Epic Real Estate Investing - How Does an LLC Protect Real Estate? | 1182

Episode Date: March 3, 2022

Real estate as a practice or an industry can come along with some inherent risks and you want protection from those risks. Therefore, in today’s show, Matt shares how to get all the benefits of the LLC inside of your real estate and get full protection. BUT THAT’S NOT ALL! You will also learn what “Driving for Dollars” and Financially Independent” means and how you can achieve the latter one. Let's go! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. What is driving for dollars? It's kind of a funny phrase, a funny term, right? I mean, you just drive around neighborhoods and pick up dollars? Well, kind of. And if you do it right, those dollars can be in abundance. And I'm going to walk you through the process of how to actually do that so you can really step up your real estate investing.

All right, let's go. Welcome to the all-new, epic real estate investing show. The longest running. Real Estate Investing Podcast on the interwebs. Your source for housing market updates, creative investing strategies, and everything else you need to retire early. Some audio may be pulled from our weekly videos and may require visual support. To get the full premium experience, check out Epic Real Estate's YouTube channel, EpicR-E-I.TV.

If you want to make money in real estate, sit tight and stay tuned. If you want to go far, share this with a friend. If you want to go fast, go to reiase.com. Here's Matt. I'm going to walk you through driving for dollars. I'm going to explain what it is, how to do it, and a newer idea around making it really efficient and profitable. And then I'm going to show you a simple plan of how you can pull it off and use it in your neighborhood to really maximize the money that you make inside of your real estate investing. So number one, what is driving for dollars?

Well, it's a time-honored strategy or a technique, so to speak, that's been. performed by real estate investors from since the beginning of since we've started investing in real estate. And what you do is it's a way of building a list of potential motivated sellers to where you can start marketing to them and potentially find a real estate deal for yourself. So that's what it is. So how does it work? Well, very much like the description says, you drive for dollars. You drive through neighborhoods.

Or you could walk if you want. You could ride your bike or a skateboard if you want. But you're going through neighborhoods, looking for some. of distress on property. And when you notice one, what you do is you just write the address down. You get the street number and the street name and you start compiling those on a list. Maybe it's on a clipboard. Maybe you're super techie. And you've got your iPad or your phone and you're keeping a spreadsheet. Whatever may be, you're keeping track of all of the properties that you see in the neighborhood that have these signs of distress. And some investors will even take additional

notes of what they're actually seeing on these properties. Like, is there, do they look abandoned? then do they look like they need major repairs? So that's the process. And that can be a little bit tedious. And there's a way that you can really expedite this. And if you stick around, I'll give you the name of my favorite app that really makes all this really, really easy and really easy to track. So property distress, that's what investors are looking for. So those signs of distress, the property could have boarded up windows. Maybe it has broken windows. Maybe it has overgrown weeds. The roof looks and disrepair. Maybe it's really out of date. All of those types of things could be symptoms of distress. And the reason we're looking for distress, because that might be a little bit

of a signal that there is a reason for that seller to be motivated to get rid of the property. I mean, if they're not taking care of the property, maybe it's more of a bird to them than anything, and they would very much welcome a nice, fair offer to be presented to them. So, once we've got our list built out of these distressed properties in this neighborhood, we'll take that list, the typical real estate investor will take that list back to their office and start looking up the seller's information. They're going to look up for their name and they're going to see if there's multiple owners on the property and they're going to start looking for ways to contact them. They'll take that list and based off of those addresses, they can run it through a skip tracing service. And a skip tracing service, what it can do is return to you the phone number and emails of those actual owners.

So you have the ability now to contact them directly and present them with your office. Now, the most efficient way to do this, because you want efficiencies with this because, as you can tell, you know, you're driving up and through the neighborhoods. You're taking notes. And then you got to go back to the office and you got to look up all this information. You got to do a bunch of research. You become essentially a private detective. And a lot of real estate investors, they avoid this practice because it is so tedious. It is so time consuming. But those that do it, they do it because they know the rewards that are at the end. They're willing to do the work. But we can make this much, much easier.

