Chat 8-1-05 with Garrett Sutton!
Posted on August 1, 2005
dc: did i miss it
dc: *choochoo* *choochoo* *whip* *whip*
dc: Hey Kim
Kim-OH: Hi dc, it seems that we are early
dc: oh well
dc: buy any properties ??
Kim-OH: Hi Roger
dc: HI roger
Kim-OH: Hi Ralph!!!
Ralph_Roberts: hi Roger, hi Kim, hi DC
dc: Hello Roger
Roger_Dawson: Hi everyone!
Ralph_Roberts: hi CTLandloard
CTLandlord: Hi Everyone
Kim-OH: Hi CT, do you post over at Mr. LL?
CTLandlord: Kim - I may have once
Ralph_Roberts: I’ve a big, tall, cold bottle of diet root beer heah…
ready to ramble!
Kim-OH: LOL @ Ralph
Roger_Dawson: I don’t know yet whether Mike Summey will be able to join
us. He’s in Destin Florida with his family and is looking for a high speed
connection.
Kim-OH: Hi mayorad
mayorad: Hello, kim-oh.
Kim-OH: Hi Garrett
Ralph_Roberts: wait for the next hurricane
Garrett_Sutton: Hello everyone
mayorad: Howdy!
Kim-OH: Roger I hope Mike can join us and Garrett
Ralph_Roberts: hi Garrett, thanks for coming
dc: Hello Garrett
Roger_Dawson: Hi Garrett! Thanks for joining us. As soon as we get a few
more people I’ll introduce you.
CTLandlord: Hello Garrett
Kim-OH: Garrett it’s a pleasure to have you here
Garrett_Sutton: My pleasure. Mike said I should answer every question
that was thrown at me.
Ralph_Roberts: Roger Dawson <—–
CTLandlord: Kim - what’s up with the Mr. LL thing?
Kim-OH: Garrett chances are you will be typing a good deal then
Kim-OH: Hi Jack
JackB: Hello
Kim-OH: Hi leopold
Garrett_Sutton: I must state that I barely passed high school typing
class.
Kim-OH: CT, nothing up with it it’s just that there is someone who posts
as CT Landlord sometimes
Roger_Dawson: Okay, here’s a brief bio on Garrett: Garrett Sutton, Esq.
has over twenty-five years experience assisting and advising entrepreneurs,
families and business in selecting the appropriate corporate structures to limit
their liability, protect their assets and advance their personal and financial
goals through real estate investments and other means of wealth creation. An
author, speaker and a member of an elite group of "Rich Dad’s AdvisorsĂ”
hand selected by author Robert Kiyosaki, Garrett speaks to investors and
entrepreneurs on a variety of topics including asset protection, liability
limitation, wealth creation, as well as various business and real estate issues.
Kim-OH: Garrett, no problem I passed with flying colors and now I can
barely type LOL
JackB: Garret, are you the one who is the LLC person?
Kim-OH: Hi Bob and Frank
FrankAL: Hi Kim
Bob_Carr: Hi Everyone
Roger_Dawson: As you can see he’s one of the countries top experts on
real estate investing and a specialist in assett protection. Garrett want to
start by telling us the best way to take title to property?
Kim-OH: Garrett I look for your responses over at CRE
Garrett_Sutton: Yes, I advise people on using llcs and Lps to protect
real estate assets. I’m an attorney licensed in Nevada and California so I can’t
answer specific legal questions out of those states. But I can help with asset
protection concepts.
JackB: Garrett, how many houses would you put in an llc?
Roger_Dawson: Until I met Mike I was only vaguely aware of llcs but we
seen to get more questions on that topic than any other.
Kim-OH: Garrett do you advocate the use of Land Trusts which convey the
beneficial interest to either entity?
Garrett_Sutton: Okay, to start, I like using llcs and LPs to hold real
estate. They offer good asset protection and flow through taxation.
dc: SO Garret when I us an LLC for my invetments in homes for rentals
when I apply for a mortgage on them would I use the LLC or my name
Kim-OH: Hi jr
Garrett_Sutton: I am not crazy about land trusts. They have their uses
but you still need a LLC to be the beneficiary.
jr: Hello
Kim-OH: Right Garrett
Garrett_Sutton: I’ll try to keep up with all the questions.
Kim-OH: Hi Mike
Roger_Dawson: Welcome Mike, you made it!
Kim-OH: Good to see that you made it
MikeSummey: I made it!
