Ownership of real estate has many benefits from an investment and tax perspective, yet there is downside risk. The value of real estate holdings can be used to cover damages awarded in lawsuits. It is important to consider asset protection strategies relating to real estate holdings in order to minimize that risk. Asset protection planning is a preemptive measures to reduce your exposure to future lawsuit risk. Scott Smith, owner of Royal Legal Solutions, says using the right tools to mitigate your exposure risk and liability is critically important. Learn more about the right tools and properly protecting ourselves.
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Ownership of real estate has many benefits from an investment and tax perspective yet there is downside risk. However, since the value of real estate holdings can be used to cover damages awarded in lawsuits, you don’t want that exposure, so it is important to consider asset protection strategies relating to real estate holdings in order to minimize that risk. Asset protection planning is a way to reduce your exposure to future lawsuit risk. It encompasses insurance and how real estate is titled to make It and other assets less valuable, less vulnerable to the claims of individuals who may be able to sue you for something in the future whether it’s frivolous or not. It is about preemptive planning, so the first place to start is with the property itself.
Since real estate investors are easy to identify, easy to sue, and appear to have deep pockets, being adequately insured is an absolute necessity. The second step involves the proper structure in which to hold the real estate. For investment properties, it is highly unusual to hold them in an owner’s personal name. That is the wrong thing to do. I’m not an attorney, but any attorney will tell you holding title to real estate or any asset worth anything in your personal name is a big mistake. It’s putting a target on your back. Holding property in one’s personal name or jointly with a spouse places those personal assets and other investment properties at risk if a lawsuit results in damages being awarded. Using the right tools to mitigate your exposure risk and liability is critically important. You need the right tools. Let’s learn more about properly protecting ourselves.
If you missed our last episode, be sure to listen to Limiting Beliefs About Money and Wealth with Buck Joffrey.
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Top 10 Things Real Estate Investors Need To Know To Protect Their Assets with Scott Smith
It’s my pleasure to introduce to you, Attorney Scott Smith. Scott is the owner of Royal Legal Solutions in Austin, Texas. They are one of the top asset protection companies for real estate investors in the country and they provide niche advice for over 29,000 real estate investors representing most of the US states, withholdings of over $4.5 billion. He personally holds real estate in over ten of those states. Scott, welcome to the show.
Great to be here, Marco. Thanks for having me on.
It’s great having you on. I haven’t done an episode on asset protection for awhile and we are long overdue because there are a lot of things we can talk about as it relates to asset protection. It’s such a critically important topic and one that a lot of investors don’t like to talk about because of the fact that they could potentially get sued scares them, but you can’t stick your head in the sand and avoid the topic. You and I are going to have some dialogue and talk about some stuff that investors need to hear. Let’s begin with you. You have an interesting background. I read a little bit about you on your website. Tell our listeners how you got started in real estate investing.
I started while I was in law school. What we ended up doing was buying a commercial real estate investment and ran a transmission auto repair shop to be able to graduate from law school without debt, me and a partner of mine. That’s where I fell in love with real estate because one of the few people that was able to come out of school and not have a quarter million dollars in debt was a pretty big accomplishment for me at the time. Ever since then, it’s always been a part of my life and part of what I do. I’m in a unique position of being a real estate investor as well as an attorney and to be helping people all over the country no matter where they live and no matter what asset class. It’s been quite the ride for the breadth of things I get to touch.
Do you stay on top of real estate law and what changes are out there, especially how it applies to tax laws? Is that something that you do? I’m not quite clear on whether you spill over into the tax side of the equation.
I do a lot of work with the taxation. I’m not a CPA, so I’m not going to file people’s returns. I know from working with hundreds of CPAs and other attorneys what are the practices that are going to work for investors. The lines that are coming up are what happens with taxes, what happens with company structure, those are always together. These usually start with saying, “How do we get the best tax treatment? How do we get the best financing?” and then we find a legal structure that fits our maximum profitability. Then the line gets drawn around what are the stuffs we do as I handle that piece for my clients. Let’s say they have water rights issue on their property, that’s where I’d say, “Go talk to a local attorney for that.” That’s particularly your one little niche area that you need to find a specialist for that piece of it, but anything high level in terms of what it takes to make money, what it takes to be able to invest in multiple different states, how do you minimize taxes, streamline your company’s structure, those are all the realm that I play in.
