{"id":70273,"date":"2015-02-12T00:01:10","date_gmt":"2015-02-12T07:01:10","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=70273"},"modified":"2023-04-12T06:07:52","modified_gmt":"2023-04-12T12:07:52","slug":"2015-02-12-bp-podcast-109","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2015-02-12-bp-podcast-109","title":{"rendered":"You Will Get Sued. Here\u2019s How To Survive with Attorney Scott Smith"},"content":{"rendered":"<p>No one wants to get sued, but if you plan to build a real estate empire, the question is not so much \u201cif\u201d but \u201cwhen.\u201d However, we here at BiggerPockets have your back, so today we are bringing on <strong>Scott Smith<\/strong>, an incredibly smart and funny asset protection attorney from the great state of Texas! Scott shares with us a variety of tools and tactics you can use in your real estate business to protect yourself from losing the wealth you are working so hard to create.<\/p>\n<p>Be prepared to learn new tips you&#8217;ve probably never heard before regarding umbrella policies, building your real estate team,\u00a0LLCs, trust funds and more. Don&#8217;t miss out on this information-packed episode!<\/p>\n<h2>Read the Transcript<\/h2>\n<p><a href=\"https:\/\/www.biggerpockets.com\/bpp109-scott-smith-podcast-transcript-you-will-get-sued-how-to-survive\" target=\"_blank\">Click here<\/a> to read the transcript.<\/p>\n<h2>Listen on iTunes<\/h2>\n<p><a href=\"https:\/\/itunes.apple.com\/us\/podcast\/biggerpockets-podcast-real\/id594419649\" target=\"_blank\" rel=\"noopener\">Click here<\/a>\u00a0to listen on iTunes.<\/p>\n<h2>Listen to the Podcast Here<\/h2>\n<p><iframe loading=\"lazy\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC5682904026&amp;light=false\" width=\"100%\" height=\"200\" frameborder=\"0\" scrolling=\"no\"><\/iframe><\/p>\n<h2>Help Us Out!<\/h2>\n<p>Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found <a href=\"https:\/\/www.biggerpockets.com\/forums\/25\/topics\/161423-do-you-listen-to-the-bp-podcast\" target=\"_blank\" rel=\"noopener noreferrer\">here<\/a>. Thanks! We really appreciate it!<\/p>\n<h2>This Show Sponsored By<\/h2>\n<p>We just wa<img loading=\"lazy\" decoding=\"async\" class=\"alignright size-full wp-image-66280\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2014\/11\/RealtyShares.png\" alt=\"RealtyShares\" width=\"283\" height=\"60\" title=\"\">nted to give a shout out to our podcast sponsor\u00a0on today\u2019s show:<strong> RealtyShares<\/strong>. RealtyShares is a crowdfunding platform that allows you to invest in professionally managed properties without leaving your living room!<\/p>\n<p>Learn more by visiting\u00a0<a href=\"http:\/\/www.RealtyShares.com\/biggerpockets\" target=\"_blank\" rel=\"noopener noreferrer\">RealtyShares.com\/biggerpockets<\/a>!<\/p>\n<h2>In This Episode We Cover:<\/h2>\n<p><a href=\"https:\/\/www.biggerpockets.com\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-41804\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2013\/04\/BiggerPockets-Podcast-Cover-300-300.jpeg\" alt=\"BiggerPockets-Podcast-Cover 300 300\" width=\"150\" height=\"150\" title=\"\"><\/a><\/p>\n<ul>\n<li><strong>Forming an LLC<\/strong> right off the bat<\/li>\n<li>The ins and outs of <strong>Insurance vs. Assets<\/strong><\/li>\n<li>Ten things you need to know to <strong>protect your assets<\/strong><\/li>\n<li>What exactly an <strong>Umbrella Policy<\/strong> is and why it might not do what you think it will<\/li>\n<li>Why you <strong>shouldn&#8217;t<\/strong> put all your properties under one name<\/li>\n<li>What you should know about the <strong>Delaware Statutory Trust<\/strong><\/li>\n<li>Scott&#8217;s <strong>advanced strategies<\/strong> for real estate investors<\/li>\n<li>Everything you need to know about <strong>LLCs vs. Trust Funds<\/strong><\/li>\n<li>Who you need as part of your<strong> team<\/strong> when investing<\/li>\n<li><strong>And SO much more.<\/strong><\/li>\n<\/ul>\n<h2>Links from the Show:<\/h2>\n<ul>\n<li><a href=\"https:\/\/www.biggerpockets.com\/webinar\" target=\"_blank\" rel=\"noopener noreferrer\">BiggerPockets Webinar<\/a><\/li>\n<li><a href=\"https:\/\/www.biggerpockets.com\/calc\" target=\"_blank\" rel=\"noopener noreferrer\">BiggerPockets Wholesaling Calculator<\/a><\/li>\n<li><a href=\"mailto:trivia@biggerpockets.com\" target=\"_blank\" rel=\"noopener noreferrer\">Trivia Email<\/a><\/li>\n<li><a href=\"https:\/\/www.biggerpockets.com\/files\/user\/brandonatbp\/file\/10-ways-to-protect-your-asset---biggerpockets-podcast-show-109\" target=\"_blank\">10 Ways to Protect Your Assets<\/a> &#8212; This document was prepared by Scott Smith to accompany this podcast presentation.<\/li>\n<li><a href=\"\/renewsblog\/2013\/02\/14\/financial-planning-death-podcast\/\" target=\"_blank\" rel=\"noopener noreferrer\">BiggerPockets Podcast Show 105 with Neal Frankle<\/a><\/li>\n<li><a href=\"https:\/\/get.biggerpockets.com\/nomoneydown\/\" target=\"_blank\" rel=\"noopener noreferrer\">BiggerPockets&#8217;\u00a0Investing in Real Estate with\u00a0No Money Down<\/a><\/li>\n<\/ul>\n<h2>Books Mentioned in this Show<\/h2>\n<ul>\n<li><a href=\"http:\/\/amzn.to\/1CdT02x\" target=\"_blank\" rel=\"noopener noreferrer\"><em>The 4-Hour Workweek<\/em><\/a> by Timothy Ferriss<\/li>\n<li><a href=\"http:\/\/amzn.to\/1zTdK17\" target=\"_blank\" rel=\"noopener noreferrer\"><em>Rich Dad Poor Dad<\/em><\/a> by Robert Kiyosaki<\/li>\n<\/ul>\n<h2>Tweetable Topics:<\/h2>\n<ul>\n<li>&#8220;Rich people don\u2019t own things, rich people control things.&#8221; <a href=\"https:\/\/twitter.com\/home?status=%22Rich%20people%20don%E2%80%99t%20own%20things,%20rich%20people%20control%20things.%22%20BP%20Podcast%20109%20biggerpockets.com\/show109\" target=\"_blank\">Share on Twitter<\/a><\/li>\n<li>&#8220;You don\u2019t really have any friends once you start getting sued.&#8221; <a href=\"https:\/\/twitter.com\/home?status=%22You%20don%E2%80%99t%20really%20have%20any%20friends%20once%20you%20start%20getting%20sued.%22%20BP%20Podcast%20109%20biggerpockets.com\/show109\" target=\"_blank\">Share on Twitter<\/a><\/li>\n<\/ul>\n<h2>Connect with\u00a0Scott<\/h2>\n<ul>\n<li><a href=\"https:\/\/www.biggerpockets.com\/users\/scottroyalsmith\" target=\"_blank\" rel=\"noopener noreferrer\">Scott&#8217;s BiggerPockets Profile<\/a><\/li>\n<li><a href=\"mailto:scott@royallegalsolutions.com\" target=\"_blank\" rel=\"noopener noreferrer\">Scott&#8217;s Email Address<\/a><\/li>\n<\/ul>\n<h2>Transcript:<\/h2>\n<div class=\"transcript\">\n<p><em>This is the BiggerPockets Podcast Show 109.<\/em><strong>Scott: <\/strong>Personally, the strategies that I\u2019m recommending you are usually only given to people that have five to ten million dollars in assets.<\/p>\n<p><em>You&#8217;re listening to BiggerPockets Radio &#8211; simplifying real estate for investors large and small. If you&#8217;re here looking to learn about real estate investing without all the hype, you&#8217;re in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com, your home for real estate investing online<\/em><em>\u00a0<\/em><\/p>\n<p><strong>Josh: <\/strong>What\u2019s going on, everybody? This is Josh Dorkin, host of the BiggerPockets podcast, here with my co-host, Mr. Brandon Turner. What\u2019s going on, Brandon?<\/p>\n<p><strong>Brandon: <\/strong>Do you have a Band-Aid?<\/p>\n<p><strong>Josh: <\/strong>I took some Advil, man. My head is pounding.<\/p>\n<p><strong>Brandon: <\/strong>Yeah, I got like this hole right there and it\u2019s like bleeding from all this stuff I learned today on this podcast. Crazy amount of stuff people are going to learn \u2013 if you\u2019ve got a Band-Aid ready, because it\u2019s a great show. There\u2019s so much. One thing I noticed, the more I get into real estate, the less real estate books I read, right? We\u2019ve talked about this before because I\u2019ve bought a lot of real estate books. I still like them but I don\u2019t learn a whole lot from real estate books. Today, I learned more than I\u2019ve learned in the past twenty years combined, I feel like.<\/p>\n<p><strong>Josh: <\/strong>His brain is bleeding.<\/p>\n<p><strong>Brandon: <\/strong>It\u2019s bleeding. There is so much going on. Anyways, people are going to love this. It\u2019s definitely, yeah, we\u2019re talking about asset protection but it\u2019s not boring. This is entertaining, funny, really, really, smart.<\/p>\n<p><strong>Josh: <\/strong>Well, they\u2019re listening to us. I mean, you know.<\/p>\n<p><strong>Brandon: <\/strong>Yeah, we keep it real. But I mean, yeah, it\u2019s great.<\/p>\n<p><strong>Josh: <\/strong>I\u2019ll tell you what, this show is for everybody from somebody who is thinking about investing in real estate all the way to somebody who\u2019s been doing it who\u2019s got a hundred properties. There is something to be learned. There\u2019s some tips in here that blow your mind. Blow your mind. Apparently, there are tips here that your lawyers don\u2019t want you to know about. There\u2019s some really good stuff, so definitely pay attention.<\/p>\n<p>This is Show 109 of the BiggerPockets podcast and you check out the show notes at <a href=\"http:\/\/biggerPockets.com\/Show109\" target=\"_blank\" rel=\"noopener\">BiggerPockets.com\/Show109<\/a> . Also, we want to make sure that you guys sign up for this week\u2019s webinar at <a href=\"http:\/\/BiggerPockets.com\/Webinar\" target=\"_blank\" rel=\"noopener\">BiggerPockets.com\/Webinar<\/a> . We did one a few weeks ago on multi-family and it was huge. It was awesome. It was amazing. The feedback was phenomenal. If you have not yet checked out our webinars, we definitely recommend you do that. Again, <a href=\"http:\/\/BiggerPockets.com\/Webinar\" target=\"_blank\" rel=\"noopener\">BiggerPockets.com\/Webinar<\/a> .<\/p>\n<p>Before we move on, hopefully you guys got a chance to check out the new wholesaling calculator that we launched last week.<\/p>\n<p><strong>Brandon: <\/strong>I think it was a couple of weeks ago<\/p>\n<p><strong>Josh: <\/strong>Oh yeah, two weeks ago. But if not, definitely check it out. <a href=\"http:\/\/BiggerPockets.com\/calc\" target=\"_blank\" rel=\"noopener\">http:\/\/BiggerPockets.com\/calc<\/a> . You can find it there. I think that\u2019s all I\u2019ve got on that. We\u2019ve got trivia, don\u2019t we?<\/p>\n<p><strong>Brandon: <\/strong>We do. So, last week we interviewed Grant Cardone and it was an incredible podcast. If you haven\u2019t listened yet, go listen to that one right after you listen to this one.<\/p>\n<p><strong>Josh: <\/strong>It\u2019s the one show of all the shows that you probably want to listen to.