Chat Transcript – March 5, 2007
Posted on March 6, 2007
Neo hi
Mike_Summey Hi everyone! Looks like I’m late!
eryk76 Hello Mike. good evening
Mike_Summey Hi Scott
fly Hi Mike……
Scott Stephens hello
santosleigh mike i hope you got the letter i sent you
Mike_Summey Hi Garrett
oz Hi Garret, long time no see. Was at your workshop a few years back in Culver City
oz Hi Mike
tommy-d Hi Mike. Hi Garrett
gsutton Greetings to all
Mike_Summey Sorry about the missing last name in today’s email. It was there when I sent it, but for some reason it got dropped from both the subject line and the 1st paragraph of the body.
Ifgia Hi Garrett, Hi Mike
Mike_Summey leigh, I got it. Haven’t had time to read it yey.
gsutton I am here to talk about whatever asset protection topic you want. Thanks for having me on, Mike
Mike_Summey My pleasure Garrett
Mike_Summey Hi Kelly & Pscherer
Pscherer Hi Mike & all
Kelly Hi, I hope I do this right. It’s my first time
tommy-d Garrett, I just got back from vacation friday and read your book Real Estsate Advantages, It answered alot of questions nobody else seemed to be able to answer.
Pscherer Leigh did you find out anymore regarding the property appraisal
gsutton Thanks for the good review!
Mike_Summey Okay guys…and gals. You’ve got Garrett here to talk about all those LLCs & corporations you’ve been asking me about. Don’t waste any time.
Mike_Summey Kelly you’re doing fine.
Mike_Summey Hi corey
Corey Hi Mike and everyone
Pscherer Garret I do not live in the state with my rentals who should I designate as the responsible party in that statae
Ifgia Garrett, I have a pretty strange question actually…sorry this is my first time on these chats as well, so like Kelly I hope that I do this thing right, haha
Mike_Summey Hi Scott
fly GSutton…Hi….For a rental base of resid. properties would u form an LLC or Co. Incorp. or what and why…??
gsutton Pschere: Basically, you need a resident agent in the state. As well, you may need a property manager.
Mike_Summey Garrett, when they all get going, you’ll have a hard time keeping up. They’re just worming up now.
Ifgia I am an American who has been living in Argentina for the past 7 years and I always get bombarded by American tourists here on how to buy property, so I have finally decided to start a business doing this formally
tommy-d Garrett, Will I run into any problems with bank financing if I take title with a s-corp.
Mike_Summey Hi Steve
Pscherer I have a property management company, so just their name and address
steve_nm hi.
gsutton Fly: You need an LLC for asset protection. If the property is in your own name all assets are exposed.
santosleigh mike, how does as a 15 year loan with a baloon payment after ten years work, this is new to me and it was offered to me by a bank officer and i don’t know anything about it.
fly Mike….u know what im doing and i have an appointment with cpa now…i ……..ok
fly OK…Thank’s…
Kelly Garrett, for the average rental house, what is the safest way to hold it. Should it ever be titled in my name?
gsutton Tommy: You may not have a problem with the bank but you may have a tax problem when you later transfer the property.
fly Thats what i thought…..
Mike_Summey leigh, that type loan would require payments based on a 15 year amortization for 10 years and then the full remaining balance would be due. I’ve never known a bank not to renew if you make your payments timely.
Mike_Summey Hi Gene
gsutton Kelly: The safest way is to take title in the name of the LLC. If it is titled in your name you are exposed to any claims brought against the property.
Ifgia My question is whether I “need” to have an LLC (or a C corp, which I already have dormant in the US just waiting to be activated) or can I juast have mortgages setup through a company like Equity Trust to handle the funding legally to my Argentina corp???
Kelly What about a land trust with me as beneficiary?
eryk76 Mike I have listened to your weekend millionaire program and was wondering how one can make the transition from weekend millionare to a fulltime investor.