CTLandlord: Hey Mike
Kim-OH: ^5 Roger
Ralph_Roberts: There’s Mike Summey <—————
Garrett_Sutton: For loans you can either take title in your own name and
later transfer to the LLC or you can take title in the name of the llc. There is
a company (www.llcloan.com) that can assist you get a loan in the LLC name.
MikeSummey: I’m here compliments on the Holiday Inn Destin,
Kim-OH: Garrett how is that company to work with?
Roger_Dawson: High five. Took me a while to figure it out Kim, but thank
you. Right back at you.
Garrett_Sutton: Glad you made it Mike.
Kim-OH: haha Roger you are clever to have gotten that
Garrett_Sutton: The company is good to work with.
MikeSummey: I’m sitting in the floor of the lobby.
Kim-OH: Mike I bet you look cute sitting on the floor
Kim-OH: Garrett, thanks for the heads up on the company
dc: Garret when filling taxes for you LLC what are the informational
forms that need to be sent in with the personal tax forms
CTLandlord: Garrett, isn’t it true that if I have property in my own name
now and want to transfer it to the llc, I have to get permission to change the
name from my mortgage company and also it requires a new title insurance policy?
Roger_Dawson: Garrett, will most investors have to personally sign for
the loan or will they be able to borrow as an llc?
Garrett_Sutton: In most cases you will have to sign a personal guarantee.
The point is that you have title in the name in the LLC without having to
transfer it at a later date.
Garrett_Sutton: I want to get back to a question I missed a few minutes
ago. I like, if possible, to only put one property in per llc. If you have 10
properties in one LLC and one property has a problem a creditor can reach all 10
properties.
JackB: So set up one LLC for each property
leopold: Is there a significant difference if your properties are under
an LLC or a sole proprietor?
JackB: what if you own 20 propertys? should you incorporate?
Garrett_Sutton: On the taxes, if you use a single member LLC you don’t
need to file a separate LLC tax return. If it is multi-member you’ll file K-1’s
for the owners.
MikeSummey: Garrett, I recently transferred all of my properties to
various llcs on the advice of my attorney and estate planner. I had no problem
with my banks.
CTLandlord: Mike, they let you transfer it to the LLC - did you have to
sign papers showing the LLC as owner?
Garrett_Sutton: There is a huge difeerence if you take title in your own
name. You get sued on the property and all of your other assets are exposed. So
you’ll want to use an llc.
Garrett_Sutton: Mike, that is good to hear. There really shouldn’t be any
problems.
MikeSummey: CT, I just sent the bank notification of what I had done and
that was that.
MikeSummey: Hi pjalan
dc: On the tax form issue I normally use turbo tax do you know off hand
if this software would cover my needs as far as a single member LLC
Garrett_Sutton: If you own 20 properties you’ll consider using a few or
more llcs.
CTLandlord: Mike, if I look a piece of your property up at the town hall,
will it say the name of your llc?
Roger_Dawson: Garrett: Ealier CTLandlord asked if you have to buy a new
title insurance policy if you transfer title to an llc?
Garrett_Sutton: By using a grant deed you shouldn’t have to get new title
insurance. States may vary on this though.
CTLandlord: Thanks
pjalan: Hi Mike and Garrett
MikeSummey: dc, my tax advisors have told me there is no difference in
tax treatment for a single member LLC
pjalan: just catching up with whats going on
Garrett_Sutton: Right, Mike. The tax is the same, its just one less
filing as a single member llc.
pjalan: I just bought a property and qualified personally
pjalan: the lender says I need to buy it first then transfer it to my LLC
that I am going to form
pjalan: is that the right thing to do and are there any concerns which I
should know
MikeSummey: Garrett, how much additional protecdtion do you have if you
put properties in several llcs vs having several in one LLC and a large
insurance coverage.
Garrett_Sutton: Just to mention, setting up an LLC isn’t that expensive.
We charge a flat fee of $695 plus the state filing fees. If you mention the name
Mike Summey we give you a discount. Is that okay, Mike?
MikeSummey: Suits me Garrett
pjalan: If I am in california will you be able to setup an LLC for me
Garrett
MikeSummey: Hi JS
Garrett_Sutton: The issue on insurance for me is that some companies go
out of business of fail to cover you. While insurance is the first line of
defense, entities are the second line.
JackB: In missouri My attorney charged me 225.00 plus state fee.
Garrett_Sutton: Yes, we handle California and all other state formations.
MikeSummey: Garrett, sorry I didn’t get out a chat reminder today as it
took me forever to find somewhere I could get online, but I did get out and
announcement on Friday.
leopold: This is excellent information, what other source, i.e. books
website, etc. would you recommend for me to get more information on this
subject?
pjalan: Yes Mike….I got the announcement on Friday
Garrett_Sutton: I’m having fun here. Carpal tunnel is setting in though.
