From 1 Property To 20: How Your LLC Structure Should Evolve

0:00 Hey. Welcome, everyone. It's Clint Coons here with Anderson Business Advisors. And in this video, what I'm going to be doing is replaying an event that Saad. And I did together to his clients at Baselane. And if you're not familiar with Baselane, it solves one of the major pain points that people experience who use LLCs. And that is setting up bank accounts. Listen, I've got a lot of videos on my channel talking about banking and how you should run money to make sure you protect the status of your limited liability company.

0:30 So before we get into the video itself that we did, where we covered a lot of material on asset protection, planning and strategizing, I'd like to have Saad, why don't you tell everyone a little bit about Baselane and what they can do for real estate investors? Thanks, Clint. Baselane is an all in one financial and banking platform. It's designed for real estate investors and we only serve real estate investors. It's got banking, automated bookkeeping and online rent collection built in.

0:59 Really, the entire goal of Baselane is to give you clarity of mind, give you that time back, to be able to invest in growth by giving you banking that's built from the ground up for your real estate business. If you have multiple entity structures, we can open up bank accounts in minutes. We can automate all the money movements so things are happening the right way. We can help you with the bookkeeping and the financial reporting. And again we can also help you with online right collection.

1:23 So all of that is packaged in one. We heard landlords talking all the time about hey, I've got multiple logins. I'm mixing my my personal funds with my business funds. We don't want to do any of that as Klinsmann coaching. We want to have the right structures and the right cash flowing through those structures with different bank accounts and basically can automate all of that for you. Yeah. So in this event, what I'm doing is teaching you about that.

1:46 He and I will be talking about the importance of where the bank accounts fit and the bookkeeping, but also about the very structures and the issues that come up when people are getting started in real estate investing. So if you've been investing for a while, you're just getting started. You're going to want to see what we've been, what we talked about on this critical webinar. All right guys, let's get started. Hey everybody, welcome to another webinar from Baselane.

2:15 I'm very, very excited. Today. We've got a very special guest here who's going to be educating all of us about really important topic on entity formation and asset protection. So if you're thinking about growth and scaling, how do you structure your business the right way as you evolve and grow over time? This is our agenda. We're going to talk about a few key topics. Why most investors are not getting this entity structure the right way. How to do the right approach and framework to be able to protect yourself and organize your business the best way possible, some scenarios and things like that, and what to do next.

2:56 And then we'll do a live Q&A after. So we'll do about 35 minutes in the first four things, and then we'll give some ten 15 minutes for Q&A. So yeah welcome in. Please fill out the poll as we're getting started. So while we're doing that I'm going to do some quick intros here. So I'm Saad Dar I lead partnerships and sales at Baselane I'm also a real estate investor. I'm a former CPA. I invest in mostly long term, but I have a mix of some small short term and mid-term rentals.

3:23 Our guest here today is Clint Coons, who we met over about a year ago. Clint is an attorney, an investor, a bestselling author. He's also a a large real estate investor in our world, 365 plus units, which is very impressive. He is co-founder of Anderson Advisors, which I'm sure many of you have heard about. If you're working with Baselane and he is a specialist on this topic in terms of asset protection, business planning, tax strategy as well.

3:56 And so he's going to be walking us through these things today. So super, super lucky to have Clint here. Clint welcome. Hey thanks for having me appreciate it. Looking forward to getting into the material. Yeah we're super excited to have you. And I'm just checking to see how we're doing on our poll. And if everybody is filling out the poll and for the team, if you could let me know when it's done. We'll kind of pull up the results and share with everybody.

4:22 You know, it's asking you questions like how many properties do you have, what's your strategy, etc. so we know who you are so we can tailor the discussion to you so you get the most out of this. And let me just see here. So yeah, we've got a couple of questions. How many rentals do you have? What's your current type of investment property. How do you manage your finances? How do you collect rent? What's your biggest operational challenge, etc..

4:46 So please fill that out in our team. If you could just let us know when that's done. So this is awesome. We've got over 125 people on amazing, probably one of the more popular webinars that we've done this year. So I'm not surprised. And Clint, I think we can just kind of jump into it. Maybe you could give a little bit of background your story. Oh, the poll just came in. So let me just cover that so quickly.

5:10 What do we have here. So we've got quite a good mix of folks in terms of size. So 0 to 2 units 45% of people, 3 to 5 units, 28% of people 6 to 10. 9% 11 to 25. 12% of folks here. And then 26 plus units, 6%. The vast majority of your long term rentals, then the next category, short term, and then the rest kind of a blend of a few percentage points for the rest mid-term, etc..

5:39 How do you manage your finances? 20% are on spreadsheets, 20% on some sort of software, 8% of accountant bookkeeper, 18% of you have separate bank accounts. That's too low. We're going to have to talk about that today. How do you currently collect rent? We also see a lot of different answers here. So 8% on cash in check. 27% on payment apps like Zelle, Venmo. We don't love that. We'll talk about that another time.

6:09 But you can check out some content about that. Property managers 33%. Online rent collection platforms 27%. Baselane 4%. So if you don't know, we also do help with rent collection at Baselane. We can automate that for you. So we should talk about that. What's your biggest operational challenge right now. Different types of answers here. Kind of a mix. But 38% say tax prep and bookkeeping. And so I think we can definitely help you that with that at Baselane.

6:37 I think the way you set up your business and your structure is also going to inform all of that too. So I appreciate everybody's very, you know, quick responses to the poll here. And we're going to jump into the content. So just really quickly what is Baselane for the people that are new to Baselane. Never heard about Baselane or wondering you know what what we can offer Baselane is the leading banking and bookkeeping platform for real estate investors in the US.

7:05 So we offer a few key products banking built for real estate investors like you and me and Clint, automated bookkeeping, reporting and tax center that helps you with all of those things that we we just talked about above and then automated online rent collection. So those are three core products. It helps you bring all of it together automated for you so you can really organize, automate and optimize your rental finances and focus on growth and scaling, which I think all of us want to achieve.