That’s great to know because I don’t think anybody can separate completely the taxation portion as it relates to the legal portion of it. They’re joined at the hip and they go hand in hand. Even though you may specialize in one area, you can’t separate or ignore the other side of it.
You’re always sacrificing if you do, which is why I work so closely with so many CPAs and we’re constantly in contact about how we are going to increase those efficiencies. The taxes drive what the lawyers like myself end up doing. It’s the same thing, for example, with the financing when we’re acquiring property or what are we going to do on that end of it. It’s the banks that determine what’s the process in which we’re going to acquire new assets and then we play our own game after the banks do their part. We’re always the after-the-fact problem solvers.
Well set but critically important at the same time. Scott, I’ve read somewhere that you invested several years “deconstructing” real estate investing. I don’t know what that means. Can you maybe explain what that means?
That means that you basically read every single book you can possibly get your hands on and then you start to outline what are the strategies that work and don’t work as a professional. What that looks like from a lawyer perspective is that if you ever look at how many books lawyers typically read to go through law school, it’s usually around eight feet high if they stack all the books they read. What I did is I took all the work and study habits that I had through law school and then I applied it specifically to just real estate investing and real estate asset protection and said, “What’s that going to be?” That’s what informs my basis of decisions and then I stay fine tuned by talking to other professionals because things are always changing and I can’t stay on top of every little niche area, but that’s why I have friends and colleagues.
It’s good to be highly educated. One of the things I harp on so much is to educate yourself and build your financial intelligence and your level of knowledge in the areas that you are either an expert at, a professional in, or passionate about, and so you are clearly doing that, which is great. Let’s talk about asset protection and the reason why we need this. Everybody understands the need for it. No one wants to get sued. If you plan to be a real estate investor, the question becomes not so much if you will get sued, but probably when you’re going to get sued. Do you have a feel for how often people get sued in the US? What’s the likelihood of being sued?
Lawsuits are a pretty common here in the United States where we live in the most litigious country in the world. The issue at real estate investing in particular is that there’s a 95% probability that you’re going to be faced with a major lawsuit during your lifetime as a real estate investor over the course of twenty years. I like to think of it as saying like, “We don’t know when it’s going to flood, but we know it’s going to flood and what are we going to do?” Asset protection is an insurance policy for the flood, but we’re going to call the flood a lawsuit and asset protection says, “What are we going to do when there’s going to be a major lawsuit?” A lot of the common structures that we think about that people use for protection like, “I have an insurance policy, so I’m okay.” Those don’t work in a lot of these cases and most all of them when we are thinking about the major ones.
There’s a misunderstanding or misconception as to what could happen if you get sued. Being sued sounds very scary, but it could be so many different things. I’m not sure even for myself I understand. I’ve only been sued once and it went away because it was frivolous, but what could happen? What’s the real fear in being sued?
The issue, as I’ve personally seen, is investors lose $3-plus million from a single lawsuit, completely wipe them out. These are guys that were insured and still had that happen to them. The biggest misconception that happens is that people think that insurance covers you from anything that can happen to you from the risk of real estate, but from a legal perspective, insurance only covers one type of claim and that’s for accidents, which is called negligence, but every other type of claim, there’s hundreds of other types of claims from fraud to breach of contract to gross negligence, which is merely a bad accident, aren’t covered by insurance. Those can happen from a car accident that exceeds the limits of liability to your insurance policy to unrelated business deal. So many things can happen during our lives that would then trigger out of nowhere one of these major lawsuits that then threatens us with potentially completely wiping out our assets that we spent our lifetime developing. In that sense, thinking about what are we going to do for having that peace of mind? Once the lawsuit is filed or even threatened, it’s already too late to do anything. A transfer after the fact the lawsuit is threatened or filed is called a fraudulent transfer. The law only favors the proactive in these circumstances.