CTLandlord: Garrett, if I have insurance on my properties and a blanket
umbrella policy that covers them all, will that be an issue separating the
parcels into different llcs?
Kim-OH: Poor Garrett LOL
MikeSummey: Garrett, these chat’s improve your typing skills.
pjalan: great Garrett….what will be the discount if we take the name
Mike
dc: 695!!!!! Im flinching
MikeSummey: Just a side benefit.
Roger_Dawson: Mike, out worst nightmare. An attorney with Carpel tunnel
syndrome!
Garrett_Sutton: I’m not suing anyone.
Roger_Dawson: Garrett, have you written a book on this topic? How can we
get it?
Garrett_Sutton: On the umbrella coverage, you’ll list the various parcels
as coverage items. some companies may limit the number of parcels you can list.
MikeSummey: Garrett, I carry a large liability with Nationwide Insurance
plus a huge blanket policy behind that. What’s your thoughts about having dozens
of properties per LLC in a situation like that.
Garrett_Sutton: Yes, I wrote "How to Use Limited Liability Companies
and Limited Partnerships" which is on amazon and at www.successdna.com
MikeSummey: Garrett, give everyone your website address as well.
Garrett_Sutton: Sure, Mike. It is www.sutlaw.com
MikeSummey: Hi reena
reena_ny: Hi Mike
MikeSummey: Garrett has written several books.
Garrett_Sutton: On the idea of having dozens of properties in one llc, it
is a judgment call on your part. That’s not how I do it, but it is your call.
Roger_Dawson: Here’s more of Garrett’s books: Garrett has authored Own
Your Own Corporation, The abcÕs of Writing Winning Business Plans, The abcÕs
of Getting Out of Debt, How to Buy and/or Sell a Business, and co-authored Real
Estate Loopholes. These titles are included in the "Rich Dad, Poor
Dad" wealth building book series.
JackB: Garrett how do you do it?
pjalan: so one property one LLC (single member llc) is the way to go
right Garrett?
Garrett_Sutton: With great patience on the part of my wife and kids.
MikeSummey: Garrett, in order to maximize the protection you get from an
llc, don’t you need to set up a separate bank accout for each one and treat it
as a separate business.
pjalan: okay so one LLC and bank accnt for each property right?
Garrett_Sutton: I like one property per llc if possible. Of course, in
Calif. that is $800 per year per entity. Some will put two or three properties
per entity in Calif., but I don’t suggest more than that.
Garrett_Sutton: Yes, a separate bank acct. is a good idea.
Garrett_Sutton: And yes, Mike, you must treat these as a business.
Roger_Dawson: Hi Steve!
leopold: Is there a seperate cost for each llc? So if I have 20
properties, do I have to pay for 20 llc’s?
Steve: Hi everyone! Better late than never…
Garrett_Sutton: Yes, each entity is a separate cost. We offer discounts
on multiple entities.
MikeSummey: Garrett, when you have hundreds of properties, at what point
does the added headache of so many llcs ande bank accounts outweigh the
potential liability when you are adequately insured.
Roger_Dawson: You better mention Mike’s name 20 times for your discount!
MikeSummey: Hi Steve
Steve: Hi Mike
Garrett_Sutton: One Mike Summey is good enough.
MikeSummey: HI Shane
JackB: If you have 20 properties would it be better to incorporate?
Shane: hey Mike
leopold: This is my first time joining this chat. How can I get a
transcipt of the discussion?
Garrett_Sutton: Well, we need to talk about incorporating. By that I take
you to mean use a corporation, which we don’t do for real estate.
pjalan: After the chat is over it is posted on the website leopold
leopold: Thanks.
Steve: Garrett, I have been told by an attorney that I could be at risk
to lose a potential liability case by having a property deeded in my LLC name
but the mortgage in my personal name. Is there any credibility to that
statement?
JackB: what do you do?
raleighbound: hi folks!!
Garrett_Sutton: You won’t use a C corp to hold real estate. You may use
an s corp for flipping, but in most cases you’ll use a LLC or LP.
MikeSummey: Hi raleighbound and Rob
Garrett_Sutton: I don’t agree with your attorney’s take on the issue.
pjalan: and what about Land Trusts….I have been hearing about
Steve: Well, he’s not my attorney and you see why
pjalan: So having mortgage under personal name and title on the name of
LLC is fine
MikeSummey: Steve, I believe the correct way is to have the loan in the
name of the LLC and then personally guarantee it.