7:34 So that's a quick blurb about Baselane. And we're going to come back to this at the end. I'll give you that was just a sneak preview on the offering will allow you to sign up for some special trainings that we're going to be offering at the end of this, and so I'll come back to that. But I really I think we want to get into the conversation. And, Clint, I think I'll just try to ask some questions on behalf of the investors here.

7:59 I'll let you know. I have one LLC for about nine properties, and there's one that's not in the LLC and then eight that are okay. So I might be one of your subjects here today as well. And so I guess the first question is really just around, you know, I see this on bigger pockets. Like why should I have an LLC versus just having it on my name because I get cheaper rates on my loans and things like that.

8:25 How should we be thinking about that first question? That's a great question. It comes up all the time. And you're right, I've seen it a lot on bigger pockets. I used to write for Bigger Pockets when Josh started it. I don't know how many years ago, 15, 17 years ago. And that was always a topic of conversation from a lot of people. You know, having grown up in a real estate investor family and seeing the challenges that people have to navigate when it comes to owning property, the right way to reduce the risk of litigation, and also seeing what happens when you know you do get sued and what your options are.

9:04 Do you make a claim to your carrier to cover you, and you hope that they're going to cover you, or you're just sitting back across your fingers trying to settle it out because you don't want to make a claim because then you're going to get dropped, which my father tended to do more often than not when it came to dealing with his friction in his in his rental portfolio. Right. But what I tell people is this.

9:29 All right, so you take your insurance and everyone has a false sense of security with an insurance. And here's a great example that came out of a recent case. And what happened here is that an individual was this is in California. They were being sued by someone who was injured on their property. All right. So somebody was injured on the property. They're now starting to lawsuit. And that is their tenant. And the tenant in the lawsuit itself.

9:57 They claim that the landlord did not keep the property up to code and didn't provide habitable living conditions. They throw all this extra language into the claims because of what they intend to do with their claim or with their pleadings, is to assassinate your character. Yeah, yeah, you're injured on the property. But you know what? This is a slum landlord as well. So I just want the court to take notice. You don't want to protect this person, right?

10:25 We want to go after them and hold them personally liable and get all kinds of damages. So what happened with this landlord in California is that they turned the claim over to their carrier. And their carrier then looked at the complaint, sent back a letter and stated, you're not covered. And of course, the landlords like, what do you mean? This is why I bought the insurance. It's it's for this type of slip and fall. They said, yeah, normally that would be covered and you're correct.

10:53 But as you'll notice in your complaint that the landlord or the plaintiff's attorney also pledged that you violated the warranty of habitability by the way, you maintained your property. And he said, no, that's not true. Doesn't matter. You see, in your policy itself, it states that if they make that type of claim, you're not covered. Now, how did I find out about this? Because of course, the landlord sued. Is carrier in the landlord lost because it went up to the appellate court, and the appellate court held in the favor of the carrier because that was inside of his policy.

11:25 And so when people tell me, hey, you know what, I'm just going to load up on insurance and it's going to be there to protect me. I mean, we could spend probably the next 40 minutes and I could just keep citing case after case after case, where that is just not the facts that carriers find ways to get out of coverage. And so when it comes to asset protection, you need insurance. It's your backstop, but it's not how you should protect yourself.

11:51 And what I like to remind people, you know, many times you don't get sued for what you did. You get sued for what you have. And the more that people can discover that is plaintiff's attorney that you have in your own name, the more likely it is that they're going to be aggressive in pursuing the claim. Yeah, that's super helpful. So I think that's just kind of recapping it. The benefits of that obviously main one is the liability protection as you just highlighted.

12:19 And then it also sounds like the second thing you just said, which is super important, is separation of, I guess, personal and business assets. Right. So you're protected, meaning if there is something exposes business only, for example, versus all of your assets, is that right? Right. Yeah. So so you might if I draw this one out. Yeah. Yeah. Please. Okay. Let me just share some strange we'll draw some examples of what I'm referring to okay. So think about if we had two investors here.

12:47 We have this investor. All right. And they set up one limited liability company. And they place for homes into this one LLC like that now. And we we can trust that to this investor over here who takes an approach where they create four separate LLCs. And each LLC has its own home. Now this question comes up a lot, and I think you're alluding to it as well, is that when you're starting out, investor one right here is a pretty common scenario.

13:24 You start buying a property, then you want you buy another property and another, and you just start dropping them in the same LLC. And you're you're maybe you talk to someone and they say, listen, you can put 4 or 5 properties in there. Just make sure you have this we just talked about. Right, right. And then you're going to be covered. Now when I started back in 99 when we started, Anderson and I would teach or speak to art to real estate investors, and this was before I started investing.

13:55 I would teach people this strategy right here. I would say, hey, you know what, take and put four properties in there. No more than $500,000 in equity per limited liability company. Because what I was focused on was if if a lawsuit were to originate from this property right here, then what's going to happen is they're going to name the LLC as the defendant in the lawsuit, and they're going to sue the LLC. Now, of course, you have insurance, but let's say the insurance doesn't cover the claim because of what I just described.

14:26 And that landlord that I just described, he had other assets. So now all those assets are exposed to the claim of the injured party to that tenant. So when you're thinking about this, what what I was teaching at the time is, hey, if they sue your LLC, the most you'll end up losing is going to be the equity in your property, because that's all you have, right? The bank gets paid first. You get whatever's left. So if your risk tolerance level sits at 500 K, then do not put more than $500,000 worth of equity into that limited liability company. Now, what I started to recognize when I started investing, I remember this was in Shelby, Tennessee, Memphis, Tennessee, Shelby County, very first property I bought back in 2005 or 2006, 2006 I bought this property.

15:22 I received my first rent check after debt and everything else. It was $217.26. And I looked at that and it struck me right. I didn't have a lot of equity in this property, maybe about $40,000. But it struck me that that rent check being was only $217. That was what was going to become my retirement, that the more those that I keep acquiring, then I'm going to be able to retire and live a lifestyle that I want based upon that rental income.

