Financial Freedom with Real Estate Investing

In a perfect world, honest real estate investors would never have to deal with frivolous lawsuits. But we live in the real world where being sued is a very real possibility. So, how do you protect yourself so that an angry tenant cannot get to your personal assets? What kinds of insurance do you need to protect your real estate assets from an ‘outside attack’? And where should you set up a holding company to take advantage of the strongest possible asset protection laws?

Garrett Sutton is a corporate attorney, asset protection expert and bestselling author with 30-plus years of experience supporting entrepreneurs and real estate investors. He serves as Rich Dad Advisor and asset protection attorney for Robert Kiyosaki and founder of Corporate Direct, a firm dedicated to supporting clients in protecting their assets, maintaining their privacy and advancing their financial goals. He has sold more than 850,000 books, including the invaluable Loopholes of Real Estate and Start Your Own Corporation.

Today, Garrett joins me to explain the ins and outs of asset protection. He discusses how the LLC protects your personal assets, why it’s important to set up an LLC from Day One, and how insurance serves as your first line of defense. Garrett offers insight around entity structure, speaking to the value of setting up a Wyoming holding company with charging order protection. Listen in to understand the concept of equity stripping to further protect your real estate assets—and learn to avoid personal liability by following the four corporate formalities!

Key Takeaways

Why it’s important to set up an LLC from Day One

  • Too late once sued
  • Plaintiff can reach all personal assets

How the LLC protects you as an individual

  • Courts respect lease in name of LLC
  • Attorney will work to get name off suit

The role of insurance in providing asset protection

  • Serves as first line of defense
  • LLC provides second line of defense

Why Garrett recommends an umbrella policy

  • Extra coverage for home + auto
  • Protects against outside attack (i.e.: car wreck victim)

How to set up the best possible entity structure

  • LLC in state property located
  • Several LLCs under Wyoming holding company
  • WY = strongest asset protection laws, privacy

The value of a charging order protection

  • Doesn’t allow forced sale of assets
  • Victim must wait for distributions

The 4 corporate formalities

  1. Annual meeting w/ minutes
  2. Registered agent in state
  3. Separate tax return
  4. Separate bank account

The consequences of failing to follow corporate formalities

  • Personally liable in any suit
  • ‘Veil pierced’ 50% of time

How Corporate Direct can retroactively fix compliance issues

  • Operating agreement, minutes + membership certificates
  • Transfer ownership from individual to WY LLC

The concept of equity stripping

  • Leverage debt as form of asset protection
  • WY LLC provides credit, receives first deed of trust

How to notify your insurance company re: title transfer

  • Use grant deed, inform of transfer to LLC
  • Add LLC as additionally insured (avoid higher premium)

Connect with Garrett

Corporate Direct

Call (800) 600-1760

Resources

Loopholes of Real Estate by Garrett Sutton

Start Your Own Corporation by Garrett Sutton

Books by Garrett Sutton

Rich Dad

Michael’s Mentoring Program

Partner with Michael

Invest with Michael

Financial Freedom with Real Estate Investing: The Blueprint to Quitting Your Job with Real Estate—Even Without Experience or Cash by Michael Blank

Podcast Show Notes

Review the Podcast on iTunes

Michael on Facebook

Apartment Investor Network Facebook Group

Michael on Instagram

Direct download: ABI_152.mp3
Category:general -- posted at: 9:40pm EDT