5 Wealth-Saving Insights for Real Estate Investors
Anderson Business Advisors
We are a business planning and consulting firm with a focus on providing high-quality tax and legal services.
Lessons from 20+ Years of REI Experience and 365+ Doors
Real estate investors often find themselves navigating a labyrinth of possibilities when strategizing their taxes and structuring their business entity. Understanding the ever-changing laws and regulations is a full-time job, in and of itself.
To simplify it, Clint Coons, Esq. and Toby Mathis, Esq. recently distilled their extensive REI experience into an actionable, comprehensive guide for protecting your assets and reducing your tax burden. They then shared this for free in our highly popular Tax & Asset Protection Workshop.
Here are 5 of the most critical insights...
(Click here to learn about more free upcoming workshops)
1. True or False: LLCs Do NOT Protect Your Assets
“They’re looking for deep-pocketed defendants” – Clint Coons, Esq.
A Limited Liability Company (LLC) is often seen as a silver bullet for asset protection. This simply isn’t true, and this common misconception can leave your portfolio and even personal assets exposed to major risk. However, LLCs are absolutely helpful, but ONLY if set up the right way.
The main issue with merely setting up an LLC lies in the public accessibility of information. Today's digital age makes it incredibly easy to uncover details about business entities, including the names and addresses of members, through websites like opencorporates.com. This level of transparency can be detrimental, particularly if your personal address is tied to your LLC.?
Imagine a scenario where tenants can directly track you down to your home; this isn't just hypothetical. Such instances have occurred and will occur again, leading to confrontations that no investor would want to experience.?
While an LLC can shield you from liabilities occurring within the business (inside protection), it’s equally important to consider your personal liabilities (outside protection).
One step that investors can take to maintain their privacy and minimize personal liability is attaching a virtual business address to their business entity. When doing this, ensure that the service you choose can forward mail efficiently and is appropriate for the nature of your business.?
When protecting your assets, the goal is anonymity. This is because lawyers and creditors are seeking deep-pocketed defendants; when you become anonymous, and your assets become undiscoverable, you are no longer an attractive target.?
To explore more asset protection strategies, consider joining an upcoming Tax & Asset Protection Workshop. (Register today)
2. Critical Tax Strategies for RE Investors
“What if you could make paying taxes voluntary?” – Toby Mathis, Esq.
The amount of tax you pay boils down to two things:
1 - Knowledge of the tax code.
2 - Willingness to change.?
It’s even possible to pay absolutely zero in taxes – hypothetically, you could stop working today and invest in things to offset all of your taxes. But for various other reasons, such as not being able to work with lenders, this isn’t feasible.
However, what this means is that as informed investors, we have the power to identify a percentage of income that we are willing to comfortably pay each year and then adjust our activity so that we focus on this number.?
“My number is 20%,” Toby explains. “Anything over that, and I’ll start to get really, really upset because I feel like I’m overpaying.”?
Your number may be 15%, or it may be 25%. It’s completely up to you.
As a real estate investor, there are many tax strategies available to you. The more strategies you can utilize, the more control you have in attaining your goal number.?
Here are a few tax strategies that all investors should know:?
If you’d like to learn more about these strategies, and more in-depth, consider joining an upcoming Tax & Asset Protection Workshop. (Register free)
3. Best State to Form Your LLC
“This is the first entity you need to set up.” – Clint Coons, Esq.
领英推荐
For savvy investors seeking tax efficiency, asset protection, and privacy, the Wyoming Holding LLC is a powerful solution.
Its structure creates a legal barrier between your personal assets and investment properties, effectively shielding your personal wealth from potential lawsuits or creditors.
Wyoming’s favorable laws also ensure that your personal information remains confidential. This will prevent disgruntled tenants or business adversaries from easily accessing your private data.?
One of the most advantageous benefits of a Wyoming Holding LLC is that it’s treated as a partnership for tax purposes. It presents your income in a consolidated form, making it more attractive to lenders and potentially increasing your borrowing power.
If you’d like to learn more about the nuts and bolts of establishing your Wyoming Holding LLC, consider joining an upcoming Tax & Asset Protection Workshop. (Register now)
4. How to Avoid Audits as an REI
“They’re auditing poor people. Not rich people.” – Toby Mathis
This staggering 2022 IRS statistic catches the attention (and infuriates) many –?
The rate of income tax audits was disproportionately higher for the lowest income wage earners at 12.7 per 1,000, compared to just 2.3 per 1,000 for other income groups. Roughly a 12:2 ratio.
The algorithms are set to go after folks in the lower-income tax credit.
Why is this the case?
While the wealthiest earners pay good money to lawyers and accountants who protect their assets, the lowest income bracket earners do not.?
Luckily, expensive accountants and attorneys aren’t necessary to take advantage of the strategies these wealthy investors use. Technology and online resources have democratized access to more sophisticated tax planning strategies.?
If you’d like to learn more about bookkeeping strategies that’ll significantly decrease your chances of being audited as a real estate investor, consider joining our Tax & Asset Protection Workshop. (Register now)
5. Living Trust vs. Will
“I don’t care if you’re worth $20 or $20M, anyone can create an estate plan.” – Toby Mathis, Esq.
Estate planning can be confusing, but ignorance and wrong choices can lead to many legal hurdles and other unexpected consequences.?
A common but misleading notion is that wills are sufficient for most people unless they possess a massive estate. This is not the case.
The key issue with a will is its inherent requirement for probate – a legal process that can be lengthy, costly, and public.?
During probate, the executor of your will is granted the authority to distribute your assets. This process often leads to significant attorney and court fees, diminishing the value of your estate.
In a simple will, assets are directly transferred to beneficiaries, making them vulnerable to their personal liabilities, such as divorces or lawsuits.?
A living trust offers a more controlled and private approach. Assets placed in a living trust bypass the probate process, allowing for a smoother and more confidential transfer of wealth.
Join Toby at an upcoming Tax & Asset Protection Workshop to explore the nuances of estate planning and learn to safeguard your legacy effectively. (Register free)
In the complex world of real estate investing, knowledge isn’t just convenient – it may be the difference between thousands of dollars (or much more).
But it’s not common knowledge, and tax strategies are ever-changing. Most CPAs and attorneys, unless they specialize in real estate, may not be aware of these insights.?
If you’d like a more in-depth look at these strategies that we use at Anderson Advisors to protect your assets, reduce your tax burden, and most efficiently pass on your legacy, join us for an upcoming Tax & Asset Protection Workshop. This is a live event without any replay, so make sure you’re there from the start!