15:53 And c so for me, that was a change in my thinking because I looked back at this investor, number one, and I said, all right, so you're involved in a lawsuit, you lose $500,000 in equity, but that doesn't that isn't what hurts you. What hurts you is the fact that you if is that you have each of these properties. This one's throwing off 8000. This one's bringing in 10,000. This one's bringing in 6000. Maybe this one's bringing in $14,000 a year.

16:19 In my example right here, you just lost. What's that? $38,000 in income. That's what hurts because, see, the mistake that I think a lot of us originally start thinking about is, hey, you know, the equity and the property, but you don't eat your equity. You don't go to Costco and say, hey, can I pay for my groceries with the equity and my property? They're not accepting that what you're paying for is with the income. And so there's the mistake that I see people make when when they're grouping properties in an LLC, they're not recognizing, you're not trying to protect equity.

16:51 What you're trying to protect his income because income equals lifestyle. And lifestyle, then is freedom for you to do what you want to do. And so that that income is so important. That's why when we create one LLC per property, we could take a hit in our portfolio right here. And maybe here is in this property is $125,000 in equity. And yeah, that sucks. And I lost that. But what did I keep? I kept the $8,000 from this property.

17:16 I kept the $10,000 from this property, and I kept the $14,000. So I still have income coming in. My lifestyle will be impacted, but it's not going to have the same impact that it would if I lost all of that. Not yes. And this is why I recommend people do not group properties. And I get it. The likelihood of being sued, you know, is pretty small. In my investing, which started in 2006, I've only dealt with two lawsuits.

17:47 Now, the the lawsuit that I'm in right now. Okay. And this is what I'm talking about why asset protection is so important Winston-Salem, North Carolina I do a lot of investing there. One of the properties burned down last year, and I actually at my events, I play the video from the local news station that went out there because this house went up in flames. It burned down to basically to the ground. And unfortunately the tenant expired, passed away.

18:14 Now he didn't die in the fire. He died several weeks later, but he was taken to hospital smoke inhalation. And he had a lot of health issues, but unfortunately he passed away. And it's sad that it happened. Why did that fire occur? Because the tenant they determined had a power strip and there was too many things plugged into it. And that's what started the fire defective power strip that he had. They traced it back to that location.

18:38 That didn't stop me from being sued and having to defend this case. And so, you know, lawsuits do happen. And again, we could spend several hours talking about those people that have run up against. And so by putting this together, what you're doing, it's prevention, right? I'm creating security around my investments because I just got off the phone with a client she's engaging in two 1031 exchanges right now. And she said, all right, Clint, where are you investing right now?

19:03 I want to know where I should be looking to roll these funds that are going to come in. And I said, honestly, I, I'm struggling to find new investments. I have not made a single investment this year because it's becoming a very difficult market, okay, for investment purposes. And so when you think about the assets that you have, if you have worked on, you brought in, as we saw there in the polls, a lot of people have between 0 to 2 and then 3 to 5 properties.

19:31 How easy it is it to go out there and just replace that portfolio tomorrow if you had to start over? It's not difficult. Extremely. Yeah. That's why I push. So a couple of questions I guess. So we do have a lot of folks here that are under five properties at the moment. So just taking that into account, we've talked about the dangers of grouping. You know, let's say 4 or 5 into one LLC. And so are there.

19:58 What are the different types of structures that or are you seeing any other common mistakes related to that? Before we get into that, are there other types of kind of things you see that we should avoid? I guess, before we get into what's the right structure? Okay, so so when you're structuring the first thing you want to look at, let's say I had a piece of property here and I want to transfer this into a limited liability company okay.

20:26 All right. So so I would want to know one thing is where is that asset located. You see one of the mistakes that people make is they think that everything is a one size fits all. If you go on bigger pockets and if you search Reddit and you talk about asset protection and real estate, you'll see everyone pumping, hey, set up an LLC. In fact, at the event where you and I first met before you came up and we started chatting about the benefits that Baselane could offer even Anderson's clients for bank formations, which just, you know, as I stated, open to my eyes and really helped a lot of people, the individual I was speaking to was telling me that he set up two LLCs.

21:06 He had two properties in Florida, two rental properties. Any any contacted this group on the internet. And he set created two limited liability companies for these Florida properties. And both of these LLCs are Florida LLCs. And he said to me he's going to deed the properties in. And he said, can can you guys assist with this? And I said, yeah, we can assist with the deeds, but I don't think you want to do that. And he said, no, no, I definitely want to do that.

21:35 And I said, okay, let me ask you a question. Does the property, do they have debt on the property? Okay. The answer to that was yes, they do have debt on the property. Okay. So so then my question, I told them, hey, since these properties in Florida, you understand that when you transfer debt encumbered property into a limited liability company, that's going to result in a transfer tax, okay. So there's going to be a transfer tax there.

22:03 And he did not know that. And I said, well, do you want to pay that based upon what your properties. That's going to probably run you about $3,800 to transfer those properties in. Now, the way he'd created these limited liability companies and the way I mean to move them into the LLCs, I asked them, how long have you own the properties? This one is owned for about six years, and maybe this one was eight years, 8 or 10 years.

22:28 I said, okay, Florida has a tax cap, meaning your property taxes can only go up 10% a year maximum. Has your property values exceeded that? He said, oh, absolutely. Over the past, you know, 5 or 6 years, they've really run up in value. I said, okay, so then your tax cap. Okay, you're going to lose it gone as soon as you transfer your property into the LLC. So now your property taxes are going to jump on you and you say sorry, is that is that because they redo the appraisal?

23:00 Yes, they do in Florida. And Florida is not unlike there's other jurisdictions that will do this as well. And so then we talked about the fact that they have a mortgage on it. And I said who owns your mortgage? He goes, well, I don't know who owns my mortgage. And I said, well, here's something that's really simple. So everyone that's watching this right now, pay attention here before you move property into an LLC, the first thing you want to do is go to or Google Freddie loan lookup tool and then Google Fannie loan lookup tool.

23:30 Use two separate browsers. It's going to take you to a web page, and on that web page, you can type in your property address in the last four digits of your Social Security number. And then the site will tell you whether or not Freddie or if you're using fannies. They own your mortgage. Now that's key, because if they don't own your mortgage and you deed property into an LLC, then the lender that you originally worked with, they haven't sold your mortgage to either one of these companies yet.

