management LLC (Rental Agreement) and the LLC will “do all of the management” of the rental. He can but does not need to own part of the LLC. Your son can act as an employee of the LLC and help manage it. I would put your property into one LLC and have the other LLC act as a management company. What exactly does that mean? Does it mean I establish an LLC and put my properties into it or do I establish an LLC and put my property manager (my son) into it?Ī. You said an LLC should be the manager of the rental properties. I hope learning all this is not “too little too late”. We received permission to publish this one as a Blog since it might be of interest to many of you visiting our site. We often receive interesting questions from our students.
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