<\/p>\n<p><strong>Brandon: <\/strong>Yeah, it\u2019s amazing. Anyways, in that interview, Grant mentioned that two years ago, he bought a huge apartment complex in Florida. I think it was like 1000-something units and he said he won the bid against 38 other investors even though he was the lowest bid because he did two incredible, unique things. So the question today is, what were those two unique things that he did to win that bid? So if you think you know the answer, send the e-mail answer to <a href=\"mailto:trivia@BiggerPockets.com\" target=\"_blank\">trivia@BiggerPockets.com<\/a> for your chance to win the digital version of <em>The Book on Investing in Real Estate with No (and Low) Money Down <\/em><em>written by me and yeah, if you want to get a copy of that book right now without the trivia, it\u2019s on sale actually over on Amazon so go over and pick it up or just go over to <\/em><a href=\"http:\/\/BiggerPockets.com\/nomoney\" target=\"_blank\" rel=\"noopener\">BiggerPockets.com\/nomoney<\/a><em> .<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>And we link to the Amazon sale from <\/em><a href=\"http:\/\/BiggerPockets.com\/nomoney\" target=\"_blank\" rel=\"noopener\">BiggerPockets.com\/nomoney<\/a><em> so you can find it there.<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>Yep. Awesome. Well, I think that\u2019s pretty me all the upfronts. Why don\u2019t we get on with today\u2019s show?<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Sponsor?<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>We do, there we go. Let\u2019s not forget our sponsors, guys.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>They\u2019re awesome so we can\u2019t forget them. All right, here we go.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>Let\u2019s bring it in. Let\u2019s bring it in. Thank you, by the way, to our sponsors for their support and here we are.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>All right, this episode is from to you by <\/em><a href=\"http:\/\/RealtyShares.com\" target=\"_blank\" rel=\"noopener\">RealtyShares.com<\/a><em> . Realty Shares is a real estate crowdfunding platform that allows accredited investors to invest in pre-vetted real estate deals online. So, investors can browse and invest in both residential and commercial properties that yield returns of 8 to 16% annually.<\/em><\/p>\n<p><em>\u00a0<\/em><em>So as Realty Shares member, you can also possibly invest of professionally managed real estate investments in a variety of asset types and geographies for as little as $5,000, all from the convenience of your living room.<\/em><\/p>\n<p><em>\u00a0<\/em><em>So to learn more and to get started with a free account, visit <\/em><a href=\"http:\/\/RealtyShares.com\/BiggerPocket\" target=\"_blank\" rel=\"noopener\">RealtyShares.com\/BiggerPocket<\/a><em> . That\u2019s <\/em><a href=\"http:\/\/RealtyShares.com\/BiggerPockets\" target=\"_blank\" rel=\"noopener\">RealtyShares.com\/BiggerPockets<\/a><em> .<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>All right, awesome. Good stuff, good stuff. Thanks again to everybody who comes and sponsors us here on the BiggerPockets podcast. We definitely appreciate it. Also, quick heads up, if you have not yet left us ratings or reviews on iTunes \u2013 you\u2019re a listener and haven\u2019t done that \u2013 please do that. It really does help us get more listeners to the show so we\u2019d definitely appreciate it if you do that and you can find the link on the show notes.<\/em><\/p>\n<p><em>\u00a0<\/em><em>With that, why don\u2019t we get to this? Today\u2019s guest is Scott Smith. Scott is a asset protection attorney located in the Austin, Texas area and Scott\u2019s just got some amazing stuff. I just want to kind of get to it. He\u2019s got so much to say, so much to share. He\u2019s got amazing tips so bust out your pen, get a notebook. If you\u2019re driving, pull over. Park your car. Get out a notebook and take notes because there\u2019s a lot to learn today. So let\u2019s get to it.<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>All right, Scott. Welcome to the show, man. It\u2019s good to have you here.<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Yeah, thanks, Josh. Great to be here. <\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Awesome. Well, today we\u2019re going to talk about something that maybe some people find a little bit, what\u2019s the word \u2013<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>Daunting?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Daunting, scary, whatever. This is the #1 question I get from people all the time because it\u2019s so overwhelming. I don\u2019t know what to do about it. That is the concept of asset protection, LLCs, stuff like that. And I don\u2019t know what to tell people. I mean, like \u2013<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>Well, they ask me all the time. Hey, should I do an LLC? What should I do? And I\u2019m like, talk to your lawyer.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Yeah, talk to your lawyer.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>I\u2019m not going to tackle that. Don\u2019t go asking me because I\u2019m not going to get in trouble for giving you the wrong advice.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Today, we\u2019re going to make Scott here get in trouble because he is a lawyer.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>Pretty much, pretty much.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Yeah, well, I\u2019m really excited to share with you guys today some of the cutting edge strategies for novices all the way to advanced strategies for the really high level players that are doing. First and foremost, what we always have to do as attorneys \u2013 we always have to hedge our liability \u2013<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Wah-wahh. Come on, man.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>The yadda, yadda, yadda.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Let\u2019s hear it. Let\u2019s hear it.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Obviously, this is not legal advice. I am not your attorney and you should retain counsel before taking any action and I won\u2019t become your attorney until we have a signed retainer agreement. But apart from that, I think I\u2019m going to have some really great concrete strategies that everybody\u2019s going to be able to implement in one way or the other to help make sure they\u2019re protected and that every dollar that they make and work hard to make in this industry, that they\u2019re going to be able to keep it from other people trying to come after it.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Hey, Scott. By the way, would that disclaimer pretty much stand across everything that we do? You know, I mean \u2013 you\u2019re a lawyer so it\u2019s probably perfect advice, like, hey folks listening. Don\u2019t listen to us. You can listen to us, it\u2019s great, but before you go and do stuff, talk to your lawyers, right?<\/em><\/p>\n<p><em>\u00a0<\/em><em>I mean, you want to make sure \u2013 we\u2019re an entertainment show. We give good practical advice but at the end of the day, before you actually make decisions that could have ramifications, talk to your lawyer. Not enough people, not enough real estate investors are willing to invest the money to talk to their lawyers and it\u2019s so important because it could save you so many problems. I just want to kind of get your feedback on that.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Yeah, you\u2019re absolutely right, Josh. Here\u2019s my thoughts on that topic. First of all, if you think that you can give one blanket piece of advice that applies to everybody equally, you\u2019re crazy because everybody\u2019s business is different. Everybody\u2019s situation is different. The law is very particular to the circumstances, right? That\u2019s why we have facts and we have the law and that\u2019s where legal precedent gets created from. I think you\u2019re right that I find time and time again that the real estate investors that I talk to are trying to save money. Everybody wants to save money, right? But it\u2019s kind of like trying to save money by not buying fire insurance on your house. Sure, you can save some money in that.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Or flood insurance.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Yeah, flood insurance is another great one, right? That you can wipe out \u2013 the cost to you up to 10, 20, up to $100,000 to repair a property if you don\u2019t have properly insured and the same kind of thing ends up happening with what I focus on, which is asset protection and making sure that people have their businesses structured correctly. That way, when somebody comes with a lawsuit against them, I get to be as their attorney to go into the other attorney\u2019s office and say, good luck trying to sue me because what you\u2019re going to collect against is this piece of paper and this piece of paper has no assets in it.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>You\u2019re the man!<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>That\u2019s the way to do it. It\u2019s not as hard as you would think it would be. Just a couple of strategies can really get you into a much higher barrier for anybody to come after your assets. Just kind of taking that insurance asset protection kind of issue \u2013 they\u2019re really two sides of the same coin. We really should start thinking about insurance as a way to protect the property like we have flood and fire insurance, and we should think about asset protection in the way that, how do we cover our ASS-ets? How do we cover ourselves from being able to, if somebody sues us, to keep their hands off our money? That\u2019s the way that I kind of like to explain it to a lot of my clients.<\/em><\/p>\n<p><em>\u00a0<\/em><em>The first question I ask whenever I go into any conference or I go in to speak to anybody is I ask, does anybody here own a piece of investment property in their name, personally? You\u2019ll be surprised that even with the power of the internet, and even with your great podcast and forms that BiggerPockets offers, you still find people that are still owning property in their personal name. They have this idea that ownership of the property means that they want to be able to have it in their legal title. So, I tell them, what you don\u2019t want \u2013 what rich people do is rich people don\u2019t own things. What rich people do is they control things.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Can you explain that, by the way?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Yeah. The difference between ownership and control is more like a legal fiction. The legal fiction is in the sense of saying that, do you really care whether you own a yacht or do you care that I just get to go use my yacht whenever I want to? It\u2019s not even my yacht. I just get to go use it. Well, no, you wouldn\u2019t care whether you had ownership at that point or not, right?