24:04 The letter could accelerate. And so when I was talking to this gentleman, I said, hey, what's your interest rate on the properties? Oh, he said, it's about 4.75. It was low interest rate. I said, so look them up right now. This one was owned by Freddie. This one was not. And I said, if you transfer this property into an LLC, then there's a likelihood that the lender is going to force you to refi if they discover that transfer.

24:32 So on three counts. You've got serious issues here. So then he asked me what should I have done? I said, you need to use the right entity for the right jurisdiction where the property is located. And in Florida and LLC is not what we use. We use a different tool. It's called a land trust. So my point in sharing this with everyone here is that understand that it doesn't matter where you live, although that is important as well when it comes to structuring.

25:01 What we look at is where is the asset located. Because I find a lot of our clients that we that we structure and we work with continually, they invest in multiple states. I invest in five different states, okay. And so the majority of my assets are outside the state of Washington where this office is located. I have three properties here in my portfolio. Everything else is somewhere else. So when you're structuring, you want to make sure you're aligning the structure to the state.

25:28 When you know about these types of issues. And that's one of the biggest mistakes I see with investors. They always believe the LLC is the first entity they need to set up. I say, hey, take a pause. Let's see. You're going to need it, but let's see how it fits in. Yeah, that's super helpful. So just maybe recapping. And by the way, I did paste that Freddie Mac link as an example that was mentioned for loan lookup in the chat.

25:52 You can do the same for Fannie. It's changed to Fannie and look it up and you'll be able to find it. So just to make sure I'm getting this right and for the audience here. So not every situation is copy and paste. Like there are a lot of nuances to the individual situations that you might be in the state really matters the situation of your current properties. If you don't have the LLC and now you're trying to get them into an LLC matters, right?

26:18 And all the things you mentioned, the debt structure, the tax situation in the county or the town that you're in, it matters. And you know, there's cost to all of those things as well. So you're saying not necessarily LLC. There are other ways to do this, such as land trust depending on the situation. Is that a good recap? Yeah, that's a that's a great recap. It really depends on your situation on how we want to structure it.

26:44 That's why I said earlier everyone's situation. It's not a one size fits all. Yeah. That's that's all. There were some people already asking about land trusts in the Q&A which is which is great. Hey guys. You've been watching this video thus far. We've got a lot of nuggets we've been sharing with you. Listen, if you want to learn more about bassline, check out the QR code right now. You can go to the website. They've got a tremendous amount of offerings for you that will help you set up your bank account, your bookkeeping to make sure you're running your business the right way.

27:16 I'm all about asset protection, sod's all about making sure you run it the right way as well, because the last thing you want to have is a situation where someone pierces your corporate veil because you screwed up somewhere along the way. All right, let's get back to the video. And so maybe just before we get into, like, more details, you know, there's so many people on Baselane that we know of that are all growth minded. They all have a couple of properties. As you can see.

27:41 I don't know what their situations are in terms of LLC today or corporate structures. And they all want to grow. And so if they're going, you know, beyond that five property mark and your box that said, hey, depending on your risk level, probably four is a cap or maybe five and one or maximum maybe. How how do you recommend people think about growth? Should they start creating different entity structures for each property they buy from there on, what do people still do, like 3 to 4 and one and then do another batch and another batch, like how would we think about that part?

28:16 Okay, so first off you have to determine how you're going to acquire the real estate. Is it going to be a loan which would allow you to close in an entity. And if you're new doubtful you're going to qualify for a DSLR alone if you haven't been investing for a while. So if you're just getting started, you have maybe 1 or 2 properties. You're going to get a conventional mortgage. Then what does that mean? That means I have to take title in my own name.

28:42 All right. Because the only way I can do it, they're not going to allow me to take title in an entity unless, as I stated, the DSR loan. Now here's another nugget you should pay attention to. In my experience, what I did a long time ago when I started investing is I established a relationship with some community banks in the community in which I was investing. Now, why did I go down and start working with these community lenders?

29:11 Well, sometimes they had better, better rates, not all the time, but they offered more favorable terms from the standpoint is that as an investor, I want to close in an LLC. And if the community bank is going to treat that loan, which they typically do as a portfolio loan, so they're holding it, they're not selling it, right. I'll allow you to close in an LLC. You see, there's only one reason why conventional lenders do not allow you to close in an LLC is because for Freddie Fannie guidelines for underwriting, you have to close in your own name on residential property.

29:48 But Freddie Fannie allows you, once you close, to transfer it into an LLC if they own the mortgage. But right or closed. So community banks aren't under that pressure. So from that standpoint, work with them. If you want to close directly in an LLC, if you're obtaining loans, keep that option open. So jelly speaking you close in your own name. That is the first thing that happens. And then once you've closed on that property, then the question becomes, how do I get that property into this LLC without creating the issues that I just described?

30:25 Tax issues, transfer tax, debt issues, acceleration. So when I look at that, sometimes it involves setting up a structure where we set up a land trust up here. And instead of going directly to the LLC, we move it into a land trust that is owned by the limited liability company. And we have to have it owned by the LLC for asset protection purposes, because outside the state of Florida, if I didn't have this LLC and instead the land trust was set up and it went right back to me, if something went wrong with that property, if I get sued, that property could be taken and they can sue me personally.

31:06 So the LLCs, a critical piece here with the land trust, it needs to be the beneficiary. And so in this manner what you're solving for is the lender concerns about the due on sale clause, about the transfer tax issues that can come up and moving property. So you would use this as the way to create your asset protection. Now, even though I put this on the board here, understand it state specific if this was in Pennsylvania.

31:34 Okay. In fact, the gentleman I was talking about when I asked him, I said, where else you invest? And he said, Pennsylvania. I said, you just picked the hardest states to invest in when it comes to structuring Pennsylvania. This doesn't even work. I said, so everything I told you, just forget about it. You can't unless you want to pay a lot of money to transfer the real estate. So again, you have to understand where you're investing.