You need to be preemptive is what you’re saying. Regardless of how much you have to lose or how much a person’s stands to lose, at the end of the day, you want to set that foundation. You want to build on a solid foundation of asset protection because if your goal as real estate investor is to build and grow your real estate portfolio and increase your wealth, meaning your net worth, you have more to lose. You have a lot to gain, but you stand a higher risk of losing more, and so it’s important that you set that foundation right from the beginning.
The number one rule of investing is don’t lose money because it’s so hard to come back from losing money. A lawsuit is another one of those ways that you can lose money. You can lose a lot of money all at once out of nowhere, which is why lawsuits are inherently scary thing, but what separates low level type of advice of being scared of a lawsuit from real actionable information and what it takes to have smart asset protection as an investor comes into answering some fundamental questions about what’s a model that I can set up as a foundation that I can start now that can grow with me throughout my life that is efficient to grow, meaning not expensive as I add more assets and gives me flexibility to correct the course along the way without having to completely redo large chunks of legal work. That’s where the art comes in from what the variances in types of attorneys that advise on these issues from an investor perspective versus general advice.
Let’s discuss the top ten things real estate investors need to know in order to protect their assets. I’ve got this broken down into ten categories and we can touch on each one of these and you can go as deep or not as deep as you’d like to go on any one of these. The first one, and maybe this is strategically first for a reason, is about liability. Let’s define what the liability part is and how we protect ourselves there.
Liability in a legal context occurs in tons of different ways. Anytime you’re entering into a contract, there’s potential liability because somebody could sue over that contract. Anytime that we’re sending an email to people, we’ve created a written record that could then be used for a fraud case. That happened with a client of mine that I had to defend her on, which was, there was an email between the buyer and the seller. She is the seller and the buyer ended up asking, “What plumbing underneath the house has been replaced?” Her response email was, “All of the plumbing has been replaced.” She come to find out a few months later after the sale, there’s a leak in one of the plumbing in the wall and it costs $75,000 in damages and the buyer is saying, “You totally defrauded me because you told me all of the plumbing was replaced,” and she’s like, “No, what I meant was all of the plumbing underneath the house was replaced.” That email exchange, the ambiguity and what people meant in legal terms is what we call fraud. In normal people terms, we call that a miscommunication, but that’s what fraud is based in. Liability can attach and from simple scenarios like that all the way to ways that we normally live our lives. I gave the example before about having a car accident that exceeds the limits of liability of your car insurance policy being another way that we constantly engage in potentially risky behaviors from a legal liability standpoint.
Is it only about negligence? Is that what liability is about? Is there more to it?
Negligence is just accidents, but in the case that I gave you before about the emails, that’s not an allegation of an accident. That’s an allegation of, “You lied to me. You told me that all the plumbing was replaced.”
Even though it was a mistake on the sender’s part? That wouldn’t be classified as negligence then?
This is like the turn of the legal art of what makes one claim versus another because the defender is always going to say, “It was an accident. I didn’t mean it. You should’ve understood what I meant.” The other guy’s going to come back in and say, “Of course you meant it and I can prove it because you wanted me to buy that house that you knew that had the bad plumbing,” so where does it go to? A jury then makes that determination of eight people you don’t know, get to decide that they randomly pulled, makes that decision of did they mean it or was it an accident? That’s the legal crafting that goes into this. The insanity of this whole system is rooted in that. Do you want to trust twelve or eight people you don’t know to be making these types of determinations for you?
The second item probably segues from the first and that’s insurance because they think you can get insurance to cover some of these misunderstandings, so let’s talk about insurance.
Insurance is great that they cover accidents. We always want to think about insurance as taking care of all of the nuisance claims that come up. Somebody slips and falls on a property would be a good example of something insurance will cover. The problem with insurance is that insurance companies inherently are in a business of collecting premiums and denying coverage. What you find is that when claims get expensive, insurance companies find ways to deny coverage and they’ll either say that it’s because it’s outside of the scope of the policy or they’ll say that you did something particularly negligent, really bad negligence. We call that gross negligence. An example of gross negligence is if grandma falls through a rotten staircase on your property. We would say, “That’s an accident. A normal accident. She fell through the staircase.” The insurance company would say, “No. This is gross negligence because,” here is the key language, “you knew or should have known that the staircase was rotten” and they’ll make that claim because they’ll make that claim, then all of a sudden, they can deny the coverage and leave you having to sue your own insurance company to force them to pay.
