REALTY411 Magazine - A FREE Real Estate Magazine for Investors! REALTY411 - A COMPLIMENTARY MAGAZINE FOR INVESTORS - Page 118

STRATEGY Holding Title in a Land Trust or Limited Liability Company I Randy Hughes, known as “Mr. Land Trust” shares his expertise and insight. have written a lot about the virtues of holding title to your investment real estate in a Land Trust, but confusion persists. Most attorneys advise their clients to title their property in a Limited Liability Company (LLC). The reasoning is that LLC’s give better asset protection than Land Trusts. While it is true that LLCs provide better asset protec- tion than Land Trusts it makes no sense to put more than one property in ANY one entity. Think about it, didn’t our grandparents tell us “not to put all your eggs in one basket?” What exactly does this mean? When our country was primarily occupied by farmers (and many of them were chicken farmers), it quickly be- came common knowledge that when you were collecting eggs in the chicken coop, you did not use just one basket. The reason why you used more than one basket was if something happened to that one basket (i.e you dropped it, stepped on it, something fell on it, the cows sat on it, etc.), you could lose ALL your eggs. With multiple bas- kets you could at least end up with something to eat. This logic holds true with real estate too. If you hold the title to your property in any one entity (i.e. Land Trust, LLC, Corporation, etc.) and a claim occurs against No one will learn to protect your assets like you will. No one will lose sleep over setting up a good asset protection plan to protect you and your family... other than you! So, take the bull by the horns and get to work. one property it can infect/affect the other properties. This is just common sense, but since only 5% of the lawyers in the USA are asset protection specialists, poor advice abounds. Think about this logically. If you own five properties and they are all titled in an LLC and a lawsuit occurs against just one property...all the properties will be af- fected. Oftentimes in a lawsuit a judge will order that no assets be transferred by the “owner” (read: your LLC) even before the jury has rendered its verdict! This means that you can’t sell or refinance ANY of the properties in your LLC until the lawsuit is over. Most lawsuits take years to resolve. Are you getting to see the picture here? I hope so. Furthermore, if you lose the lawsuit and a lien/judg- ment is recorded against the “owner” (your LLC), you have ALL your equity tied up (in all properties held inside the LLC) until a resolution can be negotiated with the Plaintiff. This puts you in a terrible negotiating posi- tion and you will likely be the big loser. You would also likely be restricted on your ability to transfer member- ships in your LLC. One of the benefits of getting older (and hopeful- ly wiser) is experience. Not only your own personal experience, but that of your peers. Over the last 44 years of investing in rental real estate, I have seen many > PAGE 118 • 2017 Continued on pg. 120