The best strategy for situations like this is to have more than just one line of defense. In these cases you would want insurance, but you also want to split up your properties into separate LLCs so that they cannot all be scooped up in a harsh lawsuit, should it occur.
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ROYAL LEGAL SOLUTIONS
Learn how to free your time, protect your assets, and create lasting wealth with asset protection attorney and long-time real estate investor, Scott Royal Smith. When a close friend lost over $3 million in a single lawsuit, Scott decided to leave his litigation practice to help people protect themselves from frivolous lawsuits. His law firm, Royal Legal Solutions, now helps thousands of real estate investors and entrepreneurs protect more than $1.2 billion in assets. Join Scott as he deconstructs the lawsuit game and shows you how to protect yourself and your hard-earned wealth.
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TRANSCRIPT
The truth is that there is a lot of bad information out there when it comes to real estate investing and how to protect your assets. Whether is is Joe Lucky, the keyboard warrior from an internet forum, or your CPA, or the worst case scenario a general practitioner that thinks he has a clue about what it means to be a real estate investor. If they tell you that all you need is insurance, they are wrong! Insurance protects you from different types of claims than an LLC does. Let’s take for example a case that I had with a client. It wasn’t a slip and fall on her front porch. It wasn’t somebody had a simple case of negligence in the management of the property. Those would be things that insurance would cover. In her case, she remodeled a house and replaced the plumbing underneath the house. The buyers asked her in an email, “what plumbing underneath the house did you replace?” Her response was, “All of the plumbing in the house was replaced.” Come to find out three months after the sale that there was a leak in the plumbing leading the tens of thousands of dollars in damages because the buyers at that point were out of town. Well, what do you think happened? A lawsuit happened. The buyers were saying the seller’s email was intentionally fraudulent in stating all the plumbing in the house had been replaced. This isn’t the case of a seller who is intentionally misleading a buyer. This is a case that happens with almost all lawsuits. It’s a misunderstanding. You don’t have to be a bad person to get sued. All you have to have is a misunderstanding. Luckily for my client, she had a proper asset protection strategy in place with a Series LLC that allowed us to negotiate a very advantageous resolution to the case. In fact, that particular case we were able to get completely dropped. My name is Scott Smith. I’m an asset protection attorney focusing on real estate company structures. I protect my clients and make them judgment proof and I’d like to help you.
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