Case Study

Using LLCs with

Rental Property
by Dyches Boddiford

www.Assets101.com

Copyright © 2009 Dyches Boddiford • Assets101.com

THIS INFORMATION IS DESIGNED TO PROVIDE ACCURATE AND AUTHORITATIVE INFORMATION IN

REGARD TO THE SUBJECT MATTER COVERED. IT IS OFFERED WITH THE UNDERSTANDING THAT THE
PRESENTERS ARE NOT ENGAGED IN REDNDERING LEGAL, ACCOUNTING OR OTHER PROFESSIONAL
SERVICE. IF LEGAL ADVICE OR OTHER EXPERT ADVICE IS REQUIRED, THE SERVICE OF A COMPETENT
PROFESSIONAL SHOULD BE SOUGHT.
Case Studies

Case Study #2 (real life):

John and Sarah are husband and wife. Based on an accountant’s

counsel, they own four LLCs where they are each members, making
them multi-member LLCs. Each of these LLCs owns a single rental
property. They also own one rental property in their own names as joint
tenants. All properties are or are almost paid off (large equities). Here
is their structure.

John Sarah

LLC LLC LLC LLC

This structure provided the asset protection for John and Sarah and
segregated liabilities between the properties. However, it created a need
for four additional bank accounts, EIN numbers and partnership tax
returns. In studying The Grand Plan and The Limited Liability &
Partnership courses, you know that it makes more sense to structure as
below.
© Dyches Boddiford -1- www.Assets101.com
Case Studies

John Sarah

Multi-Member LLC Single

Member
LLCs

LLC LLC LLC LLC LLC

This would segregate the liabilities for each property from other
properties. And, since the single member LLCs are disregarded for tax
purposes, only a consolidated partnership return for the multi-member
LLC is required. It would also provide charging order protection should
John or Sarah get a judgment against themselves personally. But John
was tired of the extra tax returns and wanted to simplify even more. He
proposed the structure below.

He proposed to set up five single-member LLCs, one to hold each

property. He would own two of the single-member LLCs and Sarah
would own three. In this structure, John certainly simplified the

© Dyches Boddiford -2- www.Assets101.com

Case Studies

paperwork and tax reporting. All income and expenses would now go
on their joint personal tax return.

John Sarah
Single
Member
LLCs

LLC LLC LLC LLC LLC

While this structure is better than owning the properties directly,

four points should be made.
1. John and Sarah potentially lose charging order protection that the
multi-member LLC provides since each own separate LLCs (no
innocent third party). This is a significant consideration since the
houses are almost paid off and therefore attractive targets for any
judgment holder against either or both of them personally. (Some
form of equity stripping should also be considered.)

2. A liability occurring on one of the properties should be stopped

from affecting the owner of the LLC that owns the property.

© Dyches Boddiford -3- www.Assets101.com

Case Studies

However, with a single entity layer, opposing counsel will

probably investigate whether the liability shield was respected by
the owner. In other words, was the entity treated as separate from
its owner?

3. John and Sarah lose the low audit profile of the multi-member
LLC’s separate tax return. This partnership return would net all
income and all expenses, passing these net numbers on to the
members’ personal return for the taxes to be paid. While there
would be no extra taxes to pay, there would be the cost of the extra
informational return.

4. To take maximum advantage of estate tax exclusions, Sarah and

John must try to equal the equities in the properties. This should
be revisited each time a property is purchased or sold.