And thank God there is a way to make this easier because I remember I got my first $27,000 check. My first deal was $27,000 by doing this very thing the old-fashioned way. Now I do it the, I don't know, the new fashion way. And that's where the deal machine app comes into play. It's an app that you can download right on your phone, right from the app store. And how it works is as you're driving through the neighborhood, you'll pull out your phone, you'll open up the app. And once you see one of the properties that has the same.

sign of distress. So you found a property there that had a condemned notice on the door. That could be a good, good opportunity for you. So what you do is you go ahead and you take a picture of that property right there through the app. And the picture will appear on your phone, obviously. But what that picture will also do is the app knows which house you took a picture of and where you are. It will pull up the owner's information. So you'll know their name right away. You'll have their phone number right away. In many instances, you might even have their email address. And you have have the opportunity to call that seller right there from that location while you're sitting in front of the house. You don't have to go and back to the office anymore and do all of that tedious research.

You've got it right there at your fingertips. Or and or what you could do is you could just click a button and what that button will do is it'll trigger a postcard being sent on your behalf to the seller saying that you'd like to buy their property and if they're open to your offers, they can call you right back. Your number will be included on that postcard. What will also be included on that postcard is the picture of the property that you just took. And that really stands out in someone's mailbox. It gets a great response. It's a really efficient way to drive for dollars and generate all of the profits that this practice can. So what the people at Deal Machine have done is they've given my clients the ability to test drive the app to get free access for seven days.

What they've also done, which is really cool, is they're giving you $30 of free credit to send those postcards. Because you got to get. The postcard costs money and there's some postage involved. So they're going to give you $30 of credit. So go ahead and try it out. And you can get access to that right here and right here only at epic deal machine.com. Now, number four, your best plan. As my collective 15 years of doing this has shown me, this is what you're going to want to do.

The best way to drive for dollars is to identify the market or the neighborhood that you want to make your investments in and create a driving plan for that neighborhood. Being organized right from the start will really help you be productive at this practice. Because you don't want to do double the work and accidentally drive down the same street twice or three times within the same week. That can be a real waste of time. You don't want to do that. So let's get organized right from the beginning. The next thing you want to do is you want to schedule it.

You want to schedule your driving days, your driving hours. Because what doesn't get scheduled doesn't get done. You see, using driving for dollars as a part of your deal finding strategy can be really, really effective. But having a well-oiled marketing machine and plan in place can significantly improve your results. Now, it's important to keep in mind that as you come across these properties that look like there's some sort of distress, that doesn't mean they are going to sell you their property to discount. It doesn't mean you're going to find a motivated seller. It doesn't mean every single opportunity is worthy of marketing to.

It just means that there's a greater possibility there than the nice, clean, pretty house on the corner. The other nice thing about it, there's not a huge capital outlay to take this on. It's actually, it's essentially free. You've got gas and maybe some pens and pencils, something like that. That's it. But the trade-off, it takes some work. And it can be tedious and sometimes frustrating in some regards. But gratefully, the deal machine app kind of removes all of the bad stuff of driving for dollars and leaves just the good stuff.

So get your seven-day free access of the deal machine app plus your $30 of free mail credit by going to epic deal machine.com. Epicdealmachine.com. We'll be back with more right after this. Canada can be a global leader in reducing the harm caused by smoking, but it requires actionable steps. Now is the time to modernize Canadian laws so that adult smokers have information and access to better alternatives. By doing so, we can create lasting change.

If you don't smoke, don't start. If you smoke, quit. If you don't quit, change. Visit unsmoke.compet. Hope is not a financial strategy. Let's get back to work. How does an LLC protect real estate? I mean, you've probably heard that you should use one, but why?

What are the benefits of how you are protected? Those are really common questions and good ones at that. Real estate as a practice or an industry can come along with some inherent risks, and you're going to want protection from those risks. And that's really all what an LLC does is it can protect you, it can shelter you from those real estate investing dangers. And I'm going to walk you through it so that you are protected, that you get full benefits of the LLC inside of your real estate. So, I'm going to go over how an LLC protects real estate.

The nuances, the many exceptions. And then an easy and almost free way to set one up should you decide you need to go in that direction. So what would happen if a creditor were to file a claim against you or your business? Or a disgruntled tenant decides to file a lawsuit against you. Would your assets be covered? Would they be protected? If your business isn't structured correctly, your business assets could be used to settle that claim. And your personal assets could be at risk as well. With proper asset protections in place, you can legally avoid a lot of the stuff that real estate investors routinely face,

like creditor or tenant claims. Many business owners choose an LLC to form their business and protect their assets. This acronym LLC stands for a limited liability company. So right there in the name, it kind of tells you that you are getting limited liability. You're getting some protection. However, there is that word limited. So that suggests there still might be some liability for you. The main LLC protection deals with any liabilities or debts that the business may incur.