From a real estate investor’s perspective, what should they have and carry in terms of insurance?
I always say be very well insured. I’m very well insured, but I don’t depend upon my insurance to be my safeguard, my ultimate safeguard.
It’s like a first line of defense?
It’s your first line offense. Get rid of all the nuisance stuff. That’s what insurance companies are great at. They’ve got a huge team of people out there that are good at getting rid of the small claims and we want those people, and the small claims are much more likely to happen. The company structure only makes sense because those are the things that we’re worried about when you’re going to get wiped out. That’s why we have a company structure in place, but insurance keeps our life running smooth.
Let’s talk about judgments. The third one on our top ten list. What can you tell us about judgments?
Judgments are particularly bad, especially for investors that have assets that are pooled together either in a single LLC or they have it pooled together inside of their personal name. What will happen is if either one of those scenarios end up with judgment against the entity, then they can start to seize every asset in the entity until the judgment is satisfied. It’s unrestricted liability for everything in that particular name. That’s the problem that we have with pooling assets. We don’t want to pool assets together inside either in one person or inside of one entity.
You never want it in the name of a person anyway.
Always, never in the name of person and absolutely never in the name of two people. That’s even worse.
As the saying goes, “You want to own nothing but control everything.” The fourth one here is common asset protection structures. Let’s talk about common asset protection structures. This one caught me a little off guard because I had been studying asset protection on and off for many years and I’ve come to find that there’s one common structure that a lot of people talk about and recommend, but you have an interesting twist on it, which is the series LLC, which we’ll talk about here in a minute because that’s the fifth item. Let’s talk about the common asset protection structure and what a real estate investor needs to know about that.
A quick history lesson on this one was that the two no go’s in terms of asset protection are always owning property in your own name or general partnership, meaning you and your buddy had both your names. It means a lawsuit against either one of you puts the asset at risk. The general partnerships are out. The old way people use to protect assets used to be limited partnerships and that’s where you have a limited partner and a general partner and the general partner would have all the legal liability that we talked about before, segregated into his camp and the limited partner would own the asset. Then the laws changed, and they said, “We’re going to allow you to do LLCs.” Now everybody switched to LLCs because it was a lot cleaner than having to do these limited partnership type agreements.
The old way people are doing that, they’re still doing it, is that they’ll use one LLC per property that they own and then they’ll have one master LLC that will then own all of those subsidiary LLCs. If you had five properties, you’d have five LLCs to hold each property and then one parent company, so six LLCs total to be able to compartmentalize every asset. The reason you do that is because LLCs are treated as individual people, so if you had a lawsuit against one LLC, it couldn’t affect any of the other LLCs.
The problem with that is it’s expensive to form and maintain all of these different companies between filing fees, registration fees, franchise taxes, yearly fees, etc. The new way of doing that, which is I say “new” because in legal terms it’s new even though it’s been around for over twenty years, is to use a series LLC. A series LLC allows you to create one company that can create its own individual child companies inside of it. We call those child series, and it can create an infinite number of those for free, so you only have to pay once, but you get this infinite amount of protection.
That is an interesting twist and something I wasn’t aware of. I knew series LLCs existed and I looked into them years ago, but what I was reading online doing my own research didn’t jive for what I was trying to achieve in terms of putting together an asset protection structure. Let me ask you this question. This is the part that I don’t understand. It’s my understanding from other resources and asset protection attorneys that you’re better off having an LLC in the same state that you own the property regardless of whether you put one property per LLC or you group them in three or five or however many per LLC, but that LLC is in the same state as the properties. I don’t exactly remember why the case is, but if I had to think back, the reasoning was that if there was a lawsuit, you want your LLC to be in the same state of where the lawsuit originated, meaning where the property is nexus. Is that true or is that not true?
