09 Jan There Is No Silver Bullet
There Is No Silver Bullet
George N. Skidis, Jr.
Everyone has their secret strategy. Every Real Estate Guru has two or three of them for sale. Their students end up believing that their course is the magic pill or silver bullet. They firmly believe that it will protect them and their investments from the clutches of the evil plaintiff’s attorney.
The problem is that many individuals attended a seminar and laid down their hard earned cash for a asset protection course. Did you know that every one of those courses has a disclaimer in it? A disclaimer is the way the author can escape all liability from the course they promoted and sold. The disclaimer protects them from you the purchaser. It protects them from how you implement the strategies laid out in the course. Implement it correctly or not. It is not the author’s fault.
Guess what? When it comes to asset protection, there is No Silver Bullet that covers all situations. Regardless of how much you believe in it or paid for the materials, there is no perfect defense. One thing is certain, something can and will go wrong. Maybe the course is great in New York, but won’t work in Arkansas, New Mexico and Utah. Or maybe it only works in New York. No one will know the answer until to this question until the issue has gone to trial and been decided by the courts.
If there is no silver bullet, what can you do? No sense looking for a magic pill. They don’t exist either.
A real estate investor needs to look at all aspects of their business and implement as many defense strategies as can be prudently paid for. They should start with the following four categories.
- Insurance: Property & Casualty, Workers Compensation, Completed Operations and all capped with a minimum of a one million dollar Liability Umbrella. Always have insurance.
- Business Entity: Choose the right business entity for your situation. This includes Sole Proprietorships, Partnerships, S corporations, C Corporations and Limited Liability Companies known as an LLC. Some Investors even use more than one entity to shield the owners from liability is reasonable.
- Ownership: You can own property in your own name, business name or in a Land Trust. If recognized in your state an Illinois type Land Trust should be considered. Check with your tax advisor before placing real estate in a name or entity other than your own. Sometimes getting the property out of the entity is 1,000 times easier than putting it in was. Without proper planning, taking a property out of an entity can trigger major income tax consequences.
- Out of state entities: Beware of using out of state entities. They drive up the cost, may not work as you were told and have one other issue that impacts real estate investors. You must also tell your own state everything and may have two income tax returns to file. Real Estate investors must also beware of Delaware and Nevada Corporations which have been actively sold to the unsuspecting for years.
There are other off the wall ideas but these are the main concerns every investor will face. We recommend the book “Lawyers are Liars” by Mark J. Kohler. It is one of the best myth busting compilations we have read. Go to http://markjkohler.com/about-the-book-lawyers-are-liars/ for more information.
Most importantly, join a real estate Investors association in your area. We recommend groups that are either members of the National Real Estate Investors Association, Inc. which is located in Cincinnati, OH.