Episode 335: Protecting Your Assets As A Real Estate Investor With Jennifer Gligoric
If you’ve been in the real estate business long enough, you’re either going to get sued or someone’s going to threaten to sue you. As a real estate investor, you need to protect your assets. In this episode, Jennifer Gligoric, the author of Asset Protection Basics For Real Estate Investors and the COO of Leafy Legal Services shares how we can protect our assets using some basic methods. Explaining how we can ward off legal issues and stop people or hungry lawyers from their suing spree, Jennifer gives real life examples of how her company has saved many from preventable problems without dragging further any legal issues.
Watch the episode here:
I have Jennifer Gligoric. We’re going to be talking about asset protection and the basics that all real estate investors need for asset protection and beyond basics. You put together a book called Asset Protection Basics For Real Estate Investors. If you’re in this business long enough, you’re going to get sued or someone’s going to threaten to sue you.
People don’t realize how prevalent it is because they wait until it happens to them. We did an entire study. We took the national survey of the court data. In 2018, over 100 million lawsuits were put out in the courts. That means every American has a 25% chance of being sued for something over some time in their lifetime. If you’re a real estate investor and you own one additional property and you have one rental house in your name, your chances of getting sued go up to 95% in the next twenty years. It’s an exponential jump. It’s because it’s so profitable for the people who are vexatious who do this to do that. Let’s say you have two rental houses. One, you have your mom and then you have one with yourself and you have your primary home. You’re going to the store or whatever. The phone rings, you look down for a second, you get into a minor fender bender.
Now that their head hurts and this has nothing to do with your rental properties but they ended up getting a lawyer. Before you know it, that lawyers put leads over all your houses and your property. Even if it wasn’t your fault. Let’s say they slammed on their brakes. You had enough room, it wasn’t your fault. It was reckless driving on their part. They were the ones who were not paying attention. You end up having to go to court. The judge brings down the gavel and all that. You’re now out thousands of dollars and you still have to take care of liens or settle or get them to pull the liens. It’s a process because you have to pay people to help you to do that. It’s all because you put your properties in your own name. People think about, “I need asset protection because of bad tenants.” That’s the first thing that comes to your mind. That’s not what it is. It’s all this other weird stuff that can come.
I’ve heard nightmares of people that send their secretary out to go pick up lunch and she got in the accident. It was a work-related accident and now the whole company, whether it be involved in real estate or not, are all liable now because she was working for the boss when she went to go pick up the lunch.
Everyone thinks insurance will protect me from that. No, insurance has very specific things and then there are a lot of things they don’t cover. What we do is hide it. They can’t get it if they can’t find it. We provide the structures and we’re fans of the series LLC or Delaware statutory trust. For the series LLC, we pair it with a Texas anonymous land trust because Texas is very powerful protection state for businesses and individuals. You will operate things out of your LLC. You’ll no longer write checks to contractors or your secretaries or anything in your own name. It all happens in your LLC. Monies that come in go to that. They go back out away from you and there are all these arms-length clauses and things that happen so that if you do get sued, there’s nothing for them to get. That’s what asset protection is. We can’t stop people from suing you. What we can do is make it completely not worth their while to do it.
If you’re shady in you’re being all a criminal, it doesn’t matter. They’re going to get it, but to tell you how powerful our structures are and I say this a lot but look at that Jeff Epstein. They had the power in the might of the United States government, the government of Saint Thomas, the government and other countries all converged against this guy. They are still trying to pierce his corporate veil. He was a horrible, demonic person doing awful demonic things. They’re going to get you if you’re bad. It doesn’t matter how rich you are. You’ll get it. For regular people who are not breaking the law and being bad, it’s the same type of powerful structure and it can stop vexatious litigants. There are a lot of predatory people out there. There are predatory lawyers.
I live in Galveston, Texas, a little island here. To give you how prevalent this is, the city of Galveston has some lots and they decided, “What are we going to do? We still have some money from Hurricane Ike so we’re going to build houses. We’re going to call them low income houses.” People who would normally qualify for a house loan here, they have to work on the Island. They cannot make more than $105,000 for their combined income and they have to have a credit score of at least 680 to try to build up our middle-class. They built very nice houses on stilts so you didn’t have to pay the flood insurance. It’s five houses. I know this because my neighbor works there. It’s their property. There are no liens on that property when they bought it. They go to their first closing, “What are you going to do about these liens?” The city goes, “What liens?” It turns out this guy that goes around and he files liens against people. People are so desperate to sell or whatever, they will settle and he makes an income out of it.