© Dyches Boddiford -4- www.Assets101.com

 Dyches Boddiford & Peter Fortunato
present
For more info Amassing Tax-Free
Click here…
www.Assets101.com
WEALTH
Using Self-Directed IRAs
Feb. 21 & 22, 2009
Atlanta, GA
Theory and practice come together for one dynamic weekend. Just think of how much you could make if you could
invest your retirement plan in an investment you already understand. For most of us, that is real estate and notes in
our own local markets. Well, properly structured, you can. We have been doing it for years. This weekend is an
opportunity to learn how to super-charge your IRA with returns of 12%, 15%, 25%, 50% and higher! You will learn
nice and steady, as well as very aggressive, techniques for growth.
Peter and Dyches will join forces in what promises to be a lively conference on self-directed IRA investments. Pete
will present case studies and will walk you through, step-by-step, exactly how the transaction would be crafted and the
results. He will also suggest scenarios to watch for that can boost your returns significantly.
Dyches will take you through the technical issues in layman terms, as well as sharing some of his own IRA
experiences. He and Pete will analyze some actual transactions and show you the different ways they could have been
done to gain different advantages or results.
Though the discussion will mainly be concerning using your IRA to invest in real estate in your own locality, other
investments could be used as well. For instance, one former student uses his IRA to fund a rental program for
commercial dumpsters. He routinely gets a 40%+ return on his invested capital! Think out of the box. Is there an
investment that you are aware of that can provide exceptional returns? Bring your ideas and we will discuss them.
The manual for this class will only be available to class attendees and not for sale afterwards.
Just a few of the topics that will be covered -
y Simple IRA estate planning strategies that provide y Why Roth IRAs are for everyone! (you only thought
tax savings and asset protection you understood them)
y Avoiding disqualified transactions that could y Using land trusts and sub-trusts with IRAs
cost over 150% of the investment in penalties! y Making your kids millionaires with their own IRAs
y How to make sure your lower valuations stand up y Using SEP-IRAs to sock away 25% of your income
to IRS scrutiny when converting to a Roth IRA...
y Get retirement income before you reach age 59½
y Prohibited transactions & disqualified parties
without penalty!... y Custodians that allow IRAs to invest in real estate
y Investing in real estate and notes y SIMPLE Retirement Plan(s) & when to use them
y Making loans/buying options with your IRA y and much, much more...

Hilton Garden Inn - Atlanta Airport $80 Single or Double

2301 Sullivan Road Group Code “Boddiford” Pre-registered Attendees. . . . . . . . . . . . . $ 597
College Park, GA 30337 Each for 2 or more registering together. . $ 497
404-766-0303 (Add $60 at door)

Name Paid by: Ck #___________ … MASTERCARD … VISA … DISCOVER

Address CARD # ___________________________________________
Expiration Date _____________________
Home Phone Work Phone Signature __________________________________________

Mail to: The Oaks Group, Inc., PO Box 505, Marietta, GA 30061 or call/fax (678) 935-4439
 How to Become a
HARD MONEY
LENDER
March 21 & 22, 2009
For more info Dyches Boddiford & Robert Witcher, Atty
Click here… Only two pre-requisites for this class:
www.Assets101.com • you must have access to at least $15,000 – 25,000 to lend and
• have experience dealing with real estate.
If not . . . don't forget to recycle.
Just some of the topics that will be covered:
v New Mezzanine Loan program designed for a tight real estate market! (You and your borrowers will love this one!)
v What prepayment penalty clause allows you to charge prepayment penalty no matter what, even at foreclosure?
v When do you have to give a default notice and the right to cure (and when do you not)?
v Who has to give truth-in-lending statements and who doesn't? What are the penalties if you don't comply?
v Do you know how much normal attorney's fees are for a foreclosure? 15% in most states right? Not necessarily, it could be
much less if you don't have the right language.
v The attorney gets all the attorney fees at foreclosure, right? Not necessarily, you can participate if you know how.
v Evaluating the property and borrower.
v What do you do when a borrower wants an extension? Can you charge an extension fee?
v How do you maintain records of payments received and how do you calculate pay-offs (an improper pay-off amount just cost
a lender $7,000 to settle!).
v How to deal with Chapter 7 & 13 bankruptcies. And how to try to avoid them in the first place.
v What is "usury" and how do you calculate it?
v The proper way to title public documents for IRA loans. If they aren't done properly, you may not be able to foreclose!
v How to track loans, step-by-step. How 1098/1099's are handled. Handling and tracking loan payments from borrowers to your IRA.
v Licensing requirements and how to avoid them.
v Avoiding consumer loans--HOEPA (Home Ownership and Equity Protection Act), also known as Section 32, RESPA and
Predatory Lending Acts affect you and your loans. What's the penalty if you don't comply?
v Why loan-to-value has little meaning, you should look at investment-to-value.
v How a DUE ON SALE clause can make you money (accelerating the loan is only one way).
v Why using a Call can be better than a Balloon.
v Adding "Money Stretchers" to loans. Using "Must Takes" to get ride of dog properties you may have.
v Why you should never make phone calls to debtors.
v Why you should never let debtors send their payments to your home.
v Bridge, building & construction loans up to 5% per month in some states - well secured!
v Alternatives to escrows – keeping it simple and making money at the same time.
v Other ways to structure funding that can generate even greater returns.
Plus – You will be provided with all our latest documents and checklists.
The value of these documents and clauses will return you the cost of the seminar many times over.
Hilton Garden Inn - Atlanta Airport (Single or Double $80 Pre-registration ends 3/16/2009
2301 Sullivan Road "Boddiford Group" rate) On or before 3/19. . . . . . . . . . .$ 997 $ ________
College Park, GA 30337 Additional person . . . . . . . . . . .$ 797 $ ________
404-766-0303 (add $50 each after 3/19 and $100 each at door)