If that were true, there would be no sense in where it would matter where to incorporate, which is the number one thing that asset protection attorneys first advice. People talk about why it’s important to incorporate in Delaware. That’s a common piece and the zeitgeist of this. The reality is Delaware, Texas, Nevada, and Wyoming, all at par each with other in strength, so that piece of that inclination of you is wrong in one sense, because it does matter where you incorporate, but if you have a Delaware company that’s operating and owns a piece of property in Illinois, that Delaware company then has to be registered in Illinois if it’s going to own property directly in the name of the LLC. That might be what those attorneys are alluding to, but not all LLCs are made equal. California LLCs are extremely weak. They’re almost useless for what they do. All my California clients, we’re doing something different besides using a California LLC for what they do.
Let’s say you set up a series LLC, whether it’s in Texas or elsewhere, and then you have one of the cells or the child LLCs, and we haven’t talked about this yet and you should probably explain it, but if the child LLC is in a state like Texas and it owns property in Kansas City, Missouri, do you not have to register that child LLC in the state of Missouri in order for it to be recognized in that state, especially if you ended up getting a lawsuit in the state of Missouri?
If the lawsuit gets filed in the state, then you have to have it registered, but we don’t do it that way. We’re owning property in all the different states through land trust to create anonymity and also avoid the foreign entity registrations that you end up having to do. That’s the secret of how you avoid tons of costs while creating additional protections, like being able to hold a property anonymously. A more fundamental piece of that question is saying like, “How would a Texas series LLC be treated in a different state? How does that work in a state that doesn’t recognize them?” There are thirteen states that allow you to create the series LLC, not every state allows you to create it there, and what we look at is “A series LLC is an LLC, just like a Delaware LLC.”
You create that in Delaware and use that everywhere. Texas series LLC is the same thing. It’s a Texas LLC that you’d then be using in a different state. What you find out is, when you look into this a little bit more, that it’s been around for over twenty years that people have been using it and we don’t find any major case law around people challenging it. Even though you’d be highly incentivized to challenge it because you’d be able to pool all the assets together and make more money from the lawsuit, nobody has challenged it. The only way that can make any sense is because the law itself is clear.
Case law can only interpret what the law is. If the law is clear, there’s nothing there for them to interpret. There’s nothing there to challenge even though people are highly incentivized to do it. Is it something new? Is it a novel type of way people are using it? Absolutely. Are there strong reasons and legal precedent across the board to be able to say that it’s a valid structure and a strong structure to use? Absolutely. Implicitly everybody seems to agree on that once you start to look at what happens that there aren’t the lawsuits challenging it.
Explain what the series LLC is for those in the audience that don’t quite clearly understand what that means.
A series LLC is a company structure that you can form in a state like Texas that will allow you to create what we call individual child series. You file one parent company and then you can create as many child series as you want. They’re all free to create and each child series is legally as if it were its own LLC. In essence, you can stamp out as many free LLCs as you would like. The advantages to it is that you’re able to then have one tax return for it because one EIN number for the parent and all of the money flows up to the parent and you’re able to keep one bank account as long as you have accurate accounting records for each of the individual child series that’s going to be defensible.
The key question there is always, “Can you prove which money belongs to which company?” That’s where we say one bank account is sufficient as long as you have accurate accounting records. Property managers do that all the time to show that the money isn’t there and it is somebody else’s. Then the other key piece of it is it’s easy to tag the money in QuickBooks to be able to take care of it. The crux of this is that with a series LLC structure, you can set it up with one entity, expand as much as you want to, and nothing in your life increases in complexity as a real estate investor. That’s the gem of it because most structures that we look at either have to increase in costs on what your costs are going to be like if you do LLC piece or otherwise complicate what we have to do with our banking, our insurance, or taxation.
Not quite too good to be true, but it sounds like it simplifies things so you don’t have to have multiple LLCs with multiple QuickBooks accounts and multiple bank accounts if you could literally in real life and real practice have one set of books that is categorized or tagged with individual LLCs and properties that would simplify a lot of things, so I like the sound of that.