In most situations, your personal assets will be secure from any business decisions, any business practices or engagements that you may be involved in. Unless you have put up a personal guarantee for, say, a loan. That personal guarantee will live. lie outside of that LLC agreement. Another main area of personal protection is from any wrongdoing that partners or your employees may partake in. If the business is sued and found liable, then your personal assets are protected, as long as

you didn't personally have any involvement. Protecting your real estate involves transferring your real estate into an LLC. However, keep in mind that if there's financing attached to your property, some lenders are kind of reluctant or resistant to allow you to do that. Likewise, there are some mortgages that contain a due-on-sale clause. And by transferring your property into an LLC, it could trigger that due-on-sale clause, meaning the whole amount of your loan, whatever financing you may have on the property, could be called due. Therefore, prior to transferring any property into an LLC should be discussed with your lender, because you certainly don't want to have to write that big check if you don't have to.

Next, if an LLC files for bankruptcy, the members won't have to use any personal money to settle any debts that are owed by the company. However, if you own multiple properties, let's say three, and they were all inside of a single LLC, and there was some sort of legal action taken against you, all three of those properties could be at risk. So if you place each property in its own LLC, they are essentially insulated from each other. In addition, any other personal assets would be protected as well. Additionally, an LLC is very helpful in passing along appreciation to a family member or spouse without incurring any additional capital gain liability. Normally, if a property appreciates after the purchase date when the owner dies and they pass that along to their heirs, the heirs would be responsible for that appreciation. At death, any assets inside of an LLC will get a step up in basis for any share owned by the decedent. With a step up basis rule, all that appreciation is calculated.

at the time of the decedent's death, not at the time of the purchase. Now, the limitations or the exemptions. A major area where your limited liability protections would be removed is if you participate any wrongdoing or negligence yourself. For example, if you were to commit tax fraud or commit any sort of intermingling between your business and your personal assets, you and your personal assets will still be held accountable and definitely could be at risk. There are a few other exemptions, like if you were to take out a loan and provide a personal

guarantee, you wouldn't be protected there either. Because in this case, you've already given the lender permission to come after your personal assets if you were unable to make good on that loan. Additionally, if you sign a contract as yourself and you fail to actually mention your LLC, your business entity, then you become personally responsible and no longer protected by the LLC. Finally, if your LLC is not in compliance with your state's regulations, you could have some liability there also. Thus, the reasons you need to set up your LLC. the right way and do it the right way the first time. And to help you out with this, I'm going to introduce you to some friends of mine to help you do this the right way. So I've worked out a deal for

you to get a free consultation where you can hop on the phone with a live breathing person and work out the details of your business. And you can brainstorm some ideas about what's going to be best for you. And then, if you want to move forward, they'll actually set up your LLC. They'll create the whole entity for you. And here's the best part. They've agreed to pick up the majority of the customary expenses that you'd expect to pay for setting up an end. entity like this. It's almost free. So what's the catch? Because there's always a catch, right? Nobody's going to do anything for free. Well, here's how they see it. If they can do a really good job for you and they show you what they provide and the service that they provide, there's a

really good chance that you may want to engage in some of their other services and products. Also, you might want to do business with them in the future. That's it. It's the old, let me show you how I can help you by actually helping you, trick. They'll take a look at your situation. They'll look at all the variables. They'll look at all the nuances of your business. of your goals and make sure that you are set up indeed the right way. You see, when it's done correctly, you could potentially write off 250 different deductions, saving you potentially thousands and thousands of dollars. And that's even if you're just starting out, even if you're right at the beginning of your business.

If you like the idea of this, you can get the rest of the details by going over to free entity.com. So you can start protecting your assets and keeping more of that hard earned money right there in your pocket. Freeentity.com. Please stand by. We've got overhead to pay. We'll be right back. Boarding for Flight 246 to Toronto is delayed 50 minutes. Ugh, what?

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gambling or that if someone close you, call 1-866-531-2-6-0 or visit comexonterio.ca. Remember that person that gave up on their real estate investing dreams? Neither do I. Let's keep going. Back to the show. What does financially independent mean? And I understand the question because, you know, it may sound rather simple, but there are some misconceptions that could get in your way. It gets in a lot of people's way.