Name __ Paid by: … Ck #_________ … MASTERCARD … VISA … DISCOVER

Address CARD # _______________________________________________
Expiration Date ______________ CVV________
E-Mail *________________________________________________ Signature _______________________________________________
Home Phone Work Phone * Your e-mail address is very important for us to send confirmation.
Mail to: The Oaks Group, Inc., P.O. Box 505, Marietta, GA 30061 Fax: (678) 935-4439 Call: (770) 428-7846
 Dyches Boddiford For more info
presents Click here…
www.Assets101.com
Buying & Selling Using

Owner Carryback
Financing
April 25 & 26, 2009
“Owner Will Finance”
Those are magic words. Even in a market where institutional interest rates are low, those words will get the
phone ringing. Whether you are buying or selling, you need to understand how to get this financing or take back
financing your self without getting taken!
This class will be of interest to Buyers, Sellers, Real Estate Agents, Note Brokers and Note Investors. We
will consider the difference in terms and financing you would want as buyer versus those you would want as
seller. We will also discuss how selling and carryback financing can benefit the investor who wishes to retire
from day-to-day management.
Below are just some of the topics we will cover.
y Getting a Higher Price for the Property while Selling y How to Purchasing Subject-to
Faster y Dealing with Insurance
y Difference in Balloons & Calls – when to use each y “Nothing Down” v. “No Money Down”
y WRAP Notes & Mortgages y Getting Guarantors/Co-Signors
y Lease-Options, Lease-Purchases & Land Contracts as y “Abandoning” the Collateral and suing on the
financing tools Note as alternative to a Deficiency Judgment
y Terms & paperwork depending on whether you are y Collections & alternatives to foreclosure
Seller, Buyer, or Note Buyer/Broker y “Walking the Mortgage”
y Clauses to include in Note & Mortgage y Additional Collateral
y Interest only, normal & negative amortization y The relationship of Price & Terms
y Getting Seller to give you 0% financing y Discount for early payoff & lump sum payments
y Tax reporting – installment sales1098, 1099, y Substituting Collateral
Section 121, dealer sales, capital gains, SE tax y Dealer property issues and owner financing
Hilton Garden Inn - Atlanta Airport $80 Single or Double Pre-registration ends 4/20/2009
2301 Sullivan Road Group Code “Boddiford” Pre-registered Attendees. . . . . . . . . . . . . . . . .$ 597
College Park, GA 30337 Add 2nd person pre-registering at same time. . $ 397
404-766-0303 (Add $35 after pre-registration deadline, add $60 at door)

Name Paid by: … Ck #_________ … MASTERCARD … VISA … DISCOVER

Address CARD # ___________________________________________
Expiration Date ______________ CVV________
Home Phone Work Phone Signature __________________________________________

Mail to: The Oaks Group, Inc., PO Box 505, Marietta, GA 30061 or call/fax (678) 935-4439