It’s legal extortion.
His game is a paper system. The city is going after him. This is ridiculous. They’ve uncovered how many times he’s done it and how many people have ended up paying and it’s not here now. They’re trying to enact different laws and things like that.
That doesn’t solve your immediate problem if I’ve got to sell my house today.
No, it doesn’t. If they couldn’t find it, if ownership was underneath some veils, guys like that can’t operate. It protects you. It’s a protective measure. They would have to spend money, time and effort. This isn’t a problem here, it’s rampant and it gets worse. Anytime you have people on TV talking about the recession or things like that, people get desperate and they do crazy things too. You need to be protected ahead of time.
In my life, there is never a free and clear house. I pay for something myself then I loan it to my corporation and my corporation has a debt back to me because you need this debt. The debt needs to be worthy of the value of the property so that if someone does a frivolous lawsuit like this, you can at least foreclose them off. If they want to pay the underlying debt, you’re happy. I helped a person one time get out of a free and clear house. I knew the contractor was going to run down and file a bogus mechanics lien. I had them run down and they beat him to the courthouse and they filed a pretty big lien on the property. He tried to extort them and tried to get them to do all this stuff to get the lien off. Finally, he had to foreclose him off.You can't stop people from suing you. What you can do is make it completely not worth their while to do it. Click To Tweet
If they couldn’t find the owner and it was all under a corporate veil, he wouldn’t have been able to do it. He would spend so much time and trying to find who owns what, where does this go? What does that go? He would have to literally prove why he’s breaking open an anonymous trust. It’s very different. Not that you can’t be sued but he would have to sue the operating company that wrote the checks. That’s who he would sue. In discovery, there is nothing to discover and then you don’t have to worry about any of that. It’s very powerful. Legally, the series LLC and even the Delaware Statutory Trust if you have properties in California, Massachusetts or Delaware are considered the ideal protective structure for real estate investors specifically. We pair that with the state plans and the solo 401(k) and self-directed IRA. You need one of those.
I’ve been using land trust for two decades. Everything’s in a land trust or a personal property trust if it’s a mobile home. Is that the same thing as in an anonymous trust?
No, not unless it is paired with a series LLC because it’s a little bit different structure. What you have is you have your operating, what you write your checks for. You have 123 Corporation and then you have a hidden protection one trust. Underneath that projection trust, you have another LLC and it is something completely different and that’s the parent LLC and then there are these arms link clauses. Underneath the parent LLC, you have one over here and then you picture this one head and all these little branches under it. Underneath that parent you have another trust specifically for that trailer or house. Underneath that trust is another child LLC. Instead of one, you are going from the trust to this fee to the other trust and the thing. You could have up to sixteen legs underneath it. It’s very powerful because if you have more than one property, you have all these little legs and each one of them is considered separately.
The thing that is different in what confused because this is a new legal structure. The LLC as an instrument was created in Wyoming in 1976. The first series LLC was 96. For lawyers in like Alabama allows for the series since 2005. For many legal firms, it’s still considered new to them because they are very slow to adapt and slow to change. This is considered cutting edge to legal strategy specifically for these people. The only caveat with that is it is taking the IRS a very long time to catch up. Your bookkeeping has to be very good. You can have one bank account underneath the parent, but you need to make sure that you delineate on the checks and on the payments. Especially in your backend accounting, they are separated into each child entity. That’s very important.
With a series LLC, you just have to go by an LLC for every entity that you wanted to do.
That’s like a house of cards because your name is tied to it.
You can do a series which means you buy national property buyers LLC and then you can be like, “I want to do some apartments with this guy.”
You open up a child underneath your series for that. The series has the other one. You have the trust, then you have the parent and then underneath that, you’d have a child series that you’re opening up with this guy and that’s got a different operating agreement and a different thing under that thing. You may want to get a different bank account for that. Many people have separate accounts for them to add another layer of protection because you have to be able to prove that these are separate. They operate separately. It’s a structure created for ease and also for asset protection. It’s still considered a new legal theory. You would have a child series underneath that one. Let’s say you say, “I want to get two buy and holds.” Each buy and hold would have another little child underneath.
