Setting Up LLC For Real Estate Investing (Your 1st LLC!)


– Hi, Clint Coons here and in this video, I am going to discuss the first LLC you should set up when you’re looking to invest in real estate. So with that, let’s get started. (upbeat rock music) – All right, guys, when
it comes to setting up limited liability companies there’s a lot of information out there on the internet about setting up an
LLC in your home state, what type of LLC you should set up, Nevada, Delaware, Wyoming, you name it. So I can see how it can get confusing. But, here’s what I want
you to think about. When you’re going to create
a business structure, one of the first things
that I always focus on is keeping my name off a title. Or off of that business. Unless I’m willing to be out there, actively promoting myself, like ClintCoons.com, or you know, Anderson Business Advisors, where I want people to
know that I’m associated with that business entity, there is no reason why
you should have your name tied to your limited liability company that is going to own rental real estate. Recently, I was featured, I didn’t know this at the time, on a segment on NPR where
they were talking about privacy of limited liability companies. And in this hour and a half long segment that did discussing the
fact that tenants cannot, in certain circumstances, find out who the owner of a
limited liability company is that actually owns the property, how troubling that is for these tenants who can’t find out this information. Now, I didn’t get quite get
the gist of the interview, or the NPR program, other than the fact to say
that tenants need to know who the owners of the LLC is, so that they can, what, harass them? I mean, if you have a legitimate claim you can always sue the LLC, you don’t need to know
who actually owns it. But they were making the point that, yes, we need to know who owns it and that people, like myself, they took one of my videos
and an audio segment of it where I discuss using an amenity, these are the problems
that prevent tenants from finding out who the true owners are, because people can set
up entities anonymously. Well guess what? This is exactly why you should do it. Because you do not want
tenants contacting you, stepping into your life, creating problems, think on this. Let’s say you had a tenant. And they’re disgruntled with you because you evicted them, or you’re about to evict them, or maybe they want a new refrigerator and you’re refusing to do it because they want the
refrigerator with the ice maker and you say, you have a perfectly fine
working refrigerator right now. What could they do if they know about you? Have your personal information? Well, simple. They can get on the internet and just trash your reputation. What’s to stop them? Nothing. They can create multiple fake accounts, start posting fake postings about you that other people will see, your friends, your business associates, future tenants, what
could that do to your job? You think you have any
legal recourse against them? No, you could possibly get a
temporary restraining order, but that’s going to be
expensive and time-consuming and may not be granted because you don’t have proof that they’re the ones actually doing it. So it is for that reason, when you’re thinking about
investing in real estate, I strongly encourage you
to create your structures so that people cannot discover
who the actual owner is. The way I go about doing
this is I typically start with a Wyoming limited liability company. That is going to be the
first LLC you set up. And the reason why you’re
going to use Wyoming, is because Wyoming does
not list any information about the members or managers of that LLC. Now, the Wyoming LLC should
be used for residential real estate holdings. I’m about to show you
this in just a second. If you’re going to use, if you’re going to be
investing in commercial, multi-family, then I
would go with Delaware. And the reason why I look
at these two structures is because with Delaware you’re dealing with a
different type of lender than you would be in Wyoming, where you have single family loans. So, there are different type of loans, different types of lenders, and so they look for different things when it comes to creating
these structures. So, the way we set this up, to protect your identity so
someone cannot discover you, is you first create
your amenity-compliant. We’ll call it that, an
amenity-compliant LLC. This can be in Wyoming,
it can be in Delaware. Let’s just go with Wyoming here. So I set up this Wyoming LLC. That gives me complete amenity. So I’m the manager, I’m
the member of this LLC but no one knows that its me because nothing’s reported
to the Secretary of State. Then, when I go to create my, let’s say, my Texas limited
liability company up here, here’s the Texas LLC. Here’s a Washington LLC right here. Then I’m going to have these LLCs owned by this one Wyoming LLC. So when you’re creating them, after you’ve set up this
first base structure, because this is going to own all of your limited liability companies. You don’t need to do this one-per-one, so you have a whole bunch of Wyomings. Just create one. It will be the member in all of these. The information that the Texas
Secretary of State’s website will point to this company right here because that’s what we’ll going to list when we file for our Texas LLC. The name of our Wyoming LLC. So if a tenant, they’re in
this Texas property right here, they’re disgruntled
because you didn’t buy them that new refrigerator they wanted that had the ice maker and
the water dispenser in it, and maybe the touch screen. So they decide, well, I’m
going to get back at you. Well, who are they going to get back at? The limited liability company? No, they want to go at you, the owner, to make your life uncomfortable. So if they look up the LLC on the Texas Secretary of State’s website, it’s going to point them to Wyoming. If they look up the Wyoming LLC, it’s going to point them nowhere. This is how you build out your real estate investing structure. Now, this is on the residential side. If it was a commercial property and I wanted to build this stuff out, then this would be Delaware right here that I’d be setting it up in. So, keep your business affairs private. Do not allow people to discover that you’re the owner of these entities. And a lot of times people say, well Clint, they’re going to know it’s me because I’m managing the properties. If you’re self-managing, don’t
tell them you’re the owner. I mean, one thing’s often said is that if you’re dealing
with tenants yourself, and you’re self-managing your properties, and you’re talking to them and they’re disgruntled about the owner, Well, heck! you can join them, say you know what, I think the owner’s a real S-O-B myself. I just manage the properties. Guy never responds to me. So now you can kind of be one of them. And they don’t know that
you own the property. So they may look at you differently. So this is how I go about
creating structures, it’s very important, the first entity you
create in building out your limited liability company structure for real estate investing is going to start with
an amenity-compliant LLC, either in Wyoming or Delaware, based upon the real estate
you plan to invest in. (upbeat piano music)

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