4 Steps To Real Estate Transaction Privacy and asset protection

4 Steps To Real Estate  Privacy & Asset Protection

The ease of looking up information on line is a double edge sword for real estate investors.  On the good side you can quickly track down who owns a vacant house and reach out to the owner to see if they want to sell.  On the bad side all of the assets owned by real estate investors are just as easily accessible making which puts a huge liability target right on your back for easy law suits!  Take a moment and consider how you can better establish asset protection in your investing strategies.

asset protection

Asset protection

What can you do to begin removing that target off your back and protect your assets?

Have you heard the news? I’m sure you know that we live in unprecedented times of frivolous lawsuits. Unfortunately, real estate investors can become easy targets for lawyers. With today’s technology and easy website searches a lawyer can quickly look up what real estate you own and determine if you have enough assets to pursue in a lawsuit.

Asset protection and privacy are created in layers.  Below are 4 steps for you to begin working on your own asset protection and privacy plan.

 

1.  Don’t Own Anything!

One way to keep your personal information private is to not own anything personally.  If you don’t personally own houses then your personal name will not show up in the online tax records.  If a fee attorney has an issue and looks online you will look like you are worthless online and that is a very good thing.

There are a couple ways to get your personal name out of the tax records:

  1.  Entities – Take title in an LLC.An LLC can be taxed as S-Corp or a C-Corp. Consult your CPA for the best structure that works for you particular needs. One primary benefit of using an LLC is that the members of the LLC have only limited liability associated with the acts and the debts of the LLC.
  2. Trusts – There are applications for both land trusts and personal property trusts but let’s focus on the land trust.   The land trust is a good vehicle for providing privacy and asset
    protection in your real estate investing business. A land trust is a legal agreement where a trustee is appointed to the ownership of property for the benefit of the beneficiary of the
    trust.

The land trust is not recorded at the local courthouses. Instead it can be retained by beneficiary making it very hard to obtain the property ownership information. All that’s visible
to the public search is the trustee information. Protection can be maximized by using a different land trust name for each property purchased, and there are a number of additional
strategies associated with using trustees.  Additional land trust benefits include protection from code violations, liens, HOAs, and title claims.

The bottom line with the land trust is that it becomes challenging for anyone to track down the property that you own. When a lawyer does the initial asset search, you’ll appear not
to own anything, and you won’t be worth pursuing in a lawsuit.  This is a big step forward in asset protection for you.

 

2.  Keep your personal information personal

This is an easy step to take and most investors do not follow this easy step!  Never, Never, Never give out your personal phone address or phone number.  Period – no exceptions!

  • Don’t use your personal name on leases or contractor agreements
  • Don’t use your personal information on your websites
  • Don’t use your personal name and address on closing documents, hud-1 statements, deeds…

 

Instead of your personal address, take the easy step and pick up a PO Box at the post office or your local UPS store. For phone service, grab Google Voice number and use that for all of your phone call and texting needs.

Take the approach that no one needs to know where you personally live and that will help you get off the grid.  I know of a landlord who one Sunday was shocked when a tenant showed up knocking on her door!  Don’t let that happen, your tenants and contractors should not know where you personally live.

3.  Just Say “NO”

If you’re rehabbing a house and someone walks in from the street and asks if you own the house, be sure to reply “NO.”  If your tenants ask if you own the house they’re renting, just say “NO.”  You are a landlord, not the owner, right?  Never position yourself as the owner of the property and keep your ownership private.  It is mindset that will help you protect your ASSETS!

I am not advocating not being truthful. If you’re careful how you deed the property, you will not personally own it, and you’ll be telling the truth.

When tenants make special and unusual requests, simply tell them you’re a property manager, but you’ll be happy to discuss their request with your “boss.”  Who is your boss?  If you’re like me, it’s your wife. But it could be your partner.

Being discreet with your ownership protects your privacy and your assets and allows you to manage your assets like a professional.  Building a business professional relationship with your contractors, tenants, and everyone else will help you to protect your privacy and assets while running your investment business.

 

4.  Stop Using Banks & Stay Private

If your goal is privacy, consider the banking journey and check how much personal information the bank collects in exchange for a bank mortgage.

Consider how much information is provided on the application, all the property information you supply with rent rolls and addresses in full disclosure. Underwriters may ask for copies of leases and bank statements to substantiate credit worthiness.

Using banks for financing provides zero privacy for real estate investors. Even potentially worst is the issue of personal guarantees and rent assignments that kick in if something goes wrong.

Signing a personal guarantee is the equivalent of signing a blank check with no date on it that will be cashed in if something goes wrong. It puts all your other assets at risk if something goes wrong with your investment.

 

What are your thoughts and concerns on this topic?  Don’t bury your head in the sand and pretend you will never have a problem.  Instead take these 4 steps and build your real estate portfolio with a whole lot less stress!

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Comments

  1. Great advice. That’s what I love about this group. Always learning and always earning. Thanks for sharing.

  2. Jim,

    The information you provide is very concise and valuable!

    Thanks for the nuggets of wisdom!

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