31:52 And then what I like to do is I have a base structure here. I always stick everything through a Wyoming LLC. So all my companies that own all my real estate, all flow through one LLC. And there's a couple compelling reasons to do this. Number one is anonymity. Okay. So what do I mean by that?

32:22 The example I've been using for the past half a year. Bill Belichick, right. He's dating a teenager named Jordan Hudson okay. I mean there's just some 40 or 50 year age difference between them. Oh wow. You know you haven't seen it I think I know about it, but I didn't know how young she was. Maybe she's in her early 20s I don't know. But it's just kind of creepy personally. But anyways, so somebody wanted to do a hit piece on her, right?

32:53 Why does it 20 some year old go for a 70 year old guy? Well, typically it's this, right? We all know that. So how do you prove that? Well, what they did is they went out and they went to a website presumably called Open Corporates because I did the same thing after I read the article and they put in her name, Jordan Hudson said, hey, why do you go to that site and put in Jordan Hutton's because you wanted to discover how many LLCs are in her name, where she's listed as the member manager, even Bill, if he's on there.

33:29 And what they did is they searched these LLCs and they found she was on 24 limited liability companies, which was interesting because they were all set up after she started dating Bill. So they found these 24 LLCs. Now you find the 24 LLCs, because when you set up the LLC in Massachusetts, you have to list who the member or managers. So that's public available information. Anybody can search this and they can determine it. That's how they're able to discover this right.

34:00 So once they did that they said all right I've got 24 LLCs. Now I'm going to go to the county records or you use Data Tree, a program or a subscription we have where I can search the United States. And you just put in the LLC name and said, does this LLC own any real estate? And then they start finding properties and they said, oh, wow. Jordan all of a sudden has become a real estate investor, and she's acquiring multi-million dollar properties and all these LLCs.

34:28 How does that happen right now? Are you trying to say that she's generating. Maybe she is. She just got, you know, big boost in income after she started dating him. But the implication is there. And so the hit piece was done and it made national news and a lot of different places. And so I went and I looked it up and sure enough, I could find everything. So. So my point in sharing this with you is why do people want that information?

34:53 Is because they were trying to determine, Saad, what are you worth? If I was suing you? In the more information I can find about your assets, then the stronger claim I think I have. Because I can shake you down, push on you harder because you're worth going after. Because you have something to collect against. Now, had they come to Anderson, I could have fixed that problem for. And you could have set up that structure where that hit piece would have never gained traction, because they would have understood the benefit of using a Wyoming or Delaware LLC, because when you set that company up, that Delaware and Wyoming, they neither state asked for the members or managers of the limited liability company.

35:38 They don't ask for this information. Therefore nothing gets put out there. So you start with this company and then you create your Massachusetts LLC up here. And when you file in Massachusetts, Massachusetts says, well, who's the manager? Remember, you say the Wyoming LLC. So this is the this is what I hear is the parent co right. The parent company basically they call this parent or holding parent or holding. Okay. So basically I know it's on the bottom.

36:05 But normally basically this is the head honcho. This is the top layer of your structure where you have anonymity. And if you what you're saying is if you create Wyoming, does that mean if you create five different LLCs underneath that and the names are obscure or ABC one two, three? There's no way that people can find out who owns the assets inside of those smaller LLCs, if they're owned by the Wyoming LLC. Is that right? That is correct, because when you look at all of these limited liability companies, they have one common owner.

36:36 This Wyoming LLC. Your name is not associated to any of those limited liability companies. I see. That means you're disgruntled or angry. Tenant can't Google it and figure out who owns that property or somebody else that's trying to sue you or whatever the scenario is. Yeah. So it goes back to, you know, really this all. It also helps if you're self-managing. Okay. So when I grew up, my dad self-managed he still does this day. Big apartment building he had and he wanted everyone to know he was the guy.

37:09 So the problem with that is when you let everyone know you're the owner, when they've got a complaint, were they complaining to the owner? And so he's always dealing with these disgruntled tenants. Well, if people didn't know you're the owner, right. Because you have it through an LLC. Let's say this LLC here is set up in Denver. And if somebody wanted to look up who the owner of the property was and they saw this Denver LLC, 1321 main LLC, and it's owned by a Wyoming LLC called no.

37:42 One LLC. They don't see you. So I'm out managing the properties and I'm working with them. I never disclose the fact I'm the owner. I just disclose the fact that I am the manager. Yeah. And so so it's a different dynamic. One question that's coming up which is good is what's the difference between a land trust and an LLC. Just basic 101. Sure. So when you set up a land trust here okay. Here's some characteristics of a land trust.

38:13 Number one, it's referred to as a grand tour trust okay. So so what is a grand tour trust mean to me okay. With a grand tour. Trust okay. Number one, there's no asset protection. With a grantor trust. Generally speaking, unless it's codified under state law which Florida has done. But generally speaking, if I set up a land a land trust owned property in Texas, California, Washington state, New Mexico, it doesn't matter.

38:48 As I stayed earlier when I put when I put my property in there, then if anything were to happen with the property, the owner of the trust, which referred to as the beneficiary, is going to be liable. So grantor trust doesn't offer any asset protection. Be no tax benefits with a grantor trust. It's ignored for tax purposes. So you're not filing any tax returns. Everything passes through to whoever the owner is.

39:20 You see with a trust like a living trust right. You have a grantor that's going to be you. You have a trustee. Typically this is not going to be you. I will use an I like to use an LLC here as a trustee. And then you have a beneficiary and that's the the owner. And this would be you followed by your LLC okay.

39:51 So now why do people use this grantor trust. Because it has no asset protection no tax minute. Why would you set it up then. Right. For this reason here. Title transfer. Oh okay. Title transfer. Because you run into problems with the due on sale clause. If your mortgage is not owned by Freddie or Fannie and you want to put it directly into an LLC, the lender could accelerate make your refinance.

40:23 But if you put it into a trust, they don't do that. Okay. Because there's this act called the Saint Germain Act, Federal Depository Act of 19. I think it was 82 or 86. I think it was 82, which basically states, if you move property into a grand tour, trust lenders can't accelerate. So so you use it from that standpoint. So this is what the public sees. The lender would see. They don't see what's behind it. The beneficiaries ultimately an LLC because the other benefit of a land trust.