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>I\u2019d use your yacht.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>You can come anytime, Josh. It\u2019s a pretty small one right now. It\u2019s more like a bass boat. But you can still have a good time on it, I think.<\/em><\/p>\n<p><em>\u00a0<\/em><em>When we talk to them about that, we say, let\u2019s take the properties and let\u2019s put them into trusts, LLCs, and other types of business entities where you get all the benefit and all the money from your properties and the ability to control your properties but without all the liability that comes with actually owning something.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>That makes sense. Now, I for the first six years of my investments, everything was in my own name. 100% of everything. Just two years ago, or three years ago now, when I started full-time here at BiggerPockets, that\u2019s when I started putting everything into LLCs because I thought, well I have a lot more increased visibility now and I\u2019m just a little bit worried. Now, I\u2019ve shifted everything over.<\/em><\/p>\n<p><em>\u00a0<\/em><em>Maybe I can kind of step back a minute before we get too deep into the LLC side of things. I know today, one thing you had sent me earlier in an e-mail you said you would talk about \u2013 you said there\u2019s 10 different ways to protect your assets and that\u2019s what we\u2019re going to cover today, right? All those 10 things?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>That\u2019s correct, yeah.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>So maybe we\u2019ll just start right at the beginning and just hit each one, one at a time, if that\u2019s what you want.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>I\u2019m loving it.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Is that easy to do?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Yeah. So, I think we\u2019ve kind of already started covering the two topics with that \u2013 how do we use our asset protection strategies and insurance. We covered what are the difference between those two things and how they\u2019re the same side of the coin to protect you but just in different ways.<\/em><\/p>\n<p><em>\u00a0<\/em><em>One of the key parts \u2013 #2 on that list \u2013 is how insurance really isn\u2019t sufficient. A lot of people think that being able to get an umbrella policy \u2013 the dog is barking here.<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>We\u2019re having technical difficulties here.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Brandon and I will sing a song for you.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>That\u2019s all right. My dog was barking in the background a minute ago. I had to mute him. Or mute my mic \u2013 not mute him. I really got to mute my dog.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Well, like Scott said, this is stuff that you and I talked a fair amount about and like we said, guys, there\u2019s so many of you who have these questions. I really, really urge you to bust out a pen, start taking notes on this because there\u2019s a lot of great stuff. As a quick heads up, if you\u2019re listening and you have questions, you can ask questions on the show notes at <\/em><a href=\"http:\/\/BiggerPockets.com\/Show109\" target=\"_blank\" rel=\"noopener\">BiggerPockets.com\/Show109<\/a><em> . That\u2019s <\/em><a href=\"http:\/\/BiggerPockets.com\/Show109\" target=\"_blank\" rel=\"noopener\">BiggerPockets.com\/Show109<\/a><em> and Scott will be happy to assist where he can. He\u2019ll probably tell you to talk to your lawyer, but you know. I\u2019m sure he\u2019ll jump in.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>I\u2019ll always tell you to talk to your lawyer but I\u2019ll also give you a little hint about the kinds of things that you should be thinking about to research for your state because every state\u2019s different.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Yep. So now that he\u2019s back from smacking his dog around, let\u2019s get back to it.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>He always picks the perfect time. So, getting back to where we were talking about insurance and how insurance really isn\u2019t sufficient. A lot of people think if they have a couple of million dollars in an umbrella policy, that\u2019s going to be able to cover me. The real fact of the matter is that you can have a lawsuit filed against you from the very first communication that you undertook with a buyer or seller and those lawsuits can be based on allegations of fraud. Any type of statements that you make gives a basis of a lawsuit and what happens is the court looks at a statement and says, oh that\u2019s an intentional act.<\/em><\/p>\n<p><em>\u00a0<\/em><em>And if it\u2019s an intentional act, the insurance company says we\u2019re not going to cover you in the case that you intentionally did some wrongdoing. So don\u2019t think that insurance is actually going to get you there. What you really have to do is be able to set up a structure that allows anybody that would look to sue you to not be able to collect against your assets. But to really understand the real danger that we walk into as investors by owning various properties \u2013 too many properties grouped into an LLC as well as owning property in our own name is what the real power of a judgment is.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>Before you go there, I want to kind of circle back on the insurance thing. So, even prior to going into a contract with somebody, if I\u2019m communicating with them via text or via the phone \u2013 not by the phone, by email \u2013 those communications are a part impartial to any evidence against me in some kind of intentional act to mislead somebody. Is that correct?<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Sure. Take for example the instance that you wrote somebody an e-mail and you told them that you\u2019ll replace all of the plumbing underneath the house. Even though it didn\u2019t state it in the contract and even though it\u2019s not in the deed, the mere fact that you told them that could be considered an element of fraud. That\u2019s the way those kinds of things are attached and the worst thing you can do is put those kinds of things in writing.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>So, I\u2019m trying to understand this and I apologize \u2013 my thought on this \u2013 the insurance companies want nothing more than to have nothing to do with this case, right?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>They won\u2019t cover it. They\u2019ll deny coverage.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>So, it\u2019s in their interest to deny coverage as much as possible because then otherwise they\u2019ve got to pay out of their pocket.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>That\u2019s why they make money. They collect premiums and deny coverage.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Right. So that\u2019s where this comes into play. Yes, you have insurance but don\u2019t count on that. Realize that the second that you start communicating with people and the second they can find a way out, they are going to wiggle their way out of it and they don\u2019t have your back anymore. Is that pretty much a fair assessment?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Yeah, you don\u2019t really have any friends once you start getting sued. Everybody tries to run away from you as fast as possible, and especially in these types of situations because all of a sudden once you get sued, you say, well, it wasn\u2019t really my fault, it was actually somebody else that told me to do this or instructed me to do this so every attorney will say, if you know anybody that\u2019s going to get sued and you\u2019re in any way involved in what they did, try to distance yourself as much as possible from that.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>What I find that\u2019s fascinating \u2013 I mean, the whole thing is fascinating \u2013 but what I find that\u2019s fascinating is that there\u2019s this advice that goes around all the time; I see it. People say, don\u2019t worry about an LLC, just get an umbrella policy. I\u2019ve never heard anybody say it the way you did that an umbrella policy alone isn\u2019t going to cover you. So you flat out say that that\u2019s bad advice to say don\u2019t worry about any kind of asset protection, just get a good umbrella policy and you\u2019ll be fine.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Yeah, I would say that unless your umbrella policy is going to cover for intentional acts of fraud and other intentional acts that are in violation of the law, that your umbrella policy is not going to be sufficient. I\u2019ve never reviewed a policy where any insurance company was willing to take on that kind of liability because that means that you could do anything you wanted to and do it intentionally \u2013 you could go punch the mailman in the face because he keeps knocking on your door and say oh, my insurance policy\u2019s going to cover me for that.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Are most of these frauds, the \u201cintentional frauds\u201d, presumably they\u2019re unintentional, right? People just kind of doing their thing and trying to get by and it\u2019s like \u2013<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Exactly, right? Being accused of fraud doesn\u2019t actually mean you\u2019re a bad person. In fact, most everybody \u2013 all of my clients are good people. They\u2019re all honest businesspeople. It\u2019s usually a miscommunication but when there\u2019s money on the line and you\u2019re talking about 30 or $40,000 in replacement costs and one person had one idea and another person had another idea, well then you have a lawsuit even though you have two great, honest people that were trying to do a business transaction together. Don\u2019t think that just because you\u2019re honest and just because you\u2019re as up front as possible that you\u2019re not subject to a lawsuit because that\u2019s just not the case. Honestly, the one takeaway that I usually start all these presentations with is the real estate industry is the hottest litigated area of law. If you\u2019re serious about this business, it is not a question of <\/em><em>if<\/em><em> you\u2019re going to get sued. It\u2019s a question of <\/em><em>when <\/em><em>and in what condition you\u2019re going to be to defend yourself when that happens.