We’ve run this through with a lot of different CPAs. One of the key CPAs that we work with a lot is Amanda Han out in California with Keystone CPA. She’s another big person on BiggerPockets. The great part about these structures is I’ve been doing this for so long that we’ve got so many different looks at it that all the different CPAs that have come along and different attorneys that have looked at this have helped me scope this out to have that net effect. That’s not an out of the box type of benefits that you get from the company structure, but it’s particular to a certain way that you’re going to craft the ownership.
Compartmentalization of liability is number six. Let’s talk about that.
In quick terms, we’ve covered that a little bit earlier. That’s what the difference is between saying if I have two properties and I own it in my personal name, a lawsuit against me, they get to take both of them. If I had on each of those properties in an LLC, a lawsuit against me means they can’t take any of the assets of the LLC. The problem with that is if I had the two properties in the LLC and they sue the LLC, they can take both of those properties. If you wanted to compartmentalize the assets, you would have two LLCs, so then you’d have a lawsuit against one LLC can affect me and it can’t affect the property that is held in the other LLC. The net effect of that is with the series LLC, you’re creating those LLCs on your own for free.
Which automatically compartmentalizes each and every asset that is in each child LLC?
That’s right.
The seventh one touches on several of the other points, but it’s about holding companies and asset anonymity. You’ve touched upon the language that we’re going to talk about here, but explain the holding companies and asset anonymity.
What do you want to be able to think about how do you create real anonymity effectively? There are two ways if you want to hold assets anonymously. You can either use a Wyoming LLC for that because Wyoming doesn’t publish the owners of the LLC to the public, so then you could use a Wyoming LLC as your ultimate holding company if you had these five or six other child LLCs or other LLCs and you have a Wyoming company as a holding of those, that’d be one way to create anonymity that people do. There is a way to also create an anonymity where you can use a simple trust that’s completely free to create the anonymity. You can have like a Texas series LLC that then would be owned by a trust and that gives you the same effect as a Wyoming LLC, but it’s 100% free to do it and there’s no filing for the trust, so there’s no way for people to find out who owns it.
When you have a trust, do you need an attorney to hold the original formation documents?
We do everything through digital signings, so now it’s like I have a copy, our database has a copy, you have a copy and it’s in your email. Any one of the copies of it with digital signatures is going to be sufficient to be able to prove ownership and control of the trust.
I know people in the past have tried to create their own trust on their own entirely without the use of an attorney and there’s no record of the documents other than what they hold or claim to hold.
That’s 100% why it’s anonymous. It’s because you have to produce the document for somebody to know who owns it. Otherwise, somebody would be able to find out who the beneficiaries and trustees are, etc.
Eighth point is separating assets from operations.
It’s my favorite thing. You have this castle of protections with the series LLC and when you combine that with anonymity land rusts and trust to own the company, but the big piece to cutting off almost all the liability that you can be associated with is having a separate shell company that you operate through. You’d have one company like your series LLC that holds all of the assets in your life, then you’d have the separate company that does all of the operations. It’s not going to own anything, but it’s going to do all of the business. It’s going to be the landlord, it’s going to hire contractors, it’s going to be your face to the world and the types of businesses that you’re running. The idea there is that when something goes wrong, who are they going to sue? They can’t sue you because you are acting through that shell LLC, so it leaves them being able to sue the that shell LLC where they can get nothing, so your worst case scenario in that example is that you start a new shell LLC and continue running your life.
It might be a little over simplistic but the way I look at the asset entities as title holding entities where you have your equity stored and then the operations are in transactional entities where you have cash flows coming in and out, and so you’re separating your cash flows from your daily business with the assets that you want to hold and protect in separate entities. Is that an oversimplification or is that how it works?
That’s how it works. All the cash flows that you’re getting in and out from that business don’t belong to that business. That’d be at further piece of documentation to be able to put in place, just like you have a property manager that’s operating on your behalf, that there is a contract there that says, “This person’s operating on my behalf and they have the ability to collect rents, but they all belong to me.” That’s what your asset holding company would need with your operating company to be able to show that they are two separate entities and that you’re treating them as such.