40:52 It's private meaning that the document itself it's not recorded anywhere. No one can look at your trust document and see who the parties to the trusts are. All of that is hidden because it doesn't get recorded. The only thing, only way somebody knows that a trust even exists is because title to the property is held in the trust name. That's it. So it still has a title transfer, but there's no due on sale clause so they can accelerate on that basically.

41:22 Correct. There's no transfer tax issues when you transfer it in that we talked about moving into an LLC. Some states impose a transfer tax if you go directly into an LLC but they don't into a grand tour trust okay. Yeah. So oftentimes that's what we'll do is we'll set up the trust here. Individual will take their property. And they did it into the trust which by way of little asterisk right here. If I want to tell you if you're if you're not using a professional to do this.

41:52 And I'd highly recommend you do it. But I get I know there's a lot of people, especially you come from bigger pockets. They like to do things on their own. Never use a quit claim deed. Okay, there's another thing you should write down. Never use a quick claimed to transfer property. Always use a warranty deed or grant deed. If you're in California, always use a warranty deed. It's important. Whenever I see the use of a quit claim deed from an individual to an a land trust or to an LLC, even if I don't know, I can't discern that you're somehow involved with that entity.

42:28 I know you are, because you'll never buy property from someone and accept a quick claim deed on that purchase, because you can't get title insurance with that type of deed and you have no guarantees. And so if I'm going to give you two, $300,000 for a piece of property, I want to guarantee that you're the owner of the property with a quick claim deed. You're saying maybe I own it, maybe I don't, maybe it has warts, maybe it doesn't.

42:54 You get whatever I have, you take the risk. People don't ever do that. They always want warranty deed. So that's how you can mess things up and disclose it. You're the owner unintentionally. That's super helpful. We have one more section and then we're going to get into Q&A for folks. And this is really important because I think there's sort of an element of like, how do you set this up the right way and structure it? And we're going to be sending out a link here soon that Clint had provided.

43:20 That will help you guys with that. If our team can share that. And what what exactly is that link for? Where does that take them to set up a strategy session with us where, I mean, so if you want us to look at your individual situation where you're investing, is it long term, short term, mid-term rentals, flipping property? I mean, there's different strategies for different types of investing. Buying subject two. We'll break it all down for you in 45 minutes and create a plan for you.

43:50 And obviously we'd like you to use us to help set it up. But there's no obligation. What we want to do is we want to make better informed investors out there, because eventually when people start consuming the content that you and I are putting out and they start understanding how things work, they start making better decisions. And then, you know, they're involved in a lawsuit. They're not putting their entire investment portfolio at risk. Yeah, we obviously have the same incentive.

44:14 Right. We want to keep investors investing. They open up more accounts, they create more LLCs and they find financial success. This to me, folks, is a no brainer. They're giving you a 45 minute free strategy session. All of us should do this. I'm going to do it because I've made that mistake. I have 8 in 1 LLC right now, and I think after just watching this today, I'm going to have to listening to this, I'm going to have to adjust mine as well.

44:39 We have one more section, I guess, Clint, we want to talk about, you know, operations a bit and the Baselane and banking also comes into that because you had a video that I saw a long time ago about on YouTube about, you know, where things start to get messed up with entity structures, but also the operations of it with banking and the way you set it up and financials and not having clean books and things like that.

45:02 So what are the things that you see often that folks are kind of making mistakes around? Let's say they do even set up the structure that you're coaching. What are some common things you're seeing folks not doing correctly that they should be doing correctly with their structuring, with the structuring, the way they set up their bank accounts, for example, things like that, so they don't pierce the corporate veil, etc.. So, so one of the things that you'll see come up a lot is people don't have operating agreements.

45:33 All they do is they file the LLC and they never put together an operating agreement. That is a huge problem. The other thing, of course, is. How they run the money. So let's let's just draw this out. I see some people say the links not working. No, we put this in a new one. I just tested it. The new link is working. Let's pin that for the team on Baselane. You tap 26, right? Maybe that link forward slash be.

46:05 Yeah, I'm on it right now. It's opening up okay. Yeah. Perfect. Now so so here's what happens. They have a structure that looks like this down here. And these LLCs are owned like that. Now what individuals will do is they'll commingle assets. So let's say I have some CapEx over here with this property. The roof needs some repair work done.

46:36 And I have money in this LLC. People will take money from here and pay it over here and cover the roof expense with this LLC checking account, assuming they even have an LLC checking account opened up. A lot of times they don't have any checking accounts, they have a checking account in their personal name, and then they'll start covering the CapEx in the turns with their personal account. And so what they're electing to do is they're electing to treat their their structures one common enterprise, and they're ignoring the lines of how money flows.

47:08 And so it's not only spending money. Here's another great example we see a lot. Let's assume that somebody is set up a structure here. They have a bank account here. They have a bank account here. And they have nothing here or here. Now this has 20 K in it. And they decide, you know what, let's go on a cruise. And the cruise line wants a deposit of $12,000. So they move the money directly out of the LLC into their personal account.

47:39 Right. It's my money. But you see, it is. But it isn't. Right. In order to receive those funds, what you need to do is move the funds from here to here and then from here to here. So you have to follow the lines, is what I always tell people when we draw out their diagrams and we create their structures for them, they ask me, how do I get money in and out? I said, just follow the lines.

48:01 As long as there's a line connecting the box to you or a box to a box, that's how money would flow. So if I needed money up here, I would move money into my blue box and then move money into my red box just like that. Right. So, you know, one of the things that attracted me to Base Lane when you and I started talking was the ability to simplify this for our investor clients. And I'll tell you why.

48:27 Because a lot of people, as I describe, do not do what we just told you. They'll set up their Wyoming LLC down here, they'll open a bank account here, and they'll never open a bank account up here in these single member LLCs. And I get it. You know, for a lot of traditional banks Wells Fargo, Chase, Bank of America, those guys, that's a heavy lift to go in there and say, hey, I need to get a bank account set up for this LLC.