Pscherer Garrett so if I understand I use my PM Co and their address on my state LLC docs
ndill7071 garrett, my name is nick, and I am going into a partnership with a few friends to buy a commercial property that will house retail and office space. should i form an llc with my partners separate from the llc i have to old my own rental properties?
sdanrich Garrett: First, Thanks for your time. Now: 1.) Best corp to hold RE? I understand the RA & PM for RE in other states. 2.) Do I/Should I use a corp entity formechanical patents?
tommy-d Garrett, I was going to use thes-corp strictly for my flips and use my llc for longterm investments as you recommend in your book
gsutton Ifgia: Given your situation you probably need a consult with a tax pro and an atty. Sorry to do that to you, but some situations are more complex that a one sentence answer can deal with.
sdanrich Mike was right. Wow.
Ifgia haha, ok, I thought so…
Mike_Summey Everyone, if you hold properties in a single member LLC they are treated for tax purposes as if you owned them in our own name. there is no tax return for the LLC and the income and expenses go on a Schedule E on your tax return.
gsutton Nick: When you have different ownership percentages a new LLC is called for.
Pscherer Are husband and wife considered single member llc
Ifgia Garrett, would it be possible to contact you directly at sutlaw.com and handle this one and one?
Ifgia one on one, sorry
sdanrich Mike: thanks. Is married filing single considered single member LLC?
Mike_Summey Pscherer, I’m not positive, but I think so.
gsutton Sdanrich: I like the LLC for real estate, except in CA where there are extra taxes on them. You can also use an LLC for your patents
Mike_Summey Pscherer, check with your tax advisor on that to be sure.
gsutton Ifgia: Yes, good idea.
Ifgia Great thanks so much, I have to run now, but I will definitely be in touch, thank you so much!! Thanks Mike!!
Mike_Summey Pscherer, you could own 100% of the LLC without your wife and still have the income and expenses go to a Schedule E on your joint return.
sdanrich GSutton: Adv for LLC with patents vs S/C corp. Mike: Thank for getting GS her tonight.
gsutton Tommy: Use an S corp for flips, not a C corp.
Kelly Garrett, is an LLC too expensive to do for only 1 or2 houses?
sdanrich sorry. Adv == Advantages.
gsutton Sdanrich: The LLC offers better asset protection. YOu can use a corp to hold patents but it should be reviewed to make sure it is the right entity for you
sdanrich Thank you
sdanrich Very much.
Mike_Summey Everyone, next week I will have the contact infor for Garrett on this website under the “We Recommend” header. You will be able to contact him directly if you would like for him to set up an LLC or Corporation for you.
ndill7071 garrett..nick again…if i form a new llc with my partners how will we go about securring financing. will it be more challenging due to lack of history as an llc
gsutton Kelly: The LLC is a form of insurance. YOu have to look at it that way. I hold single homes in separate LLCs.
sdanrich GS: Can you form the entities in all states?
Mike_Summey Hi Penny
sdanrich Are you Registered Agents in all states?
gsutton Nick: the bank will look at your credit and require personal guarantees. The LLC history won’t be much of a factor.
Penny Hi MIke
oz hi Penny
Penny & everyone
gsutton Sdanrich: Yes we can and do.
sdanrich ‘Lo Pen.
Kelly Garrett: then do you always recommend a separate llc for each house?
Penny Large crowd tonight I see.
sdanrich GSutton: Are you Registered Agents in all states?
Mike_Summey Nick, until you have a track record in the LLC or huge assets in it the bank is going to require personal guarantees on the loans. No different then if you were taking out the loans in your own name.
Mike_Summey Hi wps
gsutton Kelly: Yes, but it is a judgment call. In CA, where it is $800 per year per entity some of my clients will put up to 3 homes in one LLC. Your call.
fly GSutton… i want to form an LLC with my wife and she still work at her job and i run the LLC. We file taxes together. Would u advise this tax wise…??
gsutton Sdanrich: We have relations with RAs in all states.
Mike_Summey fly, why not just set it up in your name?
sdanrich Thank you again.
gsutton Fly: Yes, it is a flow through entity so it can be done that way.
Kelly Mike: Do you hold each of your homes in separate LLCs?
fly That is an opption…
fly OK…..thank’s GSutton
Scott Stephens GArrett: I have an S/corp established for my restaurant; would you run property through this or another entity?
