INVESTOR RESOURCES
ASSET PROTECTION
PROTECTING YOUR ASSETS FROM RISK Airbnb Investments During the Pandemic
of the deferral arrangements have strings attached, such as payments must immediately resume or incur harsh penalties, and possible default will result.) If a lender brings a default action on the mortgage, the costs will add up quickly. Will a foreclosure sale cover the mortgage? If not, then the Airbnb investor is liable to the lender for a deficiency judgment. PROTECTYOURASSETS In 2010, many investors experienced firsthand how personal guarantees placed all their assets at risk. Personal savings, brokerage accounts, residence, and investment properties could be wiped out if held in the borrower’s name. A few harmful properties and years of positive investing activity will be because of a failure to plan. The defeat was in not seeing the risk associated with the property loans. Just like in 2008, Airbnb investors should be mindful of the effects of walking away from a mortgage or foreclosure. Take steps to minimize risk by removing assets out of your name. Here are a few strategies employed by savvy investors in the 2008 crash that saved their performing assets from aggressive lenders: Land trust to hold a personal residence. The land trust will remove your name from the title, thereby defeating a personal judgment from attaching to your residence. A vital part of this strategy is to use a nominee trustee or entity for complete anonymity. Wyoming or Delaware LLC to hold savings, brokerage accounts, and other investment assets. LLCs set up in these states offer excellent charging order protections, which defeat creditor attempts to levy on the assets held in the name of the LLC. Multiple LLCs to hold all of your performing real estate. If you have not already done so, moving your investment real estate out of your name should be considered. Also, if you hold multiple properties in one or more LLCs, consider putting these into separate LLCs. A creditor can obtain a judgment against the property owner, i.e., LLC. If the LLC has more than one property, then these additional properties can be subject to attachment. A multiple LLC strategy will minimize the risk of loss associated with #3 above. These are just a few of the strategies available, but you should know asset protection planning only works if you set it up before the problems arrive at your doorstep. If you would like a free strategy session to review your portfolio risk, you can obtain one here: aba.link/think. •
by Clint Coons, Anderson Advisors
You’ve seen the headlines—
The facts are that many investors invested in Airbnb with the expectation of generating considerable rental income to justify the high cost of the property. If history is any guide, this investing is high risk. In 2008, 2009, 2010, real estate investors who speculated on the belief prices would always go up received a spoonful of salt when they swallowed the bitter pill of a real estate price collapse. It appears for some Airbnb investors the current economic environment will be creating a mini repeat of the 2008 collapse. The question you should be asking is: “What steps should I be taking to protect my other assets from the risk associated with a few risky ventures?” Here are a few considerations for the Airbnb investor: LOAN DEFERRAL Contact the lender and seek a loan deferment for two or three months. Many lenders have been willing to offer these deferments. However, what if, at the end of the deferment period, the property cannot sustain itself? “Airbnb to Layoff Nearly 1900Workers” —CNBC May 5, 2020 “ABargainwith the Devil—Bill Comes Due for OverextendedAirbnb Hosts” —WSJ April 28
Here are some of the unknowns:
1. Will Airbnb relax their required 72 hours between rental turnaround time restriction? 2. The American public is averse to traveling. 3. What is the risk if someone brings COVID-19 into your property and infects other guests, and they claim your property was not properly cleaned? In scenarios 1, 2, and 3, you might find yourself in a position where you cannot make your mortgage. (Most
98 | think realty magazine :: july 2020
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