Once you have those out of the way, however, attaining financial independence, if you want it, it's much simpler than most people think. All right. So I'm going to take you through, one, what financial independence means. Two, we're going to discuss the misconceptions that tend to hold people back. And then three, I'm going to give you a step-by-step approach of how to actually attain it. And then four, I'll explain to you how I was able to pull it off against all odds. And I'll explain it in a way that you can follow along and pull it off yourself. what does financially independent mean? Well, it's the situation or the circumstances of where you're able to support yourself financially, not having to rely on anybody else. You are completely self-sustainable

at this point. If becoming wealthy is the destination, becoming financially independent is the bridge that's going to get you there. Moreover, you have to become financially independent before you become wealthy. Now, there are some really big misconceptions about becoming financially independent that whole people back. But if you're aware of them, you can avoid them all together. You just have to know what to look out for. The first big misconception is that you have to be rich to be financially independent. This belief not only prevents people from even starting their financial independence journey. It's just simply not true. Many financially independent people managed to live financially modest lives in a way that allows them to maximize their financial resources without

having endless amounts of money. For example, my story. You know, when I got to of the Marine Corps, I spent the next 15 years of my life in the music business. I did very well for myself. I would say I was absolutely financially independent. I didn't have a boss to report to. I was in control of my entire financial destiny. And then one day, the digital download came along, that thing called Napster. People changed the way they started consuming music. And it wiped the whole industry out, not just me, but it turned the whole industry upside down. And there are tens of thousands of layoffs industry-wide. And there were a lot of people out there really, really struggling. And I got to a point where the wife, she didn't really care too much

about me not having an income anymore. So she took off. And based on her leaving and the financial responsibilities she left me with and what was still hovering around from my music business, I had to file bankruptcy. And at the age of 34, I had to start over. And I went out and looked for all different types of jobs. And I looked for everything imaginable. I went to to look at being a cook. I looked at selling insurance or selling cars. I looked at a number of multi-level marketing companies. ultimately I ended up bagging groceries. And fortunately, the grocery store happened to be going through a strike at the time. So they were paying $20 an hour.

And that seemed like a lot of money. At least my reference point was because the last time I worked for an hourly wage was during my high school years. And I think a minimum wage back then was like $3.35. So $20 seemed like a whole lot of money until I got my very first paycheck. And I was like, what am I supposed to do with this? And, you know, after about six months of that and realized, that no one was coming to my aid, no one was going to help me. I had this epiphany that, you know what, if I want to get back to my former lifestyle because I really missed my money,

I missed being financially independent, I was going to have to do something. No one was going to do it for me. It was going to be up to me. And the most unlikely mentor came along, happened to be the grocery store manager. We coincidentally, we're both 34 years old. So we had a lot in common from that regard. But he was managing the store and I was pushing the grocery carts. And he said, Matt, you know, if you want your money back, it's going to probably happen through real estate because he said these words to me and I've said them a thousand times since. He said, real estate, it's the final frontier where the average person has a legitimate shot at creating epic wealth. And I was like, wow. I didn't know whether it was true or not, but at that point,

I didn't have any other options. So I chose to believe him. And the following day, I went and got my, or signed up to get my real estate license and I became a real estate agent. I did that for a few years and discovered that if real estate's where all the money was at, as he explained, it's releasing on the other side of the desk because I had some real estate investor clients that gave me repeat business over and over again. And when I would look at the documents, I'd like, well, I'm making a decent commission, but look at the profit they're making. I want to do what they're doing. So I made this decision to no longer represent people and the purchasing and sale of their properties. I was only going to represent myself. I was going to be the principal. I was going to

be the buyer. I was going to be the seller from this point moving forward. And so I was able to do that and through this little book, I don't know if you've ever heard of it, this little purple book called Rich Dad Poor Dad. It's a really rare book. But they had this concept explained in the book called Escaping the Rat Race and this new idea of being wealthy. And it wasn't the amount of money that you had in your bank account. It was the amount of money that you had consistently coming in on a monthly basis. That's what real wealth was. That's what I'm really kind of getting at when I'm talking about financial independence. Because I took that book to heart and I focused on that. And in three and a half years, I was able to escape the rat race, so to speak,

per the formula. I was able to get my monthly passive income to exceed my monthly expenses. Now, I wasn't wealthy. I wasn't rich, but I was financially independent. I was in a position where I didn't have to go to work. I mean, when the alarm clock went off in the morning, I could either roll out of bed or I could just roll over. And having had both scenarios in my life, being really wealthy, and not being really wealthy, but having this financial freedom, this financial independence. I think I liked the second one better. I didn't have this pressure to perform every single day. That's what financial independence is and you don't have to be rich to get there. The second big misconception is that you don't need to be retired.

