Chris Prefontaine breaks down which legal structure to use for different real estate deals: LLCs for lease-purchase and owner-financing, trusts with an LLC as beneficiary for subject-to deals to avoid due-on-sale clauses. He warns that operating in your personal name or using an improperly set-up LLC leaves you exposed, as he learned in 2008.
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All right. Q&A Thursday. Do I need an LLC or trust for every real estate deal? Disclosure first, we're not attorneys. I'm just sharing information with what we do and what we've learned to do over the years from our attorneys. You have to seek your own advice. Now, short answer, you need the right structure. That's the short answer. I know it sounds broad, but it's not just any structure. Because this isn't about being fancy. It's about protection only. That's all it's about. Something, frankly, I did not properly do leading into the 2008 crash. Now, if you're doing deals in your personal name, you're exposed, plain and simple, guys. And again, I'm not an attorney. If you're doing them in an LLC not properly set up like I did leading up to and during the 2008 crash, you're exposed still. So what do we do? Typically, I'll just give you a very broad— every deal is a little different, right? But very broad answer. Lease purchases go into an LLC. Owner financing deals for us typically go into an LLC, and we do them state by state. In our case, deals where you're taking over financing, like let's say a subject-to deal, those often go into a trust with our LLC as the beneficiary because you're protecting against things like due-on-sale clause and that nature. That's why we do what we do. Here's the mistake people make. They overcomplicate this because so many people are teaching you all these expensive ways to do it. They get stuck in which state, which structure, what's perfect, and they never get into action mode. They never do a deal and they delay doing deals in general. That's crippling. Don't do that. Get guidance, set it up properly, then go execute, preferably with us, so you can do them and do them quickly. Not sure where to get started? Go to smartrealestatecoach.com/getstarted. Get going for free books, strategy calls, and a whole bunch more. We're going to help you get going the wicked smart way. We've been after this for over a decade doing exactly that. Because structure does matter, guys, but action matters more. I'll tell you what to do real simply here. Go to Prime Corporate. It's our resource and they'll set you up the right way like we do. Just tell them you want to have it like Smart Real Estate Coach community does. Go to smartrealestatecoach.com/prime. I'll see you next Thursday on the next Q&A Thursday.