Corporate management, number nine.
Corporate management is the number one way that people screw things up as a lot of times that they can do most of the things right. They can do the accounting records. They can operate their businesses correctly because a lot of those are processes that we set up once. If you’re working with somebody that’s myself or a good CPA, that’s also a real estate investor, they can help you set those up to make sure that you’re going to run those correctly, but then they’ll forget to do little things like they didn’t file the franchise taxes, so then the company licensures got revoked. Then all of a sudden the company protections they thought they had in place went away. One of the key pieces is to always make sure that if you’re going to do it on your own, I recommend setting a yearly calendar invite to always remind yourself of what are the things that you need to be executing every year or you can look to become a member of a firm that’s like mine that’s able to then offload all of the corporate concerns and all of the extra pieces on to somebody else. That way, it’s not something that can go defunct on you.
It’s a simple thing, but it’s something you need to stay on top of. People refer to that as corporate compliance and if you’re not able to keep tabs on it and remind yourself when to file the different forms in each of the states, then you need someone like yourself to basically handle it for you and you don’t want that to fall through the cracks.
You don’t want it to fall through the cracks. Some people want to do it themselves and some people down, but the question to ask yourself is, “What are you in the business of? Are you in the business of doing legal work? Are you in the business of being a good investor or whatever it is you’re doing?” Put people in place that are good at what they do and do it efficiently so that way I can focus on whatever it is that I do well. We’re up to a team of about 25 people at Royal Legal Solutions and I am blown away about how much I don’t do very well the more I interact with my team. Just as a business perspective, I’m always like, “If I can possibly get somebody else to do something that’s not in my wheelhouse, I’m always better off to do it.”
You want to deflect, delegate, and you want to spend your time on the highest and best things, and if that’s investing, finding deals, growing your business, that’s what you should stay focused on and then let other people handle the stuff that doesn’t grow your business.
Or dirt biking, whatever it is
This tenth one is interesting. I like the sound of it, “Think like an investor.” What does that mean?
There’re a couple of key pieces in here. You want to always be looking to hire professionals that are investors themselves or people that generally speaking are engaged in the same business that you are. You want to hire a professional to do it. If you’re going to hire somebody that’s going to produce your podcast for you, do they ever do a podcast? Can they tell you their own successes in that? From our experience, it’s doing real estate investing, but that’s a key piece of takeaway for number ten. Another piece of it is to always do lots of small deals with lots of different people especially when you’re first getting going and you’re getting your toes in the water, try to see if there’re other ways that you can break up deals to not have a lot of skin in any particular one deal until you can flush out to say like, “This is a solid team and this is a solid strategy.”
Remember our goals and a lot of the times that we’re doing with investing is that none of us are out here trying to be like, “This year I’m going to make $10 million because this is going to happen with investments.” The reason we like real estate because we like consistent returns, so stick with strategies that allow you to be able to prove out that, “How can I make sure that I’m not going to be losing my shirt on a bad investment that’s in here?” That means incorporating other people that have more experience than you and are smarter than you in a particular play or a different strategy to then link up with what you do. I always like to throw that in because time and time again, the guys that I see that get greedy with trying to make 25% return on every deal that they do, they end up getting eaten, but the guys that are focused on wanting to make a good healthy return and just don’t want to lose money, those guys are usually always doing well.
I don’t think someone should limit how quickly they grow and build their portfolio and scale, but I say often that your team is so critically important and working with the right people that have knowledge and experience is the best way to grow personally and in your business and your investing. A bit of a quick shameless plug here for our company, Norada Real Estate, is we have that entire team and the resources and the knowledge and the experience to basically pour over our clients and make sure that they grow as fast as they want to grow while not stepping on landmines. We always think like investors, we want our clients to think like investors, and the critical piece there is having the right team. Whether that’s Scott for asset protection and us in terms of acquisitions and then lending and everything else, when you have the right people in the right seats on the bus, you can grow quickly and you can be very successful. That’s the way I think about it as far as a scaling entity in a scaling business and being a real estate investor.