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Oh, yeah. I\u2019ve never heard anybody put it quite that bluntly, but it makes sense. I don\u2019t know. It\u2019s scary. Like I\u2019m going to get sued someday and that\u2019s why we have you on here. So, if insurance is not good enough \u2013 it helps but it\u2019s not good enough \u2013 what else do we do?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>So, what we want to do is be able to have a proper asset protection strategy. The reason that it\u2019s worth investing in a proper asset protection strategy is because, take this hypothetical example where you have $100,000 house with an $80,000 mortgage on it. A plaintiff ends up suing you \u2013 maybe it\u2019s one of your tenants, maybe it\u2019s a contractor, maybe it\u2019s anybody that\u2019s suing you for any work they did on the property.<\/em><\/p>\n<p><em>\u00a0<\/em><em>Well, you only have $20,000 in equity and they have a $50,000 judgment so they get to foreclose on your house and take that house. Well, they still have $30,000 left over from their judgment and they can go to your next house and foreclose on that house and keep doing that to all of your properties until all of the attorneys\u2019 fees are satisfied and until they get all of the money back from their judgment and the attorneys get to keep charging for every foreclosure they do so what do you think ends up happening to the judgment? It goes down a little bit by a little bit by a little bit and they take more and more of your things. But you don\u2019t have to be that exposed if you properly structure things inside of LLCs.<\/em><\/p>\n<p><em>\u00a0<\/em><em>There\u2019s a couple of different ways to be able to do that. The first, just to kind of give you a worst case scenario is to hold all of your property in a sole proprietorship. That\u2019s the worst because everybody knows you own the property and everybody can get to it. It\u2019s not protected.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>That means you just own it with your name, right? Like, me and my wife bought a property, it\u2019s in our name \u2013 that\u2019s what the vast majority, I\u2019d say, of new investors do it.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Exactly, because that\u2019s the easiest. There\u2019s no setup cost. There\u2019s no extra tracks, treatments that you end up having to do. So, with the LLCs, what you end up having to do is you have to end up spending a little more time and money, right? You have to file the LLCs and you have to keep the corporate formalities meaning you have to keep the corporate minutes. You have to issue shareholder agreements. You have to have operating agreements. All of the paperwork in there has to be done and it actually has to be done perfectly because any defect inside of the paperwork \u2013 there is an allegation there that you weren\u2019t really treating it as a corporation so then they\u2019re going to treat it as if it was your personal asset, being the manager.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Interesting.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>So that\u2019s why it\u2019s worth it to pay what we\u2019ll call the attorney insurance to be able to pay your attorney insurance to have somebody else that\u2019s a professional look at it and make sure that you\u2019re prepared in the event that you\u2019re getting sued.<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>There\u2019s a quick tangent I want to take with the LLCs. For Texas and a lot of other states, it\u2019s what\u2019s called a series LLC and you\u2019ll see this a lot on BiggerPockets, people talking about how cool series LLCs are and they\u2019re really cool because you get one tax filing which makes it really easy to manage but you get the asset protection because you can separate all your properties out into what would look like different LLCs. So each house then would be owned by a separate LLC underneath the series. So even though you only have one legal entity, the court and the legislature kind of made almost like a fiction to say okay, we\u2019re really going to let people treat it as if they are separate entities.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>So if one of the LLCs in the series LLC gets sued, it doesn\u2019t spread to the other LLCs?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Correct. You\u2019re going to be able to isolate your assets that way.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>So it\u2019s like having an entity that owns another entity within it, like an escort that owns an LLC. They\u2019re independent LLCs. Of course, as long as you\u2019re not comingling, right? You want to make sure that you\u2019re personally not making deposits of the company\u2019s cash into your own name and playing around. You really have to make sure that you\u2019re keeping these entities separate, which I know in your notes is something we\u2019re going to get to.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Yeah, you have to make sure that everything is separate when you\u2019re moving money around into accounts. You really have to kind of step back and say, as if these were separate companies that were owned by different people, how would things need to be treated here? So, that should be your assumption when you\u2019re starting to work in that type of structure.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Okay, I\u2019m new to the series thing. I don\u2019t know really anything about it other than I\u2019ve seen it mentioned. So, in my business I have I think five or six, seven LLCs that are all just separate because I have one for each of my partnership \u2013 ownership structures, essentially. The ones that I have with this partner will have an LLC, this partner has an LLC, this partner has an LLC. Is that something you\u2019re talking about, I should have those in a series LLC so the taxes are easier to do?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Yeah, there would be a way for you to do the taxes easier inside of a series LLC, but depending upon the complexity that you\u2019re doing, there\u2019s also the option of creating what\u2019s known as the Delaware Statutory Trust that operates very similar to a series LLC that you can create different series inside of a trust agreement. So, trust is just like a filing that ends up happening in Delaware with an attorney and an agent in Delaware but it\u2019s another way that you can separate it out and those are arguably more protective than even an LLC because Delaware actually created it to be in response to people moving their money offshore. They wanted to create an entity that was arguably as strong as having an offshore bank account.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Interesting.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>That way, all the money wouldn\u2019t flow out.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Delaware\u2019s always at the forefront of entities and structures, aren\u2019t they?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Absolutely, yeah. Delaware likes to keep the money positioned in their banks and inside of their control so they can charge through taxes on it, which is admirable.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Yeah, that\u2019s great.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>That\u2019s good political business to see if you can make money off of taxes for other people\u2019s money then you get to give it to your constituents so it\u2019s a beautiful thing. So they like to protect themselves with that.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>So this is called a Delaware Statutory Trust.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Correct, yeah. DST for short.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Do you want to cover that now or do you have that later on planned to talk about?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>I have that for a little later on. A couple of things \u2013 we can jump to that and kind of backtrack a little bit.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Sure, if you want to. Whatever\u2019s best.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>So, the thing you want to know about DST is, apart from what I\u2019ve already told you, is that it\u2019s really easy to create new business entities in a DST and they don\u2019t actually have to be recorded with the state of Delaware. It\u2019s almost like as if you were to create an LLC for an investment package for recruiting potential investors but the only piece is a piece of paper that\u2019s inside of your desk.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>So, I\u2019m going to ask you to repeat yourself because I\u2019m sure that I\u2019m not the only one who\u2019s like, what \u2013<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>Yeah, I get like 50% of that.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Yeah, okay. So tell me really quickly \u2013 I think that this is the question that people are really going to want to ask. Why would I choose a DST over an LLC or a series LLC? I think that\u2019s the fundamental question.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Yeah, so granted this type of strategy is usually for bigger players that end of happening, right?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>Don\u2019t insult me, man. I\u2019m a player.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>What ends up happening with that is, one is, the upfront costs to create it are expensive because it\u2019s got to be done right. But after that, you can create what would almost be like any of these investment structures underneath it really quickly and easily. Within a matter of hours, you\u2019d be able to create a whole new legal investment package to be able to shoot to investors. And it\u2019s really tough to get at the money once it\u2019s inside a DST for any type of court actions.<\/em><\/p>\n<p><em>\u00a0<\/em><em>So, if you\u2019re looking at EB5 money or foreign investment money and you\u2019re worried about what could happen in another country or what could happen with somebody else that looks like they\u2019re a little shaky in their legal position and what\u2019s happening in other places, a DST is a great way to kind of shelter what the money is because it\u2019s really typical for people to find out that the money is there and even more difficult for them to be able to get a judgment inside of Delaware to enforce to be able to get out that money. So, did that answer your question, Josh?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>Yeah, I think it did. It\u2019s still \u2013 I will tell you \u2013<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>We\u2019ll listen to this episode like three times.