Mike_Summey Garrett, there was an earlier question about whether or not an LLC owned by husband & wife is considered a single member LLC or not. I’m not sure. Can you answer that?
Mike_Summey Kelly, no I have several in my LLCs.
gsutton Scott: You will use a separate LLC. If you get sued over the restaurant you don’t want to lose your property in the same suit.
fly Mike….we use both her income and mine to finance…
gsutton Mike: Yes, they can be single member.
sdanrich Mike, Gary, thanks again for your time tonight. Goodnight.
fly so we just do it together….
ndill7071 mike do you still have the property evaluator tapes on sale?
Mike_Summey fly, that should make any difference as far as the LLC goes. The bank is going to require both of you to sign the note anyway.
gsutton Fly: Yes, you can do it together.
santosleigh mike, my credit score last month was 793, now i got a letter from my bank that it is now 801, why is it going up like this, i have not done anything different lately, this is a good score, right.
tommy-d Garrett, what liability issues might i run into if I run my flips through a s- corp and get sued for negligence(God forbid)
Mike_Summey ndill, do you mean the Offer Generator program?
fly LOL….now that just answered my BIG ?…..THANKU…
Pscherer Garrett, Been making payments on time for more than 2 years will the lender flip out if i transfer to an LLC
fly Thank’s Mike…
gsutton Tommy: The key is not to have alot of assets in the S corp. Just your flip properties. All your holds will be in separate LLCs.
ndill7071 i believe so…was it 39 bucks?
Mike_Summey leigh, you must me doing things right. That’s why I told you last week to quit worrying.
gsutton Pschere: I have never seen a lender call the note upon an LLC transfer. As long as you are making the payments you should be okay. Be sure and notify your insurance company of the transfer.
Mike_Summey ndill, the Offer Generator is $69.95 and you can find it in the online store on the website. The $39.95 is a close out on at audiocassette version of The Weekend Millionaire Real Estate Investing Program. You will find both in the online store.
Mike_Summey Hi Al.
Pscherer Hi Al, did you get a new keyboard
Mike_Summey Hi Jonaservices
Kelly Garrett:Does a Land Trust offer similar protection to an LLC? Do you recommend that approach?
gsutton Is anyone a CA resident investing out of state. There are new, and onerous rules now.
Pscherer I ;am Garrett
Pscherer Please tell more
santosleigh mike, i tried to use the offer generator but i can’t get it to work on my computer, what am i doing wrong.
gsutton Kelly: The land trust offers no asset protection. So you need the beneficiary of the land trust to be an LLC. Why not just use and LLC to begin with?
Mike_Summey Pscherer, I transferred hundreds of properties from my personal name to LLCs a few years back. All I did was notify them in writing of the change and everything was fine. Not one of them even questioned the transaction.
Pscherer Thanks mike
gsutton Beware of promoters selling land trusts as asset protection devices.
tommy-d Garrett, don’t I have to keep the s-corp capitalized or can I take monet out when I’m not using it. I use cash for my flips and a heloc for my holds until I get lont-term financing
Mike_Summey Leigh, what kind of computer do you have? Mac, PC, Unix?
ndill7071 Garrett/Mike…nick again…I’m from ohio..is an llc pretty simple to set up yourself or should i use a RE attorney?
Pscherer Garrett please say more about CA and rental properties out of state– I have a bunch
Mike_Summey ndill, I’ll let Garrett answer that.
gsutton The S corp will owe taxes when you pull money out. You could loan money to it. Or use an LLC, which is easier tax wise.
santosleigh mike, i’ts a hewlitt packard, microsoft, windows
gsutton Nick: You won’t believe the messes I have had to cleamn up from people doing it themselves. Proceed at your own risk there.
Mike_Summey Garrett, I agree with you on the land trust caution. The state legislature in NC is looking into some of those promoters.
Kelly Garrett: what would be a ballpark cost to set up an llc to hold a rental house?
gsutton P: The state of CA now says that if you as a CA resident hold real estate in NV, for example, through a NV LLC you must qualify that NV LLC in CA because you, the CA resident are managing it from CA. It is offensive, but they get away with it.
Mike_Summey leigh, read the installation instructions on the inside cover of the package. Install the program and the start it. Everything else is self explanatory as you go through the screens.
