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House Hacking Asset Protection Strategies (Structure Your Deals) - YouTube
Channel: Clint Coons Esq. | Real Estate Asset Protection
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- Hi, Clint Coons' here with
Anderson Business Advisors.
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And in this video, we're gonna discuss
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house hacking.
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All right, let's get started.
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(upbeat music)
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All right, so what is house hacking.
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Well I assume either you're
interested in what it might be
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you never heard of before,
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you're like, hey yeah, I wanna
learn how to hack a house.
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Well, here's what it is.
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So for our house hacking,
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what you're gonna be doing is,
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you're gonna buy a property.
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So you're gonna buy this house.
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Then what you're gonna do,
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let's say it has four
bedrooms in the house.
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If you're buying this four bedroom home.
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And the mortgage on that four bedroom home
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for you every month is $3,500 a month.
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Well, you don't wanna afford all that.
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Or maybe you can't afford
that type of mortgage,
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or maybe you just want it covered.
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So what you'll do is you'll
take those three bedrooms
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in the house, one, two, three.
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And you're going to then
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rent those bedrooms out to individuals.
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One of my son's friends
came over a week ago and
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he's working for Lockheed
Martin right now.
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And this is actually what
we were talking about.
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He's a house hacker.
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He went out and he bought a house.
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He put in three tenants into his property.
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So he lives there and
he charges each of them
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$1,000 a month.
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So he's gonna charge them
$1,000 a month to live there.
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Now if you have a $3,500 mortgage
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and you have three people
paying you $1,000 a month,
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you're bringing in three K a
month towards that mortgage.
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So then what is your actual cost? $500.
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So you don't have to pay
the entire amount, right?
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You're only paying $500.
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Yes you gotta share a bathroom
maybe with other people
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and you can't walk around naked anymore
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like you used to in your house
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because there's three other tenants there.
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But the point is,
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you're getting your mortgage
covered and that house paid for
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by other individuals.
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So that's one way that people do it.
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Another way I've seen people do it
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is they buy a duplex, right?
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Like this, you buy a
duplex, you live over here.
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So you can walk around in the nude
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and not have to worry about people.
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And then you have other
people living on this side,
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over on that side of the duplex.
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And again, same concept, right?
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My mortgage for this
duplex is four K a month,
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$4,000 a month.
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However I have these people
paying me $3,000 a month.
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So really I'm paying $1,000 a month
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towards this property to acquire it.
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So that his house hacking
right then and there.
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Now, the question always comes up.
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How do you structure this deal? All right.
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To protect it.
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Now ideally, if we're
thinking it's just strictly
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in terms of asset protection.
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If you think about multiple rentals.
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In this example up here,
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we're not renting out
individual properties,
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we're renting out individual rooms.
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So it might be cool if we could do this,
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create a little LLC for that room,
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create an LLC for that room
and other one for that room.
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So you walk into his house
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and you go to the room that you're renting
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and above the room,
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it reads a M 16 LLC.
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And the one below it says G4 LLC,
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And the one down there says,
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This is your room limited
liability company.
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And so when the tenant walks
into there, they realize,
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hey if I don't like anything and
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there's mold in the room,
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I can't Sue the owner of the property.
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I can only see this LLC.
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Okay, not gonna happen.
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You're living in a fairy land.
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In fact there's probably people out there
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that teach that type of strategy
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because they wanna sell you a ton of LLCs.
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Ain't gonna work, okay.
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They're gonna go after the
property owner, which is you.
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So you're in this situation where
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you can't break out your
liability from your tenants,
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better make sure your insurance
covers them by the way.
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So what you then need to do is look at
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what am I gonna do with
the property overall?
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So the risks that you're facing here,
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that is an issue for house hackers is
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not only the property
itself being at risk,
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but you're gonna be at risk,
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that if somebody, something
happens in that property,
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they're gonna sue you personally.
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And if they sue you personally,
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they get a judgment against you.
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That's gonna carry
forwards for 10, 20 years.
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And that's gonna make it
impossible or very difficult
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to buy real estate until you pay that off.
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So here's what you wanna do.
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You wanna take this property
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and you want to stick it in
a limited liability company.
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You want to put this in an LLC right here.
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But, it's gonna be a special type of LLC.
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This is key here.
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This LLC needs to be a disregarded,
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a disregarded LLC.
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Why a disregarded LLC,
because you want to preserve,
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all right, you wanna preserve,
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what is your 121 capital gains exclusion.
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You know, when you sell
a piece of property,
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you can exclude $250,000 per person.
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So we wanna use the LLC disregarded.
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So I can still capture
that 121 gain exclusion
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when I sell this house.
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Now, I might suggest you
take it one step further
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in your protection strategy here.
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And again, it would
apply down here as well.
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You might wanna set up,
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if you have other real
estate investing going on,
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maybe you set up a leasing
company over here, right?
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This is a Corp.
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And you have your tenants
come through the Corp
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and you put them in here this way.
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So you have another just buffer
there between the tenants
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and your business.
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And in fact, they don't even need to know
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that you're an owner,
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in this context since they're
dealing with the Corp,
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they may think you're just
another person renting
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a room in this house.
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But the idea is that this entity now
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can you get a little tax benefit there
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because you have the money
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running through the C corporation.
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You can take that money out other ways.
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So there's a few different ways
we can structure this deal.
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But as far as an asset
protection is concerned,
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I would structure it like this,
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put the LLC in place around the property.
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And it'll depend on the
value of the property.
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If you wanna take it to another level,
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check out my zero loss
real estate strategy,
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that if something happens to you,
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there's a way in which
you can not guarantee,
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but awfully darn close to make a creditor,
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not wanna deal with your property,
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take the insurance and go away.
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Be sure to catch that video,
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zero loss strategy when it
comes to asset protection.
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But this straight up LLC,
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get it in there.
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And oh by the way, if you have
a mortgage that concerns you,
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that the lender might accelerate,
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you know a friendly land trust,
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You can do this.
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You could first put the
property into a land trust here,
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and then drop the land trust
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into the limited liability company.
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If you don't know what I'm talking about,
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got tons of videos on that.
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Check out my YouTube
channel on land trust,
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and setting those up, I
describe it in detail.
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Valuable tool if you're worried about
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the lender accelerating.
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All right guys, if
you've got any questions,
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be sure to put them down
in the comments below,
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like the video,
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if you've got some information out of here
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and you want other people to notice it.
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And make sure you subscribe to my channel,
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last but not least.
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If you have any ideas,
topics that you say,
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hey Clint, I'd love to
have a video on this.
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I haven't found out answer.
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Be sure to just send me an email.
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You can find my email
there in the notes section,
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drop me an email.
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I'm always looking for new
ideas for content to put up
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on this channel.
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All right, take care everyone.
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All the best with your
real estate investing.
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(upbeat music)
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