Who is the child?
The child series is whatever you name it. Let’s say you said National Holdings one so that you could say Nat Multi 8685 is the name of the child series LLC.
It has nothing to do with the literal child. I thought you were putting it somehow.
No, we call it a child because it looks like a parent. LLCs have all these little children. They’re like sub-LLCs. That’s another good way to say it.
You got the main series LLC and you got a bunch of sub-LLCs underneath.
Each one of them has their own LLC that’s held under another sub-trust.
Have you defended these before or is there case law on these yet?
Yes, there is case law but there haven’t had anyone that’s pierced the corporate veil. It is the ideal structure. They haven’t had any one of them that they’ve been able to break open. I’m sure anything could happen if you do it wrong. In Florida, there was one case because they would use their names. There was one case but it was misinformation on the person who set it up. They didn’t have the right information for their client or the client didn’t listen. You never know how that works out. They didn’t do the accounting correct and they would interchangeably use the names when you can’t do it. We are very specific when we educate the client, “This is what you have to do.” It sounds very complicated because we’re handling all the complicated part but we make it easy on the accounting part. You will know that when I take a check in, I will change that money. I’ll put it here and I have to notate where it goes.
If everything is separated in your accounting and how it goes into your banking, that is you creating the separation between them. If you’re trying to mix and commingle and then have personal funds in it because people do crazy things that they’re not supposed to do, that’s not going to protect you. You have to do your diligence too. You have to make sure and this is very important, this is what gets people most messed up, no matter which structure they use. Even if they have a regular LLC, not a series, they don’t transfer the deed over. They have the structure, but then they get a property, they buy it in their name, but then you have to transfer that property to put the money in there. Some people don’t do it and then they’re like, “I thought I was protected.” No, there are things that you have to do.
You bought up the LLC to begin with.
That’s right. It’s very difficult to buy things in LLC, especially if you’re using your own credit and it’s more expensive that way and many banks won’t do it that way. You can buy things in the LLC. You can buy them in trust, but very few people do it and you don’t have to do it. You can take it in your name and then you transfer it.
You have a free fifteen-minute consultation like a discovery call and then there’s an expert advisor which is a full hour?
Yes, it’s an hour with one of our expert real estate advisors. Normally it’s $150, but Mitch strong-armed me. He’s a fighter. If you put in Mitch or Mitch Leafy 2019, there is a promo code and you can get it for $99. The advisor will go over everything. You’ll have to bring all your paperwork. If you own it with someone else, that other person will be there on a video call. You’re able to see the advisor, they’re able to see you and you put all everything out on the table and then we figure out the structure that’s best for you in the most cost efficient. How we do it and how we’re positioned in the industry because there are other asset protection firms, you have places like LegalZoom, Rocket Lawyer and stuff like that. It’s all do-it-yourself. They won’t even offer the series LLC. It’s too complicated and there’s no way you can do that yourself. You can’t even get these products by going there.
You can go to a very expensive niche law firm that is owned by lawyers. We’re a legal services firm so we’re in the middle of that. We have embedded relationships with in-house counsel and outside lawyers. Instead of paying $250, $350 an hour for expert consultations and having lawyers to do everything, we have an entire legal team of paralegals and real estate experts and financial planners and people. We look at all over your entire package and then we take it to the lawyer and the lawyer looks it over and they can do it very quickly. We’re able to save people a lot of money. We’ve been in this industry for a very long time, working with other companies and now we’re back.
Mitch Leafy 2019 and you get your expert advisor. They’ll spend an hour with you. They’ll do some research for you or whatever but that’s a lot of work but they’re also going to give you some sound advice.
Go to LeafyLegalServices.com and that will take you right to our page. You can learn about us and book your consultation.It's the poverty mindset that makes you think about money a lot differently than you’re supposed to. Click To Tweet
How do they get a copy of your book, Asset Protection Basics for Real Estate Investors?
They go to LeafyLegalServices.com and then at the very bottom of the page, a little thing will scroll up and ask him if they want a free download. You click on that and then you can get it.