Pscherer That’s it I am moving lol
gsutton Kelly: We charge a flat fee of $695 (plus state filing fees) for the complete package. We offer a discount of $50 to Mike’s clients.
Mike_Summey Pscherer, you’ve been saying that for months.
Mike_Summey Hi Eddie & asimmons
ndill7071 garret…nick again…so what would suggest for llc formaton, real estate attorney, tax attorney..do I have to get someone in Ohio…do you know a good one?
Pscherer Mike i know but i am waiting for winter to be over
gsutton Nick: Our office can assist if you would like. Or get a good atty in Ohio to assist.
Mike_Summey Kelly, I’ll hae the details of Garretts offer on the website next week. He has agreed to give our subscribers a $50 discount, but I wasn’t going to tell you until it was on the website…oh well. Now you know. That means I’ll have to get on the stick and get it posted.
gsutton I don’t have an Ohio atty referral for you.
Mike_Summey Hi Josh
gsutton Sorry to spill the beans, Mike
Mike_Summey Garrett, no problem…you made me have to work harder. We’ll get together tomorrow and get the details worked out.
Kelly Sorry
Mike_Summey Garrett, can you set up LLCs in all states or just Nevada?
gsutton Back to P. The key for CA is to have one CA entity to manage your out of state entities.
gsutton Mike: We can set them up in all 50 states.
Kelly Garrett: Once an LLC is set up, is it easy to add a property to it quickly?
Pscherer Garrett, so a master LLC in CA and all the out of state llc’s in the master
ndill7071 garrett..nick…did i hear you state earlier that you should only hold a few residential properties in an llc? Is there a particular limit on the number one should hold of residential properties in a single llc. what is the reasoning behind this?
fly Garrett….Would u put a # of properties under one LLC and then form another…or have them all in one…?
gsutton Your subscribers may want to consider a NV or WY LLC for the better asset protection they offer. YOu then qualify them in the state where the property is located.
gsutton Kelly: Yes, you just file a grant deed.
gsutton P: No, the CA entity is a manager, not an owner necessarily, of the out of state entities.
Mike_Summey Sorry, I had to step away, I spilled something.
fly sorry to ask the same ? twice….lol…
gsutton Nick: the number is your call. I don’t suggest more than 3 properties per entity.
Pscherer Garrett then the entity could/should be another type of entity
Pscherer In CA that is
fly answered my ?……..
Mike_Summey Garrett, I own my airplanes in an LLC that is managed by an S-Corp I own.
gsutton P: The CA entity could be a corp or LLC. Your call. Frequently our clients have an existing S corp they use.
ndill7071 garrett..nick..why only 3 is there a reason?
Pscherer Thank you Garret
gsutton Mike: That works fine.
Mike_Summey The S-Corp handles all the money and pays all the bills, the LLC just owns the planes.
gsutton Ndill: If you had 10 properties in one entity and a tenant at one property sued he could reach all 10 properties. You don’t want too many in one
Mike_Summey I have a written management agreement between the two.
gsutton Mike: It is sounding better all the time.
Mike_Summey Garrett, how do you feel about covering your liablility with insurance rather than multiple LLCs?
fly Lots of good info Garrett….Thank’s man….!!
gsutton Ndill: You also would not put a expensive free and clear property in the same LLC with a property with bad and litigious tenants.
fly U 2 Mike…..
Mike_Summey Hi Kerry
kerry hello
ndill7071 garrett if i form an llc on my own how hard would it be to add partners to it later or would you suggest all partners form the llc at the same time
gsutton Mike: Insurance is the first line of defense, But as we saw with Katrina, insurance companies find reasons not to cover you. LLCs are the second line of defense.
gsutton Ndill: You can always add members at a later date.
kerry are LLC’s better than corp.
Mike_Summey Garrett, that is my thinking as well. As for Katrina, liability insurance is different from property and casualty insurance.
gsutton Kerry: Yes, for holding real estate from both a tax and asset protection perspective LLCs are better than corps.
tommy-d Garrett, What kinds of mistakes do you find people make in setting up their own llc? I just set one up.
