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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.
Realty411Guide.com
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
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