You don't necessarily need to stop working to be financially independent. Many of those people that have reached the stage of financial independence continue to work because they want to, not because they have to. You know, when I did reach that level of financial independence, I did essentially retire for about a month or so. But I quickly discovered that I could only watch so many movies. I could only go to the driving range so much. I could only spend so much time at the gym before I was getting really, really bored. So I understand people that are financially independent and choose to continue to work.

And that's exactly what I did. I chose to continue to work. And I started to scale my business. And that's the empire that we have. That's epic real estate today. Now, people that do achieve financial independence, they may give up that corporate job, but they will pursue other avenues. They'll pursue their passions.

They may pursue side hustles just to keep them busy, to keep them involved. And these are the very types of people that come to me for real estate coaching, those that are tired of the corporate jobs and they want to make that transition, or those that have some sort of means and they're just looking for something else to do. I get both. And that extra income that they generate through real estate isn't entirely necessary for them to live, but it can produce some additional luxuries in their life. It can enable them to build on their real estate portfolio or their overall portfolio.

It can enable them to build that legacy wealth for their family. Now, another misconception is that you got to make huge sacrifices to become financially independent. Extreme frugality or giving up all of your free time to become financially independent. That's not necessary. It's not required. Even just some very minor adjustments in how you spend money and how you earn money can compound over time and compound really quickly to make a significant difference. And being disciplined and consistent and persistent with these new habits can compound really, really fast, much faster than most people

realize. The fourth misconception is that financial independence is reserved for those with certain privileges. Not true at all. Anyone can do it. It's just that most people don't. And that makes it really easy to see why so many people may get discouraged of even starting in the first place because so few people have financial independence. So they're under the idea that it's really difficult and it's reserved for a select few of society. The truth is, different people have different obstacles in their life. They've got different challenges to overcome. And it doesn't take much research at all to identify a financially independent person or even a very wealthy person that was once in your very shoes. At its core, financial independence is really all about being intentional

with money. How you make it, how you spend it, how you invest it. And consider more than just your habits with money. Consider your habits about your own well-being, about your health. Can you make improvements in your life that encourage you to be healthier? Sleeping better, maintaining good hygiene, eating better, exercising. These are all really simple decisions that we can make that will not only improve your health, but will also make your journey to financial independence much more enjoyable. Now, out of all the opportunities and asset classes that are available to achieve financial independence, nothing has done it for more people than income producing real estate. And that is precisely why I chose real estate is my vehicle, because if it had provided

financial independence for more people than anything else, I wanted to take on the thing that gave me the best shot of success. And today, with interest rates being so low and rents across the nation rising so rapidly, the journey to creating passive income through real estate, to create your financial independence, has probably never been shorter. If anything, it's been significantly reduced since I got started. So if you're open to taking a look at this and see how you can apply it to your journey, I put together a free training for you. And you'll find it at matsfreetraining.com. That's perfect for people that are just getting started. Now, if you have a little bit of investing experience under your belt and you want to kind of take it up to the next level,

you don't want to start at the beginning and potentially you want to work together one-on-one, go to r-e-i-a-a-a-ease.com, answer a few questions, and then pick a time for us to hop on the phone and brainstorm some ideas about what that next step looks like for you. That's at r-ei-a-a-a-s dot-com. And that wraps up the epic show. If you found this episode valuable, who else do you know that might too? There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them and ask them to click the subscribe button when they get here and I'll take great care of them. God loves you, and so do I. Health, peace, blessings, and success to you. I'm Matt Terrio.

Living the dream. Yeah, yeah, we got the cash flow. You didn't know home poor, we got the cash low. At Desjardin, we speak business. We speak startup funding and comprehensive game plans. We've mastered made-to-measure growth and expansion advice, and we can talk your ear off about transferring your business when the time comes. Because at Desjardin business, we speak the same language you do.

Business. So join the more than 400,000 Canadian entrepreneurs who already count on us and contact Desjardin today. We'd love to talk, business. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.