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>I mean, this all makes sense but at the same time I know I\u2019m not alone in wow, I\u2019ve still going to have to sit down with an attorney. This is a broad overview, right? That\u2019s what this is. You\u2019re not here to tell us what to do and I know that listening to some, I\u2019m like, oh man. I know I\u2019m going to have to take notes on all the different structures and I\u2019m going to bring it in and say hey, which one of these are the ones for my situation are going to be best? When I say me, I mean me being our listeners. I\u2019m assuming that\u2019s probably going to be what they are going to need to do.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>I have actually a suggestion. Here\u2019s my thought. Scott, would you mind \u2013 I mean, I know we\u2019re still going to talk about all the rest of this, but would you mind maybe you and I sit down and I\u2019ll outline a PDF. We\u2019ll go through the stuff and I\u2019ll outline the notes of what we just talked about today and we\u2019ll put it in the show notes so people can download it. Is that cool?<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Scott: <\/strong><\/em><em>Yeah, that\u2019s absolutely cool and I have plans to be able to do \u2013 I\u2019ve done some posting on the BiggerPockets blog on some issues that ended up coming up along these things. My plan is to keep creating those types of reference docket for people. So it\u2019s really easy for me when I\u2019m in the forums, I can be like, hey I just wrote a post about how you can use trusts and LLC structures and all that.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Josh: <\/strong><\/em><em>I love that. Fabulous.<\/em><\/p>\n<p><em>\u00a0<\/em><em><strong>Brandon: <\/strong><\/em><em>So people listening and want to go to <\/em><a href=\"http:\/\/BiggerPockets.com\/Show109\" target=\"_blank\" rel=\"noopener\">BiggerPockets.com\/Show109<\/a><em> , we will have a PDF that you can download with a lot more detail on what we\u2019re talking about today. Just throwing that out there. Me and Scott will put that together.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>Anyway, okay. We\u2019re going back. We were just talking about the DSTs and that was based, because we\u2019re talking on the series LLC thing \u2013 maybe I can just ask you because I\u2019ve got you on here and I like taking advantage of my position.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>If I\u2019ve got like 6 or 7 LLCs, should I do a DST based on what you know of me \u2013 I know this is quick \u2013 should I do a DST or an LLC? <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Are you having lots of other \u2013 are they all different types of asset classes or are they all real estate?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>They\u2019re all real estate.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>So you\u2019re probably okay. And they\u2019re all the same types of real estate? Like, you don\u2019t have really huge commercial transactions combined with single-family homes and what not.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>Some are singles and some are like small multis and there\u2019s a 24 unit.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>All right, so I\u2019d say what you would probably be okay with is a series LLC in that case and just go ahead and take the same types of assets and group them together. So, don\u2019t keep your <\/em><em>fix and flips<\/em><em> with your <\/em><em>buying holds<\/em><em>. There\u2019s a really good reason we do that.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Why is that? There\u2019s got to be a reason.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Yeah. So the reason that you separate those out is because it\u2019s tax treatment that the IRS will do. Those types of investments are taxed at different rates. If the IRS were to audit you, they actually get to choose \u2013 when they see that type of income, which rate they\u2019re going to tax you at and I\u2019ve never known the IRS to tax people at the lower rate if they had the option. Don\u2019t give them the option. Separate things out. If you have different kinds of companies that you\u2019re running or really big projects where you\u2019re having big fundraising that has to go with it, then it makes sense to go ahead and spend the money for the legal work to be able to establish your DST. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>But for whatever you\u2019re doing with that, it\u2019s so cheap in reality to hire an attorney who would be able to give you that initial advice of what you need to do as compared to what it\u2019s going to cost you in taxes if you ever get audited or if you ever end up having a lawsuit filed against you. A lawsuit alone is really expensive and that\u2019s just for attorneys\u2019 fees much less having a judgment.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Well, you and I are talking after the show more.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>Here you go, Scott. I think it is. Just say it man.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>All right, we\u2019re moving. Not to sabotage Brandon or anything but dude, really?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>All right, I do have one more question. I do have one more question then. This is important, right? So people who already have LLCs set up. Can they still jump into a series LLC or do you have to start all over? <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>It\u2019s a new filing so you can file a new and just move your assets over. It\u2019s not a problem. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>Okay, so it\u2019s not like I have to go and open up seven new LLCs within that series.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>No, in fact you would just do maybe one or two series and then move the assets over into that.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Okay, so all of these things are remedied. You\u2019re never stuck in any of these things that you do as long as you\u2019re proactive about it.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>I\u2019m going to take over because I see my co-host can\u2019t offer advice here, huh? My goodness. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>I want to introduce an advanced strategy if I could. Here\u2019s another point that you won\u2019t ever hear from any other attorneys because they kind of keep it inside of their secret desk drawer of things to do. So, you think it\u2019s really cool that I\u2019d be able to have an LLC that says, okay, this separates my business from me and so that way if I\u2019m ever sued, it\u2019s only going to go \u2013 they can\u2019t ever get to my business. My business is sued, they can\u2019t really get into that either. But there\u2019s another level of that that says, okay, what if they can\u2019t even find out what I own? How cool is that? If they can\u2019t even find out if I own an LLC or they can\u2019t even find out that I even own a property.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>There\u2019s two ways that you can end up doing that commonly. The first way that a lot of people don\u2019t know about is what actually happens in the formation of the LLC. I don\u2019t know if you guys knew this but did you know that a trust instrument can actually be the registered manager? You don\u2019t actually have to have your name attached to an LLC filing personally.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>No, the trust is the name that\u2019s on the LLC filing.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>But you can find out who owns a trust though, can\u2019t you?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>No, because a trust doesn\u2019t have to be registered with the state so there\u2019s no research that somebody can do to be able to discover it because that trust document literally is a document that I drafted that\u2019s on my computer. So unless somebody can break into my house and get into my computer somehow, they\u2019re never going to be able to find out that you actually own that property or own that company.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Interesting.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>And the second way that this ends up being another advanced strategy for anonymity comes into say when you want to be able to hold the actual property itself on the deed in the name of a trust instrument because again, the trusts don\u2019t have to be filed so if I have an address that\u2019s called 62-10 Winewood, for example, and I have the trust instrument on the deed instrument that says who is the owner of this property \u2013 well, it\u2019s just the 62-10 Winewood Trust. Now, when it comes time to sell that property, you\u2019ll actually have to go to that title company, produce the trust document, verify that you\u2019re the trustee of that to be able to execute the sale but anybody looking through the county clerk records or anybody that\u2019s looking through the Secretary of State to be able to find what you own won\u2019t be able to find your name.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Fascinating. That seems brilliant. Absolutely brilliant, and my question is, why did lawyers keep that in their back pocket? I mean, it seems kind of an obvious thing or is it the more people that do it, suddenly they\u2019re going to clamp down and not allow that to happen? Now that everybody in BiggerPockets knows \u2013 hold on, it\u2019s out there. You\u2019re going to get hate mail from lots of lawyers. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>I know, that\u2019s what I tell everybody. I\u2019m just going to open up the kimono and show off all our secrets here about what we end up doing in the industry. It\u2019s a really good question. Personally, the strategies that I\u2019m recommending you are usually only given to people that are 5 to 10 million dollars in assets and I think they\u2019re paying really big bucks to have people really invested inside of asset protection and because it\u2019s a limited industry. And asset protection is what I do \u2013 it\u2019s the only thing that I really focus on to be able to know everything there is to know about that and that\u2019s why I wanted to come on. I think it\u2019s great that these type of strategies, everybody should be using and they\u2019re not too expensive.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Fascinating. Okay, I want to go back to and I want to dive into the trust thing a little bit. First of all, that\u2019s a word you hear a lot in the real estate space but I know very little about \u2013 what exactly is a trust and what are you talking about when you do that? <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>And really quickly, I believe it was Show 6 with Neal Franklin \u2013 <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Frankle.