Garrett_Sutton: Land Trusts don’t offer asset protection. You need to
have the beneficiary of the land trust be an llc, so why not use a LLC to begin
with.
pjalan: Garrett, can I tranfer the title under my new LLC after closing
Steve: Mike, I have tried to do that but for some reason the banks aren’t
in favor of it. Any suggestions?
Garrett_Sutton: Can you transfer to your LLC after taking title in your
own name?
Rob_L: Garrett, where would a good place to get an llc? I found
reasonable rates at http://www.mycorporation.com but don’t know if it is a good
idea to get it from internet sites.
pjalan: Yes Mike…even I was not succesfull at that
MikeSummey: Steve, I don’t know. I’ve nerver had a problem sith it.
pjalan: Yes I think they charge 95 + filing fees….dont know how good is
that
pjalan: Have you used that website Rob_L
Rob_L: No, but was planning on using a service like that…
Steve: You have me curious now. I had dropped the issue, but I am going
to make a couple of phone calls tomorrow…
Rob_L: I heard it is easy to get an LLC
Garrett_Sutton: We offer llcs for an affordable price. The internet sites
don’t do the full job in my experience and aren’t threre to answer your
questions once you are set up.
MikeSummey: I’ve done three new loans this year tah were made directly to
my llcs without personal guarantees.
reena_ny: Garrett, Any suggestions on the extent of home owner’s coverage
one should have on a rental property to prevent any exposure?
Rob_L: Garrett, what is your site to check out how to get llc’s through
you???
pjalan: I would be curious to know if that works
Roger_Dawson: I would be really cautious about using an internet
attorney. Sounds like a worse idea than no attorney at all to me.
Garrett_Sutton: www.sutlaw.com is our site.
pjalan: why Roger?
Garrett_Sutton: Mike, good news about your loans.
Steve: Mike/Garrett, how can I build credit for my LLC so properties can
be mortgaged under it?
MikeSummey: reena, you don’t need homeowners coverage on rental
properties. All you need is all risk coverage…fire, etc.
Roger_Dawson: They are not going to give you personal service. They’re
just going to boilerplate something together for you.
Rob_L: Roger, couldn’t you just get an LLC via the internet and then have
an attorney for regular legal matters after the LLC is created? LLC is really
filling out some paperwork? Or am I speaking out of ignorance?
reena_ny: I see. What should be the extent of it?
Garrett_Sutton: An atty. will have to go in and correct/review what is
already done. You’re better off starting with the atty. to begin with. It is
cheaper in the long run.
Roger_Dawson: Rob, I’ll let Garrett or Mike answer that. But legal
documents have to be letter perfect. One mistake and you’re stuck.
MikeSummey: reena, I can insure a property in NC with Nationwide for
about $300/yr/$100,000.
pjalan: and it covers fire/theft/earth quake?
pjalan: flood
leopold: Garrett, I live in New Jersey does your services reach that far?
Roger_Dawson: Garrett: let me play devil’s advantage on this protection
issue. If you were suing someone how hard would it be for you to pierce the
shield of the llc?
MikeSummey: I have used attorneys to set up all of my llcs. I think it is
money well spent.
Steve: Reena, I do the same. Most of mine are $280 - $320
reena_ny: Thanks.
MikeSummey: pjalen, flood and earthquake are separate coverages that have
to be purchased separately.
Garrett_Sutton: Yes, we handle New Jersey. In many cases we set up a
Nevada or Wyoming entity for better asset protection and then qualify in NJ
pjalan: so this one for 300/yr/100000 covers what?
leopold: Thanks.
Garrett_Sutton: If you use a Nev. or Wyo. entity it is very difficult to
pierce the entity veil.
MikeSummey: pjalen, everything else except flood, earthquake and
terrorist attack.
Steve: pjalan, $100K in liability plus coverage for the value of the
house.
MikeSummey: Hi Eddie
Roger_Dawson: Why are Nevada and Wyoming favored?
pjalan: value of the prop is always current appraised value right?
EDDIE: Hello everyone
Steve: Mike, I am sure you have a blanket liability policy. At what point
should we consider it?
Garrett_Sutton: Both Nev. and Wyo. feature charging order protection,
which offers excellent asset protection.
MikeSummey: Garrett, I’ve finished the manuscript you sent me. I’ll have
my comments when I return from Florida later this week.
Steve: pjalan, it is how much you could replace the house for if it were
burned to the ground
Garrett_Sutton: Charging order protection would take a while to explain,
but it is my book, as well as in the one Mike is reviewing. Thanks for that,
Mike.
