Master Lease & Asset Protection

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  • I recently finished David Tilney’s class on property management and master leasing. I thought it was an incredible class! I have been trying to think up ways to apply this in creative ways to my business.

    One thing I have been concerned with for a while now is a tenant that files a lawsuit against me and the LLC that holds the house they are renting for something that isn’t covered by my insurance. Yes, I would be protected from the lawsuit busting out of the LLC and attaching to other assets, assuming I lost, but it wouldn’t do anything to protect the properties INSIDE the LLC. Those would be free game.

    So, after this class, I had an idea. What if I set up a new LLC that I use to master lease from the LLC that actually owns the house, i.e. I am master leasing from myself in essence, but then I would be master leasing in an LLC that doesn’t own anything from another LLC that owns the actual property. Then I sublease to my tenant.

    In this situation, if the tenant were to ever sue me for something, probably stupid, I could simply bankrupt the LLC that I am using to master lease the property from the LLC that owns the property and evict the tenant. As the master leaseholder, I would be liable, assuming I lost, but I would be protected by an LLC that basically owns nothing but a checking account with a little cash in it. The house itself is actually owned by a separate LLC and I master lease from them.

    What do you guys think, sound idea, or just a boondoggle that wouldn’t hold up to legal scrutiny?

    Each of my rentals was owned in a separate Land Trust. The title was in the name of the Land Trust.

    The Land Trust documents are not recorded anywhere.The Beneficiary of the land trust (could be LLC) is not public knowledge anywhere.

    You could even take it one step further and have your land trust originate in a different state.

    When you talk to your tenants, tell them you are just the property manager. Never suggest that you are the owner.

    You should not own all your properties in one LLC. That puts all properties/cashflow at risk.

    We have a lot of training and come books about Land Trusts here at CashFlowDepot

    Hi Michael–you are right, great class David offered. Jackie is correct, there is a ton here for asset protection and land trusts. These are things almost no one uses, so good luck finding a lawyer that can keep up with trust stacking or some of the unique plans that folks use to protect themselves.

    Dyches Boddiford used to offer a land trust class but I believe it has been at least 2 years since he offered it. As soon as he offers it again, I am making a beeline to that class. He has several courses on asset protection as well.

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