Hey guys are you using an LLC to invest in tax liens or deeds?
Well, in this video.
I'm going to show you a better way
to set up these deals for greater flexibility and planning.
Now, if you want to learn more about properly structuring
all of your real estate investments and protecting your assets,
you can register for our Free Tax and Asset
Protection Live event at the link below.
All right, now let's dove in.
How to structure your tax lien and tax deed investing.
Okay.
So what's the difference between a tax lien versus a tax deed?
Well, it's really important that you understand the difference
between these two,
because sometimes people get confused about what they're actually buying.
So what the tax lien, what you're acquiring is a tax lien certificate,
somebody who has defaulted on paying their property taxes.
These things come up for auction. You bid on them, you buy it.
Now you own the right to this property, meaning that the homeowner
has typically a period of redemption, meaning they can pay you off plus interest
on your tax
lien certificate and be made whole and then they get to keep the property.
But after that period of redemption expires,
then it is technically your property in the way you acquire the properties.
You have to go through a judicial
foreclosure, your action to transfer title to your name.
Now the other type of investing with with taxes is called tax deeds.
Now, in a tax deed, state, what you're doing is
you're actually acquiring the deed to the property for the back taxes.
So you actually get title.
But even though you get title to the property, oftentimes
when you acquire title, it makes sense to hire an attorney to perform.
Still a quiet title action to make sure that you have clear title.
Because what can happen
when you purchase a tax deed is that a future title company?
Let's say you're trying to flip that property to an investor or a homeowner.
They have their title company come in.
They see this was a tax deed sale.
They may be concerned about issuing a policy
because they will be asking, well, was everyone
given proper notice about this tax deal, deed sale?
And if they weren't, well, then there's exposure for them.
So the best way to clear that up
when you buy tax deeds is to do a quiet title action
after you've acquired the tax deed to make sure that there are no other claims
that can be brought against against you for owning that property.
Now, once you've got these two, the next thing you have to consider
is what is the plan for the property?
What do you intend to do with it?
Are you going to hold on to the property or are you going to flip the property?
And so for many people who are by purchase tax liens or tax deeds,
they buy it without actually knowing what is their exit strategy
or if they get it and they think exit strategy is going to be a
but it turns out it has to be B
because a property has a lot of problems with it
and they can't flip it right away
and they're going to hold it in their own portfolio. Who knows?
So you want to make sure that when you're buying
these types of investments or making these types of investments,
you're setting it up with maximum flexibility.
Now, a lot of people like to use a limited liability company
when they acquire a tax lean or a tax deal.
But there are problems with taking that approach.
It's because it is inflexible when you use just a straight up LLC.
For example, let's assume that I have a limited liability company
that I'm running my tax liens or tax deeds through and acquire a property here.
Maybe I get to because I bought two.
So and I have two properties inside of one limited liability company.
Well, as you know from many of my videos,
I talk about not holding multiple properties into one LLC.
So you decide, alright, well I'm going to flip one.
So you flip it out of this limited liability company and this LLC,
LLC that you set up is treated as a partnership for tax purposes.
So now the issue you're going to run into is that the income that you generate from
that flip is going to be considered dealer income to you, which could potentially
cause problems for you on the tax side, because now you're looked at as a dealer
and it has negative tax ramifications to all your other investment income.
So the other thing
you might be considering is, well, I want to get one out
and I want to put it over here in a separate LLC.
So now I'm going to deed the property directly
over to LLC number two, and that's going to do the flip.
Well, there's a problem right there that could be a taxable transfer for you
if you move it from one LLC to the other.
Or worse yet, you decide,
all right,
I'm going to deed it to myself and then I'll deed it over to the other LLC.
So now you've got two deed filings
that you have to pay for in order to get this properly structured.
So what I'm explaining to you is that for those people who like to use
limited liability companies for their tax liens and tax deed purchases,
you really make it a little more complicated on the back end
when it comes to the ultimate disposition of that asset or determining
what you want to use it for.
So let me share with you now a better strategy for tax lien
and tax deed investing that is using a land trust
and the way I like to set these things up when it comes to
to making these types of investments is here's my limited liability company.
I will set up a separate land trust for each purchase,
and each of the land trusts will have the same LLC as the beneficiary.
I'll also have a Trustee LLC.
This is going to be my Wyoming Trustee LLC up here because I want anonymity.
It serves as the trustees of all my land trusts.
So each of these deals will be taken
in the name of a separate land trust.
And so when you're bidding on these things,
you come to the auction, you've got your trust with you,
a bunch of blank trust agreements.
You just fill them out right then and there, right as you get the deal.
Foom All right. This is the name for my trust.
It's going to be the 1465 trust because that's the address to the property.
Now I got the other one over here is a 731 trust because I won that one.
That's going to be the address of the property.
So that's going to be the name on the trust.
So by using the Land Trust to take title, you're also giving yourself anonymity.
No one knows that these are your properties.
I mean, can you imagine you have a disgruntled homeowner now
who's upset that you just bought their property out from underneath them
because they've fallen on hard times, they haven't been paying their taxes.
I don't think
you want to be in that position where they can look you up and harass you.
So by using land trust, we can maintain anonymity.
But more importantly, it builds in flexibility.
So back to my example.
Again, let's assume that I have two of these properties right here
that I want to flip, and this one I'm going to hold as a rental.
Well, this is my tax lien company right here, tax lien LLC.
I could take these two right here and assign them,
transfer them over to my flipping company over here.
So now they're held.
Now note they're no longer held in this LLC.
They're held over here in the Corp and I'll sell them.
And the income of course would flow into the corporation.
So I'm no longer considered to be a dealer.
And then I'm going to take this one that I'm keeping and I'm going to roll
this land trust over to my rental real estate portfolio LLC.
So I'll put this one in a separate LLC over here.
So now my tax lien company, it's been stripped of all of its assets.
It's back to setting up new structures for investing.
So I create some more trusts as I go out there to buy my next round of deals.
And I have now structured out all my investments based upon
what I intend to do with them.
And the benefit to me is that I didn't have to do any deeds, right?
There were no transfers.
All I did was assigned the Land Trust fill out one piece of paper.
Redbox hereby assigns the property to orange box done.
That's why I'm saying the best strategy for people to invest in tax
liens and deeds is not to use an LLC or a corporation.
It's to take title in a land trust.
And that gives you the flexibility to move them off.
Hey, if you want to learn more about how you use this strategy,
I want to invite you to our tax and asset protection event.
We teach this event.
It's a full day event where myself and my partner, Toby Mathis, go
deep into various strategies for real estate investors.
And we also talk about the tax planning side and how you're going to save
a ton in taxes.
If you only have the strategies that we're going to be sharing with you
and you actually implement them.
The other thing
you're going to get from this event, when you come to the event,
we're going to have a team of attorneys and tax professionals on there.
Will be answering your specific questions.
Guys, I hope to see you there.