MikeSummey: Steve, each insurer has their own driteria for issuing
blanket policies. I think my company Nationwide requires 5 or more properties.
Check with your for their requirement.
Roger_Dawson: Hi Doug!
MikeSummey: Hi Doug
Doug_in_CT: Hello Fellas
Steve: Okay, thanks
Ralph_Roberts: hi Doug
Doug_in_CT: Hi Ralph, Your a fella too!
pjalan: thanks Steve
Ralph_Roberts: durn right! 
Steve: Garrett, any suggestions on how can I build credit for my LLC so
properties can be mortgaged under it?
pjalan: I am novice here..if some would mind telling me what is blanket
policy
Bob_Carr: Mike, do you still have your Duke
MikeSummey: I’m being distracted by a parade of beautiful women going
through the lobby here. I think there must be a wedding or something like that
going on down the hall.
Roger_Dawson: One policy covers several properties. Also a blanket loan
means one secured by many properties.
Doug_in_CT: Eyes on the screen, Mike
Steve: pjalan, it is a supplimental policy (in addtion to you main) that
covers all of your properties
MikeSummey: Bob, yes! Want to buy it?
Roger_Dawson: I hope he’s got a laptop.
pjalan: thanks again steve
Doug_in_CT: I won’t even investigate that computer joke Roger Dawson
pjalan: how would one qualify for blanket loan….I beleive if you get
one of those u can buy multiple properties and no credit check everytimg right?
Garrett_Sutton: I’m not keen on building up a great deal of credit under
one LLC since I like to use only one LLC per property, which precludes a great
credit score. Let’s hear how Mike got his properties financed without a personal
guarantee. I’d like the name of the lender, if possible.
Bob_Carr: Mike,Saving my $$$ for some kind of twin
Steve: One LLC for each property?? I came in late, but I’d love to know
the reason if you care to repeat.
Roger_Dawson: pjalan: we should explain that in our book a blanket loan
is one of the big mistakes an investor can make. It benefits the lender and
restricts the owner.
Doug_in_CT: So Garrett do you recommend taking title in your own name and
then quit claiming it into llc?
pjalan: Roger can you please help me uderstand that…why doest it
benefit the lender
MikeSummey: pjalan, a blanket policy rteplaces all of your individual
properties with one blanket policy. With replacement cost coverage, it provides
coverage in the full amount of the policy for each property.
Steve: pjalan, we were talking about a blanket insurance polcy, not loan
Garrett_Sutton: You have better asset protection if you segregate your
properties. If you had 10 properties in one LLC a creditor could reach all 10 if
there was a problem at one of them.
pjalan: okay Steve
pjalan: I got confused
Roger_Dawson: A blanket loan gives the lender more security because it
ties up the equity in several properties.
Garrett_Sutton: You can take title in your own name, or you can use a
company like the one I mentioned (www.llcloan.com) which lets you take title in
the LLC name.
Steve: Garrett, I never thought about it like that but it makes sense.
Thanks!
Garrett_Sutton: If you take title in your own name don’t forget to
transfer to the LLC as soon as you can.
MikeSummey: Garrett, I got my loans in the llcs because they do have a
lot of equity in them. I know that goes agains what you are talking about, which
is why I asked the earlier question about how much protection does insurance
give you.
pjalan: how do we do that….tranfer title to an LLC and how much does
that cost?
Steve: Garrett, I have not been able to transfer to the LLC because of
the lenders. They can assume the entire balance of the mortgage since it is
technically changing ownership. ???
Garrett_Sutton: You file a grant deed with the county. If there is a
transfer or doc fee you’ll have to pay it. Here in Nev. if you are transferring
from your name to your LLC there is no fee.
Kim-OH: Garrett if one uses a Nevada or Wyoming LLC doesn’t one need a
registered agent in those states and doesn’t one need to register with their own
state to do business?
Garrett_Sutton: Yes, the lenders say that. But as long as the mortgage is
paid they never call the loan.
Steve: Does my attorney do that?
Roger_Dawson: Garrett: some seminar givers (I’d rather not call them
experts) are recommending using llcs and partnerships to get around the due on
sale clause. What do you feel about that?
Garrett_Sutton: Yes, you’ll need an RA in Nev./Wyo. as well as your home
state. We charge $125 a year for that service. Again, it is a judgment call, but
many people like the better protection offered in those states.
MikeSummey: Garrett, I found the Wyoming law interesting. I plan to
discuss it with my attorney.