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>Frankle \u2013 oh gosh, he\u2019s going to kill me. Neal Frankle. We did a show on preparing for death and it was all about hey, how do you prep yourself for when you\u2019re going to die and you want to pass everything along and we do cover this stuff a little bit so if you\u2019re interested, it\u2019s definitely a complementary show to probably check out a little bit but I\u2019ll let you get to it.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Yeah so, trusts. What is that?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>I think what you\u2019re referring to there is estate planning and that\u2019s when you\u2019re talking about having a living trust but probably in combination with a pour-over will to manage your asset? That\u2019s exactly what I recommend to anybody that comes to me that has a lot of real estate property because what you don\u2019t want to happen is things get caught in probate so it\u2019s a lot to have things in trust but here are the types of trusts that I\u2019m talking about that we\u2019re using. There\u2019s two different types \u2013 there\u2019s either revocable or irrevocable trusts. It gets somewhat complex regarding what way you want to hold the property.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>If you\u2019re just using your trust for anonymity alone, you\u2019re fine using just a revocable trust. And I say that you\u2019re fine using it because a revocable trust actually provides no asset protection at all. So, it\u2019s only being used to be able to obscure the names from people being able to search for them. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>Irrevocable trusts on the other hand actually takes the property out of your ownership and places it inside of this fictitious instrument called a trust and a trust again, it\u2019s just a piece of paper \u2013 there\u2019s no filing that goes with it but a trust can have bank accounts, it can have tax numbers, it can basically \u2013 you can operate a business outside of a trust and if it\u2019s an irrevocable trust, that means that if anybody sues you personally, they\u2019re not able to get at the trust assets. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Nor are you, though, correct? I mean, aren\u2019t you typically using an outside trustee, somebody that you trust to kind of manage said trust? It\u2019s hard to answer that question with that word six times but isn\u2019t that what we need to do?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Yeah, it gets to be complicated about exactly the way to do it but a trust will only fail if the trustee is the same as the beneficiary. So, there\u2019s a couple of ways that you can get around that and it depends upon your state\u2019s laws regarding the issue but if you have a beneficiary that is an LLC, for example, you can own the property inside of a trust and since the beneficiary is an LLC, then you could actually be the trustee.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>Or, in the example, as I can appoint Brandon Turner to be the trustee, Brandon Turner can go ahead and refer control of the trust\u2019s corpus \u2013 whatever is inside a trust \u2013 to my operating company. Scott Smith\u2019s operating company is actually going to do it. So, there\u2019s ways around the legal technicalities of how it gets established and that\u2019s why it\u2019s a good idea to have an attorney look over that to make sure that you\u2019re going to have that structured correctly.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Got it, or not really, but \u2013<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>I\u2019m getting a good foundation, at least. I have a couple of questions that are related to that. First of all, LLC \u2013 I\u2019m going to throw out both questions now even though they\u2019re completely different \u2013 LLC versus trusts. That\u2019s the question \u2013 what should a person do and why? And then the second question is how much does this cost? I know it\u2019s a very weird question but like if I need a lawyer to help me set this up, am I looking at $1000 or $10,000 or $50,000? <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>All right. So, I\u2019ll take them in reverse order. In reverse order, you\u2019re thinking in terms of like thousands but not tens of thousands, unless you have a really big organization, like a really, really big organization that you\u2019re doing. By really big, I mean like 50+ properties and upwards in that range. But to answer the first question, is that I\u2019m going to have to give you almost like a non-answer in the sense that it really depends on what state you\u2019re living in but I\u2019ll tell you that just to be able to say here\u2019s a blanket thing that if you want to say here\u2019s a jumping off point for most people, is you can start off with looking at a series LLC if you have the ability to be able to do a series LLC, go ahead and do it. If you don\u2019t then start looking at multiple LLCs with holding properties and trusts underneath the LLCs. If you\u2019re acquiring property, another way to be able to do it is to have the trust instrument itself actually acquire the property because remember the trust is just a piece of paper, right? We can create that in 15 minutes on your computer to be able to print out and the trust can be the one negotiating all the contracts and holds, all the liability for what can result from that. Go ahead, Josh. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>All right, so as I raise my hand \u2013 me, me, me. Okay, so I think that one of the questions that I recall hearing a fair amount on the site has to do with being able to purchase a property with a company or a trust, LLC that has no credit, no business. Let\u2019s take an example. I want to go and buy rental property at 123 Main Street, right? I have Josh\u2019s credit and I have established my credit and I want to purchase this property, so I go \u2013 do I need to write the offer in the name of my trust or can I write the offer in my name? That\u2019s the first question. The second is, if I write it in my name, can I close in the name of the trust or LLC or whatever it is? And third, if I close in my name and I move it over to a trust, is it now protected or was it not protected because the public exposure of me having previously purchased it in my name makes me open to the world? I guess there\u2019s my questions. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Starting from the beginning of that, the trust can purchase the property but taking a step back even from that point is that Josh, you shouldn\u2019t be doing anything in your name. Like, that\u2019s how you get exposure. Everything you should be doing should be in the name of another entity. As is, Josh is the trustee of this trust. And yes \u2013<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Even the offer.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Even the offer. Anything you do can be in the name or in the name of an LLC even, as in you\u2019re a representative of the LLC. There\u2019s an LLC manager that has probably more protection than a trustee because a trustee can still be sued by mismanagement for the trust. But let\u2019s just go ahead and take it so far as the assets if you were the manager of an LLC conducting the business or in the instance of a trust, the trust can enter into the contract and can negotiate the contract then when you actually have the contracts at the final stages of what you want to do, you just make it where the contract is assignable. So when it\u2019s assignable at the time that you end up signing for it, it\u2019s immediately assigned over into your holding company of whatever holding asset that you have for it. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Gotcha. And how does a loan work for that? Are you signing a loan docks through the trust or will the lenders even lend money to a trust or do I have to do that in my personal name? <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>If lenders would be willing to lend me money based upon a document that I drafted up on my computer, it would be the most amazing thing that I could ever imagine and I would probably get in a lot of trouble for that.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Yeah, I\u2019d say you\u2019d be in jail, wouldn\u2019t you?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Probably in jail pretty quick. Remember that we have to separate out what is \u2013 a loan really has nothing to do with the property. The only thing that a loan has to do with the property is that the property is security for the loan. So the loan is actually going and it being established by Josh\u2019s credit, okay? But the bank is going to say, okay, regardless of if there\u2019s ever a default on this note, we\u2019re going to make sure that we can foreclose on that piece of property.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>But in my experience, I\u2019ve always seen like if I went to a bank and said, hey, I\u2019m buying this property, it\u2019s in an LLC. They would say, well, you need to talk to our commercial department and put down 30% and blah blah blah. They don\u2019t like lending on properties in LLCs from what I\u2019ve seen. Have you seen that in your experience as well? What are your thoughts on that? I think it\u2019s really particular to what banks you\u2019re working with and what not and how well you can educate the people that are the underwriters for the bank about what type of legal structure you\u2019re doing. The reality of the situation is that it can take some hand-holding with them and your attorney to be able to negotiate with them about what you\u2019re doing is really about asset protection purposes, that you\u2019re not really trying to hold onto property that\u2019s really in your name. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>The flipside to what I see is that people will have property in their own name and they don\u2019t want to transfer into an LLC because they\u2019re really afraid of what\u2019s really called a \u201cdue on sale\u201d. That\u2019s right. Me and my network of attorneys that I collaborate with on asset protection work, we\u2019ve never seen a \u201cdue on sale\u201d clause get enforced inside of recent history unless the note wasn\u2019t performing. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>So as long as they\u2019re performing, the bank\u2019s just going to say, hey listen, it\u2019s still a good investment. The asset class is still strong. The whole secondary market for them is still looking good and they\u2019re not losing money, so why would they rock the boat? So, as far as practical terms go \u2013<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>By the way, there\u2019s a monster \u2013 your topic, what you\u2019re talking about, \u201cdue on sale\u201d clause has led to some epic, epic debates on this site and it\u2019s interesting to hear an attorney say what you just said. And you\u2019re not saying, go ahead and violate some agreement. You\u2019re just saying you\u2019ve never seen it happen. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>I\u2019ve never seen it happen and I\u2019m not advising anybody to break their contracts or do anything like that but when you sit down with your attorney, think about the practicalities of the situation as much as you\u2019re thinking about what is the actual black letter law? <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Gotcha. Go ahead.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>That brings up a good point, too. Even if you are violating a \u201cdue on sale\u201d clause, and we can do a whole show on just that, but in all my research and what I\u2019ve done, it\u2019s not breaking the law anyway. It\u2019s not necessarily a legal thing. It\u2019s a contractual thing, which I guess then you could say down the line that there\u2019s legal implications, but there\u2019s no law that says you can\u2019t break a \u201cdue on sale\u201d clause. It\u2019s a clause. It\u2019s just an agreement. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>Again, I\u2019m not giving advice as to what people should do, but I had them in my personal name and then I transferred my property into an LLC. That probably technically violated a \u201cdue on sale\u201d clause, yet I did it anyway with the assumption that I\u2019ve never heard of somebody getting called their note due, and that\u2019s a risk that I\u2019m okay taking. If one of the banks decided to be a jerk and pull it on me, that\u2019s why I only buy incredible deals. So worst case scenario, I buy incredible real estate deals to give me exit strategies in case the one in a million shot happen where they\u2019re going to get mad at me for transferring into an LLC.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Brandon, I think your approach actually is the proper approach that an investor should be taking. The investor should be thinking about, how can I make the most amount of money possible and then hiring out other people that are experts to handle their insurance and to handle the way that they\u2019re doing to hold and manage the technical legal aspects of what they\u2019re doing. Because if you\u2019re good at making money, why in the world are you racking your brain trying to figure out all the other minutia details that go on in these kinds of things? <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>That brings up something I hear all the time \u2013 I want to know your thoughts on this. People use the LLC question as a \u2013 I don\u2019t know what you would call it \u2013 the psychological blockage from them actually getting into an investment \u2013<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Oh, they won\u2019t even start, yeah.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>So people are like, yeah I\u2019ve been wanting to invest in real estate for years but I don\u2019t know what to do about an LLC. Like, that\u2019s always where they stop.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>But remember, those are the people, Brandon, who weren\u2019t going to start in the first place.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>I agree.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>A lot of them don\u2019t have the money to put down. A lot of them are trying to start on the cheap and \u2013<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>You need money to invest in real estate? <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>What?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>You need money? <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>Money?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>My name is Josh Durkin and I got a course for you for $997. You can buy that course but you need no money to get \u2013 what? You can do it but it\u2019s not easy. Low money is more reliable, but you know, whatever. Okay, moving on.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>All right, good. Did I cut you off?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>He was going to answer.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>One last piece here, before we get going. A lot of times, you won\u2019t end up wrapping up what\u2019s going on with the \u201cdue on sale\u201d clause. It\u2019s very important but there\u2019s also an issue that happens with insurance \u2013 whether it\u2019s personal insurance or commercial insurance, and there\u2019s different pricing that can happen with that. However, if what you do is, you establish a trust that\u2019s called a Joshua Dorkin Trust and you move your property into that trust, now all of a sudden, the insurance company as well as the title company and the bank all think you\u2019ve only done something for asset protection, that you actually haven\u2019t made a sale.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>So, it\u2019s a way that you can have some, and you can have some of the asset protection elements without actually triggering some of those contractual issues as well as the insurance issues depending upon how they get structured. It gets very technical. Exactly.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>We\u2019re not going to ask.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>No, but I\u2019ve heard that \u2013 again, it\u2019s more technical than I\u2019m sure we can get into, but that trusts \u2013 somebody mentioned in something I read one time in a book that trusts do not violate the \u201cdue on sale\u201d clause typically because they\u2019re protected by U.S. law that says that a bank can\u2019t foreclose on somebody who transfers into a trust.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Right. And I believe just shooting from the hip over here, I think that applies to one to four unit properties.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Okay.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>Gotcha. By the way, if you\u2019re trying to establish an entity for the purpose of hiding from potential folks who might want to sue you, I\u2019m assuming naming it the Josh Dorkin Trust is a bad idea. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Well, you wouldn\u2019t get the anonymity with that, right? <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>I\u2019m just checking because you know \u2013 I don\u2019t want these people who want to litigate against me to find it so I\u2019m going to name mine the Brandon Turner Trust, the Heather Turner \u2013 you know, you probably want to be a little more anonymous.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>You want to be a little more anonymous but the great thing is once you have the property in say a land trust, what ends up happening is that if you own like an apartment building and you wanted to sell out particular shares of that apartment building, that will end up happening because you want to diversify your portfolio a little bit more \u2013 those are other ways that really make sense to be able to hold the property inside of a trust and still be able to have some of the management that would go on with that.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Boy, that\u2019s like a whole topic, man. That\u2019s a show in itself right there.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Yeah, it\u2019s definitely a whole other hour on what you can do with some type of creative trust instrument for investors.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Yeah, nice. All right, talk about family office, I think that was the last thing on your list of things. What is a family office? I\u2019ve got an office in my basement.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Actually, yeah. I don\u2019t know if your family office is doing the same thing that my family office does, but my family office is a service that you can use for attorneys to be able to review all your paperwork for you. So even if you have all your LLCs and Brandon has his six LLCs that he has, I would bet dollars to donuts that unless he has an attorney reviewing all that paperwork that I could find a defect in there somewhere.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>Probably.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>It\u2019s something that he hasn\u2019t \u2013 some \u2018i\u2019 that he hasn\u2019t dotted or a \u2018t\u2019 that has hasn\u2019t crossed and what he\u2019s doing. One of the things I always tell people is it\u2019s part of your attorney insurance. It\u2019s part of your asset protection plan that you should be looking at saying, what does it cost for me to make sure that I\u2019m solid whenever a lawsuit arises because once you even get threatened to get sued, it\u2019s already too late because you can get frozen inside being able to transfer assets around by what\u2019s known as a Fraudulent Transfers Act that can look back up to two years from the time that the lawsuit gets filed or even threatened to get filed to be able to claw back where the court will actually annul the sale and pull the property back from whoever you sold it to. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>So, the family office ends up coming to say listen, set up all your LLCs, get all your structures right but don\u2019t just stop there because if you spend all your money to be able to supe up your car, it doesn\u2019t really make sense unless you have enough money to be able to keep putting gas in it to be able to keep using it. All your structured business entities can almost become worthless unless you\u2019re paying the money to have somebody that knows what they\u2019re doing to be able to review it properly.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Okay, so family office literally just means a law firm to review stuff at some periodic basis? Is that what it is? <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Right, exactly. It\u2019s called a family office because it\u2019s the type of law firm that usually only the really wealthy people can afford, the people that have 5, 10 million plus in assets would be able to spend the money to protect their assets with the law firm. But I don\u2019t think that that\u2019s necessary. My research and my work, I think, shows that there\u2019s a way that the average investor who only maybe has a few properties can be able to afford these same types of protections that usually used to be only exclusive to the really wealthy.