The key piece into that, too, is you can scale as fast as you want to and the other piece is about, “Are you going stuff out? Are you taking action and to doing smart moves along the way?” A lot of us get a stalled on our path of thinking we know there is a direction we need to go, but for some reason we stop. If we can take these small steps that you can that are in the right direction, so if that means being conscious about making that first investment, then make that first investment. It means picking up the phone and calling that CPA to schedule a cheap consultation to find out about what your taxation is going to be. Take those low hanging fruits of action. You don’t have to think that you have to do everything all at once. A lot of times people miss on doing small things that would benefit them because it’s not a 1,000% right out the gate.
Some of the audiences are going to be wondering, “I need to work on this or I need to improve what I already have. What do I do next?” What immediate tips or suggestions would you advise the audience to do after this?
The best value thing that you can do is probably coming to our website, the RoyalLegalSolutions.com website and start to check out the blogs and the podcasts and the content that we have. We believe that if we can educate everybody on what it is that we do about this complicated subject and a lot of ways that we will have the best clients and the best customers and create the best value for everybody. I would say the best way to do that is through our website and you can always contact us at (512) 757 3994 or feel free to shoot me an email at Scott@RoyalLegalSolutions.com and come grab some free content as well as the list that we did. I have collateral on there that explains all of these topics in a lot more detail. Happy to share that with everybody free of charge just to be able to share the wealth, so to speak.
In the meantime, you probably want to review the insurance that you have and make sure you’re well insured. The other thing too is make sure you don’t hold assets in your name or your spouse’s name.
Knowing that your insurance is going to be good, that’s a deal breaker from the very beginning. That’s the lowest hanging fruit that anybody should be doing to make sure that they’re protected. How you hold the assets is exceptionally important. I get calls all the time from people that are owning assets in their personal name or with them and their spouse, and whether it’s going to be taxes or whether it’s looking for real estate advice from Marco or tax advice from a CPA, I would always encourage you to see what ways you can get in to have cheap paid consultations with people to be able to ask them, drill down on specific questions on what it is that you need for your particular situation, and knowing that there’s a big difference in hiring professionals. The ones that are free will only give you the most generalized possible advice because they don’t care that much to spend the time to get to know you to be able to know what it is that you’re going to need for what you’re doing. Is that fair to say, Marco, on your experience and what it’s like working with professionals?
Generally speaking, yes. Once in awhile I come across someone who’s very generous, but that can only go so far. At the end of the day, you get to a point when you’re working with someone where you need to pull the trigger and engage with the professionals so they can dig deep and help you the way they’re supposed to be helping you, the way they were trained to help you. We like to give away free information. We like to give away good information and introduce professionals like yourself to our audience because we know that you can bring value and you provide a lot of value, so that’s the important thing here.
We have all kinds of great free information for people, so I hope that we get to continue that in the future about being able to offer the best free content that gives the most value we possibly can.
Scott, thank you for coming on the show. You’ve been a wealth of knowledge. This is a complex topic and for some people, it makes their eyes glaze over, but a guy like you can certainly simplify it and put it into real world practice. They can reach out to you if they have any other questions. Thanks for coming on the show.
Thanks, Marco. Pleasure to be here.
Thanks again to the audience. If you have any questions about real estate investing, give one of our investment counselors a call and talk to them about how you can start or expand your existing real estate portfolio. Cash flow and wealth creation is what it’s all about and it leads to time freedom, so get your free strategy session and just contact our team. If you haven’t downloaded and read The Ultimate Guide to Passive Real Estate Investment, you can do that for free. Just go to any one of our websites at PassiveRealEstateInvesting.com or go to NoradaRealEstate.com where we have all of our properties posted and that changes quite literally on a daily basis. If you haven’t done so already, click that little button there, remember to subscribe and help us spread the word. Share this with your friends and family and give us a rating and review on iTunes because that helps to keep that show high in the charts on iTunes so we can share this with other people.
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