Kim-OH: Garrett, I was not aware that you offer that service, that’s
great
Garrett_Sutton: Good, Mike. Feel free to call Kathy spitzer in Jackson as
well. She owes you one.
pjalan: Garrett….how much will be the cost to setup an LLC after Mike’s
discount?
Garrett_Sutton: The LLC won’t get you around the due on sale clause. Our
position is that it is not a sale but a transfer so the due on sale doesn’t
apply.
MikeSummey: I knew that was coming Garrett.
Garrett_Sutton: The name Mike Summey is good for a $100 discount.
Kim-OH: Garrett, have you ever had to defend that position?
pjalan: Greeat
MikeSummey: Garrett, I believe Roger is talking about buying properties
in an LLC subject to existing financing, not merely transferring the property
from your personal name to the llc.
Roger_Dawson: By getting around the due on sale I meant having the seller
transfer the title to an LLC and then the buyer buys the LLC
Garrett_Sutton: Kim: I’ve never had a client have their note called.
Literally hundreds have done it with no problem.
MikeSummey: Hi M&E
Kim-OH: Garrett, thanks!!
Steve: Roger - good idea… :/
Garrett_Sutton: Roger: That could work. Be sure to check with your tax
guy on it. and make sure the LLC is clean so you’re not buying into problems.
pjalan: Roger u mean the sellter tranfers it to a newly setup LLC and
then u assume the ownership of that LLC
FrankAL: Kim, I have trqansferred over twenty porperties to llc’s. The
loans are with different lenders and none have been called.
pjalan: cos I head if you assume an existing LLC u also assume its
liablilities (if any)
Garrett_Sutton: That is true.
Kim-OH: Frank, that’s good to hear yet again
Roger_Dawson: Yes, that’s what I mean. But I don’t think it’s ethical and
is a dangerouse thing. It seems to me the lender will call the loan as soon as
he figures it out.
pjalan: what to do if the loans are called after u transfer the title to
an LLC
MikeSummey: Frank, are these loans you took out originally or are they
loans on properties you purchased subject to existing laons?
Steve: transfer back?
leopold: Garrett, does it make sense to have your llcin place before you
purchase your properties?
FrankAL: Mike, I took out these loans to purchase these properties.
Garrett_Sutton: Good question. I think it is a good idea. Know that in
Nev. we can get one set up in 48 hours.
Roger_Dawson: I have to leave for another commitment at the top of the
hour. Garrett, thank you so much for sharing your time and your expertise with
us!
Garrett_Sutton: You are welcome Roger.
Kim-OH: Roger thanks for your time again
pjalan: Garrett…can you please summarize the process…..I think I got
confused with the barrage of questions
Steve: Mike, do you take a salary from your llc’s?
MikeSummey: Frank, that’s what I thought. Those type of transfers are no
problem. It the one where you use an LLC to buy a property subject to a loan
someone else originally mande. that is where the problems arise.
pjalan: what is the best approach to buy a property under LLC (in
summary)
M&E: Hello all. I formed an LLC when refinancing 2 properties and
have found, so far, to be not much different then owning them in my own name
(since I’m a sole Member llc). Since its a flowthrough at tax time it really
just allows from seperation from my other properties. Since you also personally
guarantee any mortgage I’m not sure of the protection against personal
liability.
Garrett_Sutton: To summarize, a LLC offers good asset protection. You’ll
set one up and take title in the LLC name either at closing, or shortly
thereafter.
MikeSummey: Steve, no I pay myself cash distributions.
Steve: What is the difference? Tax advantage?
pjalan: so taking tile under LLC during closing could be done using
www.llcloan.com
Garrett_Sutton: The personal liability is only between you and the
lender. As to all others you are protected by the llc.
Garrett_Sutton: Yes, llc loan can assist with that.
Bob_Carr: Garrett,I learned a lot from you tonight,Thanks!
Garrett_Sutton: Thanks Bob.
CTLandlord: Garrett, if I have an LLC and I transfer the title of my
property to the llc, does it then show up on the land records (after proper
recording) that the owner of the property is the llc, not me and there isn’t a
problem with the mortgage being in my name personally?
leopold: Garrett, thanks for your time and expertise.
Garrett_Sutton: Sure.
Garrett_Sutton: CT: No prblem in that scenario.
pjalan: Garrett….I think CT has valid question…though you answered it
I didnt understand that yet
MikeSummey: Garrett, I’m still looking for your comments on the
difference between transferring a property you purchased in your personal name
and took out the original loan that way vs buying from a third party, taking
title in the name of an LLC as a way to bypass the due on sale clause.