Give me some real-life examples of how you’ve saved some people from some problems without dragging us too much through the technical mud.
This is not ours but this was another thing that happened. I’m going to scrap it because I’ve used this story before but we did have one that was similar to this. They bought a house that had been used for illegal activities and they did not know it. It was not disclosed to them. No one got sick. There was a famous one where the family got sick and had to live there. It was a meth house. It was like in Washington State and everyone got sued over that because the family couldn’t even live in the house but they were stuck in the house because the disclosures didn’t come and the realtor got dragged in and then all the previous owners. Number one, if you’d had a series, you wouldn’t have gotten dragged into that. This is another one that’s like it.
They didn’t get sick or anything like that, but they still sued thinking what if we could have, we should have known this ahead of time that it was there because they had started getting visitors. They thought they had kids and it was a dangerous situation and they probably wouldn’t have gotten the house because of that. They went back through who owned it and dragged the prior owners into a suit because each one of the people was saying, “That should’ve been your seller’s disclosure.” “No. I didn’t know either. That should have been yours.” They tried to go backwards to blame like the original person who would never have known because they sold the house to people. It all got convoluted. Those people ended up getting off scot-free. I have no idea why it works like that but that’s how it works like that.
They were selling all that stuff.
We had someone who had the land, it was weird to deal in California. Some people will have land and some people will have a house. They break it up like that in California, it is weird. They were not dragged into that because the land was under one of their child series. That’s how they were like looking at it going, “I am glad they grabbed me for that.” If they would have been grabbed and they would have said, “Did you have environmental testing and all the stuff like that you would need to have and something like that?”
You can put in your disclaimer you’re buying an as is where it is.
We have a podcast too. We had a guest on. She bought on an auction for $10 and she was like, “This is great.” She goes out there to a trailer, it had a huge sign on it. Former meth house, do not go in, you’re not allowed. It’s hazardous to humans. She ended up making several thousand dollars on that by selling it on Facebook, even though it was terrible. You put the disclosures out. They lifted it up and they had land and she found somebody to buy on it.
I’ve been sued three times in my 2,000 houses in my 24-year career. That’s outside of the normal doing people that I get drag into suits because I was a lien holder or something over taxes or something. I’m not talking about that. I’m talking about real lawsuits every single time. The three people that sued me were three people that I tried to help to get off the street or they were destitute. I’m going to give you all a little nugget about the charity here if you want. People under bridges or homeless can’t get Social Security and Welfare because they don’t send that stuff to a bridge address. There is no address to the bridge. They got to get an address. I took it upon myself to get them an address, get on a place to live, get them their Social Security, get them their benefits and all this stuff and they pay me a pittance for this mobile home or whatever.
Now, you’re off the street and you have some systems and everybody’s better off. They still didn’t send me my money and at some point, I had to foreclose them. I’m like, “It’s been months. You’re obviously not ever going to pay me anything. You need to move out of my house.” They wouldn’t be worried up with legal aid because they’re considered poor. They get free legal aid and they’re dragging me through the court system and I have to pay for my lawyer. Long story short, I won all three cases. I fought on principle which will never happen again because there is no such thing as principle in the court of law. It becomes about everything that isn’t. You would’ve thought I was Hitler. You would’ve thought I was molesting these people on a daily basis somehow in the courtroom. It became about everything that it wasn’t. I won all the cases and it is very stressful. They always were suing for huge amounts of money. It cost me $40,000 each time to win. I won always, but it’s not worth it.
One of the best rules before we even get to fighting is I should have settled with these people right up front. The first checks, the easiest check, even though it was completely wrong. I felt like I was being completely done injustice. The mobile home that I won was in someone else’s park and it was $6,000 mobile home. I should’ve given him the mobile home and that would’ve solved the problem. At the time I was still idealistic young man and was going to fight on the principles. I learned very painstakingly that you avoid lawsuits at all costs if you can bear it because they get out of hand very quickly. Sometimes, if you do enough volume, these things are going to happen. You also learn how to stay out of those positions. This was the nugget. You don’t do charity. If you want to do charity, go get your checkbook and give some cash or write a check to a church or something. Do not do charity with your property. It turns into a foster club.