48:55 Oh, by the way, it's owned by this LLC down here, and they can't wrap their brains around the structure. Why? You've set it up that way. So what happens is, most time they just run it out of this here. And so all rents get paid here. And then they just take a distribution here. Yeah. There. You're creating a problem. The ideal structure should be you have a bank account here. You have a bank account here you have a bank account here.

49:20 And then you have a separate set of books for each entity that accounts for all of its income and expenses. Right. And then all that flows down to here, and then that flows down to you and that entity. The blue box has its own bank account and own books. It has its own bank account and its own set of books. Now this blue box can be disregarded. Disregarded. So I saw some questions come up. Right. Okay, so all of these red boxes, no tax returns have to be filed for them.

49:49 They're disregarded for federal tax purposes. That's very important. Yeah. But you need the book to but you still do the books. You have to do the books. The reason you have to do the books is because if the LLC got sued, was sued, involved in a lawsuit, and they're trying to pierce the veil of that company, you have to show that you treated that entity as a separate business and you respected it. If you choose not to, then you give the opening for a court to say, well, you didn't do it, so why should we now respect it when you need the protection?

50:21 Big, big mistake there. So that's why you want to have separate books. Plus, if you ever want to get a loan, if you're trying to get a DSC or try to use that LLC, you need books and records. So what I like about Baselane when you first approached me is that it solved one of those major friction points for our clients. It made it simple for them to be able to open up accounts on your platform for their multiple LLCs, or if they open up a series LLC, you can create all those sub accounts inside of that.

50:55 Yeah, and that's where your money would be collected. Now in some instances cases it can become problematic. Of course, you know everyone's situation is different. You're using a PM, you have a portfolio of nine properties in Houston, and your PM over here will only give you one wire. Okay. So then what I would tell you is you'd wire it here, but then move the money back to the appropriate entity, do the book work, and then pull it back down.

51:23 And what's so simple is that on your platform it's easy to do that and it's not. And so that way everything stays clean. Because, you know, one of the things that that I found with a lot of our clients is they don't pay attention to the bookkeeping, and they don't even know if they're making money off their portfolio. Unfortunately, that's sad. And you don't see where the losses are in your investing business because you're not staying on top of the numbers.

51:53 The numbers are critical. Yeah, that's super helpful. So that that to me is really important. I meet a lot of folks at conferences where they're not doing most of this. And so we just talked about the benefits, and our team is going to be posting a link as well. We're going to be hosting these financial trainings where you're going to be working with one of our experts, who's going to help you think about how to set up these bank accounts.

52:22 And this is why the partnership with Anderson works so well, because, Anderson, helping you structure and to get you set up the right, the right, the right protection as well as the structures and Baselane can then immediately help you open up all of those bank accounts, help with all the kind of accounting and bookkeeping side of it through automation all in one login. And so the link we're sending you also here, and I'll quickly show to my screen as we move to move to Q&A here.

52:53 Lots of questions is that you'll be able to get the benefit of working with our team to be able to set those up for you. And you might be thinking, hey, well, I only have one LLC. I don't need this right now. Or you know, I need to set up the LLCs, and that's fair. But you can still do the what you have today, get that stuff sorted out and cleaned. And so you have the proper books either way.

53:19 And so if you're scaling and you have more properties, usually folks that are, you know, five plus properties, 7500 revenue, you should scan the left hand side here. You'll get a really good training on that. And then on the right, if you're starting out, you only have zero, 1 or 2 properties. Scan that and then you'll be able to go to a different training. That'll help you set up the basics. And so I'll keep this live here.

53:47 I think again, the link we sent from Clint is super important. That's the structure. And then this will be the banking part of it and the kind of helping you with the automation of the the bookkeeping side of it as well. Let me go to the Q&A because there's a lot of questions here. I don't think we're going to be able to cover all of them. We're going to do our best to honor the order and what makes sense for everybody.

54:09 We'll cover that. There are some questions. We we covered the land trust question already. So I'm going to mark the complete Florida now has a series LLC option starting June. Would it be better to start using series LLC setup to hold property instead of land trust? It's not going to change anything that I was discussing in Florida, because if you have the debt and the transfer, all that, even if it's gone into a sell, you're still going to need a land trust.

54:38 Most likely. Yeah. That's helpful. Can you transfer to an LLC for properties located in Texas? Also, some questions about people wondering if, well, if you're if it's in your name and then you're transferred to an LLC, can somebody just find you through the paper trail of who sold it or. So that's a great question. It comes up a lot. People say, well, Clint, if you transfer the property into an LLC, they would see that you're the owner of that property and you transfer it to an LLC.

55:07 So they assume now that you own it, I mean, you could make that assumption, but there's nothing that leads you to that conclusion other than if you messed up the transfer by using a quit claim deed. That's why I said do not use that deed form. Yeah, and you said to use the warranty or warranty. Yeah, yeah. There's a question about this kind of goes back to the 500 K I think I invest in vacant lots.

55:36 Would you consider in one LLC for 3 to 4 parcels under 100 K? I guess that sums up to 400 K total. Yes he would. Vacant land. It's a little different from the standpoint that your liability is typically going to be limited to trespassers and whether or not you've posted the property. So we had one client last year had a vacant lot in a housing development. Some kids were riding motorcycles on it. He knew about it.

56:02 He didn't post it. Kids got injured. They sued him. He had to deal with that of somebody fell out of a hunting blind one time on a piece of property, and they sued the land, our client, because, again, it wasn't posted. So I'm a little more flexible with land. I would say you could group land because a liability goes considerably down with land that I in with a structured property. Okay. That's helpful. Amy's asking, you know, if we go to hundreds of properties, does that mean that you essentially end up with hundreds of LLCs or how do you question. Yeah.

56:37 So as my portfolio scaled, I started grouping properties per LLC. And the reason why I did that is because once you get beyond 15, 20 LLCs, I feel that you can take on more risk. Right? Because some that you had 300 properties and you had 30 LLCs with ten properties each and each LLC generated for you $50,000 a year. That's 1.5 million in rental income, right?