CTLandlord: Great. Thanks for all your great information tonight!
Garrett_Sutton: Title is in the LLC name. Your other assets are protected
from the claims of tenants. You are personally obligated on the loan to the
lender, but not to any one else.
Garrett_Sutton: Thanks, CT
MikeSummey: Garrett, the chat officially ends at this time, but if you
would like to stay a while longer, I’ll stay with you for a while.
Garrett_Sutton: Fine with me.
MikeSummey: I’m enjoying sitting here in the Holiday Inn lobby watching
all the pretty girls go by running between the bar and the wedding party.
CTLandlord: Garret: my scenario - my partner and I own 4 properties - you
say 4 llc’s with both of us as members. No problem with a legal matter within
one LLC transferring over to another because the members are the same?
Garrett_Sutton: Right. No legal or tax problems with that.
Garrett_Sutton: Mike, have I answered your question yet. I wish I was
there in person….
Kim-OH: Garrett, how does a property held in an LLC evolve with a 1031
ex?
MikeSummey: Garrett, NO! I guess I’m having a problem explaining it. Let
me try again.
M&E: I apologize if you have covered this but since I ersoanlly
guarantee a mortgage, doesn’t that defeat the purpose of personal liability
since the connection to me the person is easily discovered?
Garrett_Sutton: If you hold property in a LLC and do a 1031 then the new
property must be held in the same llc. There is a great book on 1031’s called
"Exchanging Up" that explains it all.
Steve: Mike, can you tell me the difference between taking a "cash
distribution" versus a salary from the llc? (not that I am to that point
yet, but…)
M&E: personally
Kim-OH: Garrett, thanks again
Garrett_Sutton: m&e: Your personal guarnatee does not make you
personally liable to other creditors.
CTLandlord: Garrett, Mike Thanks again. Gotta run!
M&E: Yes but how about to tenants involving personal liability?
MikeSummey: Two scenarios: (1) I buy a property, take title in my own
name and get the financing in my name. If I transfer this property to an LLC I
understand that I have no problem with the financing. (2) I I buy a property
with an existing loan, take title in either my personal name or in the name of
an LLC and do not inform the lender, am I violating the due on sale clause?
Garrett_Sutton: You are protected, as long as youdon’t sign any personal
guarantees with tenants.
CTLandlord: Garrett- ooh, before I go - does that mean "personal
guarantees with tenants" that you don’t personally sign the leases? Do you
sign your name as member of the LLC instead?
Garrett_Sutton: Mike: Under 2, if you or the seller don’t inform the
lender and there has been a transfer you may have a problem.
Garrett_Sutton: CT: Right, everything you sign is as a manager of the
llc.
MikeSummey: Steve, a cash distribution is treated like a dividend on
stocks. A salary is for services rendered and is subject to fica taxes.
pjalan: Garrett on 2 if you infor the lender and there is due on sale
clause what does that mean…how does one get affected by that
Steve: Gotcha, thanks
Garrett_Sutton: Mike: Scenario 1 is not a problem.
MikeSummey: Garrett, that’s the answere I’ve been looking for. That’s
what I tell people, but we have some out giving seminars and telling people thay
will have no problems doing that.
M&E: OK I get it - I have three pireces personally held I wouldlike
to transfer to an llc. they are close to each other but finance seperately.
Should I form three llc’s or just one to handle them all
Garrett_Sutton: In Scenario 2 the lender may want to keep you. You may be
a stronger borrower, and remember he still has the old owner on as a personal
guarantor.
Steve: Garrett, thanks for the insight. I hope to see you back again
soon. Good night everyone!
Garrett_Sutton: m&e: It is a judgment call. If one prperty is held
free and clear and the other two have problem tenants you would certainly
separate them from each other.
MikeSummey: Garrett, that is correct. But I have to notify the lender
when I purchase the property or I violate the due on sale clause. You are
correct that the lender may have no problem with me, but I have a fiduciary duty
to be honest with them when I buy the property.
Kim-OH: Garrett, do you have any opinions on equity stripping and cold
and hot llcs?
Garrett_Sutton: I prefer 3 llcs myself in that situation.
M&E: thank you
Garrett_Sutton: Could you flesh out the hot and cold idea?
MikeSummey: Garrett, I want to personally thank you for joining us
tonight and hope you have found it as interesting as everyone else has. We’d
love for you to join us anytime you would like.