Kelly Mike: does a landlord policy cover adequately both liability and property?
Scott Stephens Good info.. thanks all
gsutton toomy: They forget to prepare an operating agreement, issue ownership interests and the like.
Mike_Summey Garrett, don’t you need to keep proper records on each LLC including certificates of ownership, minutes of annual meetings, etc, in order to avoid the LLC being penetrated.
Mike_Summey HI Sol
Sol (Cali) Hi, I guess I barely made it… just got home from work!
gsutton Mike: You are correct. Failure to follow the formalities can lead to a loss of protection.
fly Huuuummmmmm….ok
tommy-d Does the operating agreement need to be recorded or just notorized?
Mike_Summey Kelly, there may be some small liability coverage, but you need an large umbrella policy to give you the best coverage.
Kelly Mike: how large do you prefer?
gsutton Tommy: No, in most all states there is no recording or notary requirement.
gsutton Fly: Why the huuummmm?
fly lol….im learning alot from u guys here…
gsutton That is good to read.
fly this helps us a lot…..it really does……thank’s
Mike_Summey Kelly, that is usually determined by the value of what you are trying to protect. If your net worth is $500,000, you’ll have a hard time buying $5,000,000 liability coverage, but if its $50,000,000 the $5,000,000 may not be enough.
Sol (Cali) Mike, we know from the book that Roger worked for Montgomery Wards while he started buying properties. Did you have a “day job” when you first started?
gsutton You are welcome. My pleasure.
Mike_Summey Sol, I still do…it’s answering all your questions! 
Just kidding!! I spent 30 years in the advertising business before I retired at age 50.
Sol (Cali) lol
gsutton Mike: Hard to believe but I have another event to run to. This has been a great session. Good questions. Thanks again, Garrett
tommy-d Thanks Garrett
oz thanks Garett
Kelly Garrett, thank you. I’ll call you for an LLC!
ndill7071 Thanks Garrett
gsutton Thanks to all. Over and out.
Mike_Summey Sol, I bought properties for 25 years and just let them build equity and cash flow before I tapped into them to retire. I urge everyone to treat your real estate investments like you would a 401(k). Invest in the properties and then leave them alone and watch them grow.
fly Garrett..i want to do an occasional flip for cashflow as i build rental #’s…still ok with an LLC…??
Mike_Summey Garrett, we usually end at 6:00 your time, but if you would like to stay a little longer I’m sure everyone would appreciate it. If you have to leave at 6:00 we understand.
Kelly Mike: before you transferred your properties to LLCs, did you run into many liability issues? Are these times just more litigenous?
Mike_Summey Well, I guess I misse dhim.
fly Mike….?
Mike_Summey Kelly, I’ve never had a liability issue…thankfully. I attribute most of that to careful screening of tenants and keeping the properties well maintained.
Pscherer Mike in a single member LLC if you exchange a property it must go to an LLC or should you dispose of the llc just prior to the exchange
Pscherer that should read must it go
Sol (Cali) Dinner time… good night and thanks again.
tommy-d Fly, can’t answer for Garrett but he recommends using a s-corp for flips vs an lllc due to payroll taxes that you would have to pay with a business llc
Mike_Summey Pscherer, you can dispose of the property, put the money in the LLC and then pay it out to yourself as a distribution without terminating the LLC. You could then put another property into the same LLC.
fly ok…….thank’s
Pscherer Thanks mike.
Mike_Summey Has everyone gotten something from tonight’s chat?
Pscherer Yes thanks for having him and I really am moving out of CA
Josh yes, very good. thanks mike.
Kelly Yes. Thanks
tommy-d Thanks Mike
fly Yes ….Thank’s Again….
oz G/night all… very good chat tonight Mike
Mike_Summey Later this week I’ll get Garretts contact information on the website along with how to identify yourself when you contact him so you can get the $50 discount he mentioned tonight.
fly The best part is going back to read it later….lol
Mike_Summey Goodnight all. If you have an expert you would like to see in a future chat, send me an email. I’ll try to arrange it.
fly Nite All………
Pscherer Thanks again Mike
» Filed Under Chat Transcripts
Comments
Leave a Reply