57:09 If you lost 50 grand because one LLC went down, it's not changing. Not the type of scotch you're drinking or the wines that you buy, right? So you're able to absorb it. And it's not doesn't have the same impact on your lifestyle. So the when I say one LLC per property, understand is you start scaling. That changes with the dynamic of the income that's coming in. So you're able to take on more risk now because it doesn't have the same impact on your lifestyle.

57:37 Yeah. That's helpful. Chris is asking can you address how to manage minimize the aggregate cost of setting up and managing annual fees, taxes, tax filing costs, multiple LLCs for other entity structures or other entities? Basically, like if we set up a lot of these, probably a set up cost, but I guess also the ongoing management of this, which he's alluding to. The great question. So what is your typical your sunk cost going forward or your annual repeating cost is going to be the state filing fee and your registered Asian fee.

58:08 So you're talking maybe $300 a year, right? What about tax returns is when I was talking about those red boxes, all those red boxes are disregarded. They do not have to file tax returns. So there's no cost there to maintain that structure on an annual basis. I mean, once you set it up, it's just it's there. And so the way I tell people is that when you're investing, look at it as part of your investment, right.

58:34 It's a deduction. So you can write off the the investment that you make to set up your LLC. That's a tax deduction to you. But the more important part is, is that think of it as an inexpensive form of insurance that, you know, unlike your carrier, you know what's going to back stop anything that comes out of a lawsuit. And hopefully it never happens. But there's also other benefits that come from an estate planning side. Well, maybe we'll talk about that on the next event about using types of structuring.

59:00 Yeah. That's helpful. I'm going to skip around a bit. Barbara is asking can the Holding LLC parent Co write checks for all the LLCs so you don't have to have different checking accounts for each LLC, which also I don't think we're recommending that. But what do you what do you think about that claim? Well, I used to I mean, I've taught that before when people have were struggling to open up bank accounts for their red boxes and you're dealing with the bank, they want minimum balances and they charge your fees and things of that nature.

59:30 But once we start our relationship with the Baselane, you just eliminated all those concerns that people have. And I always say it's good, better, best, right. Best strategy one bank account per LLC. That's the best strategy okay. A good strategy or a better strategy would be to have a management company collecting it on behalf of everything and then distribute it down, and then the good strategies, you have it at the holding company. But if you did that, this is where people screw up.

59:59 They don't have good books and records to account for it all per LLC, and that'll blow up on you. And maybe it's not clear right now, and that's why I'm encouraging everybody to go to the Baselane links and sign up for those strategy sessions and the trainings here, because we're going to show you that you can open up a bank account for each entity in a few minutes. That's like critical, and then also show you how to connect it, because the banking is inherently doing the auto tagging for your transactions.

60:25 So you're going to learn all of that in about 45 minutes. So I definitely encourage you guys to go there and sign up now if you haven't done it so far. Again, that's also free. Obviously that's a free training that we're providing. And so just scan those codes. I'm going to ask two more questions. I think we're at time. Let's see here. There's a bunch of questions I'm trying to see what might be a why are there no taxes for the read the child LLCs.

60:54 This is from Phyllis. Yeah. So with the red boxes you set up the red box LLC as a disregarded entity. So you tell the IRS, hey, there's only one owner here. Not one owner is the Wyoming Limited Liability Company. And even that blue box could be disregarded if there's just one owner of it. So it's a tax election that is available to an LLC when there is only one owner.

61:25 And so you saw my structure. They all flowed down to that one owner. So that makes us eligible to set them up as disregarded. And then that blue box, somebody asked Amy, I think said, you know, should that be an S Corp you for rental real estate. You do not want to have an S corporation involved. Generally speaking, as an owner of your investment property, either directly or indirectly to the structures that I described, flipping is a different story, wholesaling different story, and we don't have time to go into the tax side of that.

61:57 But hey, during the strategy session we also discuss taxation. So we'll walk you through this. So those detailed tax questions you have, we'll explain that through that. Because Anderson we do both legal and tax here. We do a lot of tax 15,000 returns this year is what we're going to be doing. So it all goes hand in hand. Yeah. So we did send the the link that Clint has shared. Again it's down there. You can you can schedule that free 45 minute session.

62:25 So please do that. And then we also encourage you to sign up for the Baselane strategy session which which will help you understand how to set those bank accounts up and how to make the money movement the right way. There's a lot of convenience in that too. So yeah, I think this is it. We are. We went through a lot of content. I'm gonna have to watch the recording myself. Clint, thank you so much again for being a gracious guest and teaching all of us about the different complexities of the entity structures, how to think about the risks, how to think about yourself and how to set it up the right way, and different options.

63:01 Obviously, each person is going to have to go through that process to figure out what your right setup is. And so again, please go ahead and get that strategy call. And Clint, thank you so much for being here today. All right. So we covered a lot there in that presentation. So just to wrap things up for the people that are still with us, what would you want to tell them in closing about what they saw and what they can learn by coming and working with you?

63:29 Yeah. And I personally learned a lot too. And I think a few things. One is asset protection is actually way more important than maybe people realize because they think it's covered by insurance. And it's not in most cases too. We really have to spend time and energy thinking about the right structures based on the state you're in, the personal situation, your debt, taxes, all of those things have to be considered, which was kind of eye opening for me too.

63:52 I really love the Wyoming LLC idea of protecting everything so people can't find you. I think I'm going to do that myself. And then finally, when it comes down to once you've set up the structure, how do you bank all in one place with the right money movement and protecting your anonymity while not piercing the corporate veil, basically, and can come in there and help you with that part of it, as well as automating or bookkeeping.

64:15 So those for me were all the key takeaways. So asset protection right structures and then basin gets you to that like clarity like you know automation that helps you run your business. Yeah. So guys hey check them out. We've been using them here at Anderson. Our clients are using them. They offer tremendous benefits that you're just not going to find at the brick and mortar banks. And as a real estate investor, what I'm about is having the less friction is possible in running my business.

64:44 So hey, thanks for doing this. I really appreciate it. Yeah. My pleasure. Thank you. Clint.