[ HTJ Podcast ] U.S. Real Estate Forensics “LLC’s” – with Jay Knight, Hanna Musidi & Derren Joseph

 

 

HANNA MUSIDI:

Hi, my name is Hanna and today we have our US tax expert, Derren. We also have our US real estate and legal expert, Jay. We will be discussing Us real estate forensic.

 

VOICE-OVER:

This podcast channel it's about you, successful international entrepreneurs, successful ex-pats, successful investors. Sponsored by HTJ.tax

 

HANNA MUSIDI:

Hi, my name is Hanna and I'm based in Indonesia and currently, I'm working in a US tax firm. And today we will talk about your US real estate forensic with Jay Knight and Derren Joseph. Would you please introduce yourself, Derren?

 

DERREN JOSEPH:

Thank you, Hanna. So this would be the third installment series on US real estate for Asian investors. My name is Derren Joseph and I'm a tax professional, doing international tax in general but US international tax in particular. And in this context, we're talking about investors in US real estate.

 

HANNA MUSIDI:

Jay?

 

JAY KNIGHT:

Alright, thanks, Hannah and Derren, thanks for having me here again. It's great to be back. My name is Jay Knight. I'm a licensed real estate broker from the State of California, and I work with Asian investors who want a pathway to deal with someone in America to help them purchase the property. So that's a little bit about my background and looking forward to our discussion tonight.

 

HANNA MUSIDI:

Would you please introduce the case, Derren?

 

DERREN JOSEPH:

Right. So we did some searching in some online databases, legal databases, where you can, because when a matter is taken before the court in the US, for the most part, it's exceptions, of course, but for the most part, they're a matter of public record. So we're going to talk about a relatively prominent Indonesian family who invested in the US real estate attempted or has invested into the US real estate. We won't name names. We don't want to embarrass anyone. Everything is freely available online, but we don't want to use any names in this conversation because it will be distracting. What we want to do is focus on what happened and perhaps the lessons that would be learned that will be applicable to anyone.

 

HANNA MUSIDI:

Do you have anything to add Jay?

 

DERREN JOSEPH:

Okay, cool. So, Jay, I mean, you know, this is your wheelhouse, so do you want to paint the scene?

 

JAY KNIGHT:

All right. Yeah. This was a very tragic situation, although it probably isn't all that uncommon. If we did a little bit more searching, I'm sure that we would find quite a few of these, and basically, it is a real estate scam. One-on-one maybe not be that egregious because we don't know the actual intent of, of the, of the, in this case, the defendants, but it sure seems like that from an outside look. And basically what happened was, was a very well-to-do Indonesian family had invested some money after going to a real estate seminar that was held in Indonesia, and they were convinced to basically invest some money in what would be a limited partnership, which that limited partnership would then buy bulks of properties in the state of Michigan and America. And as a result of this limited partnership and the amount that they invested, which was going to be over a million dollars, they were promised that they would be granted some sort of visa that would allow them a pathway towards a green card and then future residency. So that was really the impetus to this whole case was they wanted to invest the money and they wanted to, they were very enticed by the fact that they were promised high returns and good investments, and also that they would have a pathway to this residency in America. So that's kind of like the outlining area of what happened, right. So maybe you want to add a little bit more, but that's kind of in a nutshell in terms of the overview.

 

DERREN JOSEPH:

Okay. Sounds good

 

HANNA MUSIDI:

And now we'll talk about multiple properties in a single LLC. So I guess right now, Derren, do you have anything to say about this?

 

DERREN JOSEPH:

Yeah, so this isn't a conversation that's made that appears to be relevant to this case, this case that we found using the legal database pacer, but it's something that in our practice that we deal with almost every week, which is someone wants to buy a, buy a property in the US, from Asia, they know they're savvy enough to know that, Hey, you do not hold things in your own, in your own name. That is really, really basic stuff, right? But so they need to form an LLC, but in order to keep costs down, they want to form one, one LLC, and pile all their property investments inside of that. And some of them actually want to do that with real estate investment and do other businesses within that. And that's a definite definite no, no, which we've discussed in a previous video. I think we did like a 45 minute or hour-long video, which we'll put in the notes below, but essentially, an LLC stands for limited liability company. And the whole principle is to limit your liability in the event that something goes wrong. And when you have a number of properties within a single LLC, you've done the exact opposite. You've given you've, you've given someone a bait, you baited them. You've made it attractive for them to see you. So let's say, for example, you have two properties and you have a dispute with a tenant in one of them, and it goes legal and they Sue you. They slip when they fell, you know, whatever happened. The US is a very litigious society. And then they Sue you. Now, if you prop, if the house in which they live, or the condo that they're renting, if it costs like half a million dollars, and then you have another condo in another development, that's half a million. So you have a million dollars in real estate. And that one, LLC, if they, if each LLC has in its own, had its own property, then the potential legal exposure is half a million. But because you piled them together, you'll potential legal exposure. That one lawsuit is a million dollars. How, because they can not just Sue you to the value of the condo that they're in but to the other condo. So, you know, if the liability was not properly isolated, so we've, you know, we've had that on so many occasions where someone is trying to cut corners and save money because of course, each LLC costs money to, to perform it, to maintain annually. They want to save the annual fees. And because they were being cheap on the front end, they pay on the back end because yeah, when the, when there's a lawsuit, they lose out because the intention behind, let me speak about this in the other video, in a lot of detail, it's to protect you. It's to protect your asset, to protect your investments, both on the inside, on the outside. What I mean by the inside, that would be the case of the tenant, the tenant, who slept on the foul, whatever happened. And they're suing you, that's an insight liability to continue. And then there's the outside liability. You have a dispute with another business person. Maybe you're doing some of the lines of business, or there's another property. There's something else. And they come after you and they come after that property. So you need to protect it from outsiders who come up to you. And it protects me from people inside who are already there and coming up to you. So the idea is asset protection, and sometimes it's better to spend a little bit more on the front end to save you a whole headache on the backend.

 

HANNA MUSIDI:

 Oh, well, I mean like, people keep on thinking that doing real estate is so easy, but it seems like it's not easy at all. So, Jay, do you have anything to add?

JAY KNIGHT:

Actually, Derren pretty much-covered everything that you know, would cover on that. So I think that was really well done. I think, yeah, as you mentioned, you know, real estate is complicated. It's not an easy thing to do, so you really have to be careful, but there are a lot of good opportunities. It's just, you got to deal with the right people that know what they're doing and that are licensed. And I, I know I keep saying that, but it is really a vital component. It's interesting that you know, would you say Derren to, some people would want to like in this case they would want to not spend a few extra dollars to have the asset protection when they are already investing a million dollars, you would think that you know, if you've got a million dollars to invest, you'll take the time to spend the next year, you know, three to four or $5,000 on making sure that you're, you know, you're protecting yourself to the best ability that you can. But again, people aren't aware and that's why we want to do this video so we can educate people.

 

DERREN JOSEPH:

And sorry, just to add to what Jay said, when you look at those YouTube videos and you look at the listen to the other podcasts, or you trapped in a room, give getting a marketing presentation, that's the thing. They always stress. The idea real estate is easy. You just invest and you'll be a millionaire. If you're not already a millionaire or you invest a million dollars, we'll get you back five, $10 million. And it's so easy. You don't have to do anything. You just sit back and you cut and it just comes into your bank account.No it doesn't, you have to.

 

HANNA MUSIDI:

Now that you mentioned it Derren. Sorry. Now that you mentioned it, I've heard so many times every time they have new real estate coming, and then, they make big, they do in the hotel or in the mall, and then they say, you don't need to do anything. We will take care of your money, just send us some money and we will take care of everything. And then like you just sit at home, we're reading this paper and the money will come to you every month. I'm like, so I was thinking it was too good to believe.

 

JAY KNIGHT:

Sitting at home every month, but you just be waiting, looking at that unemployment one ass because you'll be out of money. So yeah, don't be fooled by these types of get-rich, quick schemes because there really isn't any such thing. So. Yeah, exactly.

 

HANNA MUSIDI:

Okay. So thank you for today. I'll see you again soon.

 

VOICE-OVER:

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