M&E: Mike - I have read your books and watched your career When will
you be in New York
pjalan: Thank you Garrett, Mike and Roger…it was very informative today
and I cleared up a lot of questions for myself
pjalan: Night
Garrett_Sutton: Mike: Yes, you have such a duty. And thanks for having me
on. This is a great group with excellent questions.
Kim-OH: Garrett, the hot LLC holds mortgages against the properties in
the cold llcs as I understand the concept
MikeSummey: M&E I don’t have any plans for NY right now. Maybe later
in the fall.
Garrett_Sutton: Kim: That can work.
M&E: Well too bad - They need you in NY
mayorad: Kim-Oh, pardon … what do you mean by "hot" and
"cold" llc’s.
Garrett_Sutton: Mike: Will you be at the Learning Annex event in Oct?
MikeSummey: mayorad, where’d you come from. I didn’t see you join us.
mayorad: Hi, Mike, I’ve been here all along.
mayorad: Hello to you, btw?
MikeSummey: Garrett, NO! I’ll discuss that with you later.
Kim-OH: mayorad just what I said to Garrett the hot LLC holds mortgages
and notes against the properties in cold llcs, no equity in the properties,
nothing for a creditor to go after
Garrett_Sutton: Okay
MikeSummey: Sorry I missed you!
mayorad: Ah, gotcha.
Kim-OH: hence it’s called equity stripping
Garrett_Sutton: Kim: You have to set up such a structure before there is
a problem.
mayorad: Easy to do, Mike. btw, thanks for arranging Garrett to chat
here. You, Roger, and he have provided very good input.
mayorad: Thanks, Kim-oh.
Kim-OH: Garrett absolutely
Kim-OH: Garrett it’s been a great pleasure to chat with you this evening,
I have followed your information since I learned of you over at CRE
pjalan: Mike do we have this chat session everday…I only login on
Monday’s
Garrett_Sutton: Thanks very much, Kim
MikeSummey: Kim, that’s interesting. I’ve never heard of equity
stripping.
Kim-OH: Mike that seems to be the brainchild of Troy Titus out of NY I
believe
Kim-OH: Garrett, you are welcome but it’s we who thank you for your time
and imput here
MikeSummey: pjalan, we will have our next one nexst Monday at 8:00
Eastern time. Check the calendar on the homepage for future chat dates and
times.
Kim-OH: Mike will you be back home next week?
pjalan: thanks Mike
MikeSummey: Garret has brought several ideas to the chat tonight. I truly
appreciate it.
Kim-OH: Mike, Al Lee missed a great chat tonight
Garrett_Sutton: My pleasure.
MikeSummey: Kim, yes I’m flying back on Wednesday
mayorad: btw, Mike, when can we expect to hear your proposed legislation
to include Personal Finance as a mandatory educational course in our colleges?
Kim-OH: Mike I hope you have a great flight
MikeSummey: I’m down here for a family get together with all my brothers
and sister and my 86 year old mother.
MikeSummey: mayorad, I looking into that.
Ralph_Roberts: did your mother fly down in the King Air, Mike?
Garrett_Sutton: Mike: I’d better be getting home to the family. Thanks
for the enjoyable chat.
mayorad: I’m behind you all the way. Hope it comes to fruition in my
lifetime.
MikeSummey: No, she drove down with my sister. They are staying all week.
I have to get back on Wednesday because one of my sons has to work.
MikeSummey: Garrett, thanks so much for being with us tonight. I’ll call
you later in the week.
FrankAL: Thanks for the great ideas Garrett.
Ralph_Roberts: thanks for the great chat, Garrett!
Garrett_Sutton: Great. Talk to later.
MikeSummey: I’m going to have to go also. The family is waiting on me to
come back for dinner.
Kim-OH: Garrett, it appears that you need to join us again in the future
LOL
MikeSummey: Goodnight all
mayorad: Adios, Mike. Til next time.
Ralph_Roberts: see ya Mike
FrankAL: Goodnight Mike
Kim-OH: Goodnight mike and thanks for all you do
Kim-OH: Ralph thank you ever so much
mayorad: Thanks, as well, Kim-oh.
Ralph_Roberts: no problemo, Kim
mayorad: Good night, everyone. Have a good one.
M&E: Goodnight Mike, Roger and Garrett
Kim-OH: Ralph you are such a sweetie but I promise I won’t tell a soul
Ralph_Roberts: chat transcript will be posted in mere minutes
Ralph_Roberts: thanks, Kim … heh, heh
FrankAL: Goodnight all.
Kim-OH: hehehehe
Ralph_Roberts: nite Frank
Kim-OH: Goodnight all
Ralph_Roberts: ———> exit stage right
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