I don’t want to sound political under correct or whatever but there’s a reason why a lot of these people are under bridges to begin with. It’s not your fault. It may not even their fault but there are powers that play and you don’t want to get mixed up on that stuff. My houses are strictly business. You don’t have exactly what it takes to get in this house with a down payment or whatever, then we’re going to have to move along and wait until you do. I do my charity really easy. I write a check for my favorite charity of my choice and that’s how I donate and I don’t use my business to do charity.
That’s very smart. I agree with you. I come from the person who used to live in a homeless shelter. As a teen, I was a pregnant homeless teenager. I ended up going to the University of Miami all on my own merit. Living in bushes, living in covenant houses. There is a shelter if you’re 21 years or younger. I still will give to covenant house but the majority of the people I met were not like me. I came from a great family but they all went to pot right when I needed them as a teenager. If you met my family, you must have a silver spoon in your mouth. You’d never know. A lot of families go through that. They go through really bad times. I’m going to tell you, many of the people you can give him a house, you can give them that but they are not mentally able to care for it. They’ll get kicked out because their quarters.
They’re broken somehow.
Yes, they need other help that we need to do not to give handouts. We don’t do this anymore but back in the day, I’ve got to tell you, I was told a million times, we’ll help you if you work but if you lay down and I’m like, “How much more down can I get?” I’m a straight-A student. I’m not on drugs, I’m not trying to do any of this, everything went wrong and I made this one bad decision that’s made everything 100 million times worse and nobody cares. You have to get up and take care of it. That’s your problem. You made a mistake. You fixed it. I’m seventeen years old, sixteen years old or whatever. That has made me a business owner. That has been revolutionary because I have the power to fix anything in my life and I’ve met other people in similar circumstances. They have the power to fix anything in their life. I am mentally and emotionally stable. If you’re not mentally and emotionally stable, you can try to motivate. You can do a million things in the world that can’t help them because they have the inability to help themselves.
You have to buy a book for yourself. Have you written your memoir?
I have two books that I’ve written but they are all business-related. I have given lots of speeches at places like St. Vincent’s House, community colleges and different things like that. I get a lot of pushback not with Gen Z but Millennials. They’re like, “Boomer, shut up.” I’m not a Boomer, I’m Gen X. In their minds, they don’t want to hear it. They really feel like the world they’ve inherited is awful and whatever I try to say no. If you look back into history, it used to be a lot worse. There are so many opportunities.
There are so many places worse. You can be right this minute hundreds of places from thousands of places you can be. That’s very interesting. I hope that you take the time to write your memoirs sometime because someone needs to hear it.
I should. I’m busy trying to help people protect their assets. Most people I meet, those families, they were both working two months before and now they’re dropping their kids off at covenant house because that was the safest place because only kids can be in there. The parents are going off to Star of Hope or Salvation Army and they were in a place but both parents lost their jobs. It doesn’t have to be like that. You can make smart decisions, use smart financial instruments. It’s the poverty mindset that makes you think about money a lot differently than we’re supposed to. I fight it all the time. You don’t use credit correctly. You don’t take the same chances rich or successful people take. There are a lot of things you can change. It makes your whole world totally different and better.
We went from talking about legal necessities and all that stuff to seeing a real person who’s behind all this stuff. That goes a long way into making people want to work with you and be part. Look at where you’re at and what you should do. Everybody should at least know, if you’re not ready or you can’t afford it at the time or whatever the reason is, at least learn what you don’t know.
It’s a lot more affordable than you think. If you resonated with me at all, my whole team is like this. I work with people that I love. My entire team, I know their story. I know who they are and they all want to help people. It’s the entire company and not just me. We can help you. It may not be the most gold standard protection, but we can at least get you started so that you can take a couple of ways that are safer than you were before or learn a new way about money or how you’re saving your money to get you a little bit extra. We can do that.
I’m so glad you stopped by and get you some Jennifer Glicoric. I hope you’re achieving your goals this year. 2019 is almost over guys. Thanks a lot, Jennifer. I appreciate you very much.
- Asset Protection Basics For Real Estate Investors
About Jennifer Gligoric
Jennifer Gligoric is COO and Founder of Leafy Legal Services.