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Who are now really pissed off at BiggerPockets because we just cut the rug out from under all that money that they\u2019ve been spending to get all that information, so, awesome. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Absolutely, yeah.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Nice, nice. Okay, cool. So I think there\u2019s one more thing Brandon shot me a note here that we forgot to cover which was two-member LLCs.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Yeah. So, the two-member LLCs \u2013 what can happen is that, particularly in the state of Texas, if you have an LLC that you established and that you\u2019re actually the sole member of, that can look like you actually tried to create a business entity but it\u2019s really just you. There\u2019s nobody else there. So, the way that we get around that issue from the court looking at that and saying, ah, it\u2019s really just Brandon. It\u2019s not really Brandon Turner, LLC that\u2019s really conducting this thing, is to go ahead and fill in another member. You can throw in a member and say, you know, Josh has been really great to me this year \u2013 I\u2019m going to give him 1% of my company but I\u2019m not going to allow him access to any distributions. He can\u2019t vote. He can\u2019t sell his interest. So, it\u2019s a really crappy gift. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Cheap bastard.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>It works out well for him for being able to make sure that the court is going to look at that LLC appropriately.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Now one thing it does do, though, and correct me if I\u2019m wrong \u2013 if you have a single-member LLC, it\u2019s just you, taxes are passed through, which means you don\u2019t have to file business tax returns. You add a second member, now you\u2019ve got to file business tax return, so taxes become more expensive. Do you know if that sounds right?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Yeah, that does sound right and that can be the case but the question really becomes, it\u2019s one of those things you have to balance between \u2013 what are your awesome taxes and what can you lose if you get a lawsuit against you? Remember, these lawsuits come up not because you really did anything wrong. I mean, I\u2019ve seen really great people that didn\u2019t do anything that I thought was wrong get huge judgments against them and we\u2019re talking about an average house here in Austin can cost $400,000-$500,000. As an investor, you\u2019re talking about $100,000 in equity right off the bat. That\u2019s enough for me or any other litigator that works on the field to have a good enough reason to file a lawsuit because there\u2019s enough money there to be able to get at and depending on how many other properties are there.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>You\u2019re a shark, man. Look at you trying to pick people apart.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>I\u2019m the opposite of that. I\u2019m trying to make sure that these guys don\u2019t have any leg to stand on when they come looking at the BiggerPockets investors.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Okay, so just to add onto that. The reason that I brought that up and the reason that I know about the single-member versus multi-member tax issue is because an issue I had two years ago, and I probably mentioned this on an earlier show but back five years ago or something like that I formed an LLC with some partners of mine. We were going to buy a property together. So we formed it, we get all excited because that\u2019s what you do when you went on LegalZoom or whatever and formed it. And then we just didn\u2019t do anything with it. We just ignored it basically, and I never transferred a property into it. I just kind of forgot about it. I didn\u2019t even touch it. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>Anyway, a few years later we get a bill from the IRS for $10,000 for back payments on that because even if you don\u2019t have any business income or if you don\u2019t even touch your LLC, you still have to file a business tax return if there\u2019s two members in it that\u2019s not your spouse. So, we had a $10,000 bill from the IRS for back penalties. Anyways, I got a waive. I used Amanda Hahn and she worked me through the process of getting me fixed up but that was a stressful time. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>Anyways, I guess my point is, if you\u2019re going to do the LLC thing and the asset protection thing which you definitely should, don\u2019t forget about the tax side of it either. Consult with a CPA on what it means about all this stuff. So, that\u2019s my quick tip.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>So I was going to say, that kind of leads into like a point that I wasn\u2019t planning on discussing but you get a lot in BiggerPockets when people are starting off to say, who do I need as part of my team? There\u2019s three people that you need \u2013 you need somebody that does your insurance, you need a CPA that\u2019s going to be able to tell you what tax implications are going to look like and you need an attorney to be able to make sure your documents are going to be the way that they need to go because the average investor will go onto LegalZoom and do exactly what you did and I think it sounds like you were fortunate enough to know somebody that could help you get out of that situation. But in the reality for most people, if they don\u2019t have that kind of network of people that owe them favors, they\u2019re talking about paying thousands of dollars to attorneys at least $3000-$5000 to attorneys to be able to get out of something like that with the IRS. And the IRS is not forgiving on a lot of these issues.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>I had a quick five takeaway items that I want to be able to tell everybody. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Awesome. Love it.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>So, takeaway item #1 is that if you\u2019re not insured, get insured. Protect your property if there\u2019s going to be a flood or fire, whatever\u2019s going on. There\u2019s too much money that you have invested to try to skimp on having insurance.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>Action #2 is to say for most investors, go ahead and set up at least three LLCs or start using a series LLC structure. You should be having one company that\u2019s going to hold your flips, one company that\u2019s going to be holding your buying holds, and one operating company that you\u2019re going to be used to enter into contracts, to purchase property, collect rent, etc. Your operating company is the one that\u2019s actually performing all the business. The holding companies don\u2019t do anything besides just holding the assets and we separate those out for IRS tax reasons. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>That\u2019s interesting. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>Real quick while you\u2019re on there. Again, I\u2019m picking your brain because you\u2019re here. So, we did that. We have an operating LLC. One of ours is just for operating. I assume now \u2013 I mean my plan was to separate everything in separate bank accounts for every LLC separate \u2013 you know, like when the rent comes in I have to go to that bank to drop off the rent there. Is that not the case? Can I actually still use that one LLC for everything and just distribute? <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>If you have any contracts that are coming into the operating company, the way you can also end up doing is setting up different DBAs or assumed names for that one operating company that\u2019s not an LLC. So you\u2019re going to have checks coming in all underneath different names but for who\u2019s actually holding revenue from a property, you don\u2019t want any type of privity established between an asset holding company and somebody that is paying money to you. So you want one face to your company and you don\u2019t actually want anybody to know who your other asset holding LLCs are at all. That should not be having anything inside the public sphere because that\u2019s the last thing that you want somebody to be able to find out that they could try to collect against.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Okay. Anyway, that was good. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>That was two, right?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>Yeah, that was #2. So #3 is that you should never have any assets in your name unless they\u2019re statutorily protected like Texas has homestead protections which makes Texas one of the best states to be able to do asset protection in and in fact you can have a company in Texas, an LLC in Texas that can own property anywhere in the United States and Texas actually has a multiple hundred year tradition of this. In fact, it\u2019s an old saying that so-and-so went off to Texas because our debtor laws and our consumer protection laws are some of the strongest in the United States.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Do you have to have physical residence in Texas in order to open a Texas company?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>To open up a Texas LLC, you don\u2019t have to be resident of Texas. You\u2019ll have to have a Texas address and stuff like that but us attorneys have already figured out all the ways and all the checklists of things that you need to be able to have there to be in compliance. But remember that we don\u2019t have any assets in our name because when we have assets in our name, it increases our exposure and wealthy people don\u2019t have assets. They only control properties so they can get the benefit of the properties.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Josh: <\/strong><\/em><em>Yeah.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Scott: <\/strong><\/em><em>So we get to #4 is the family office. If anything is not being properly maintained inside of your corporate paperwork, it makes your asset protection plan vulnerable to having an aggressive litigator come at it and be able to dissolve your corporate structure. So, we should be thinking about the money that we\u2019re paying out to be able to maintain our structure. It\u2019s kind of like maintenance on a house. You never think that you could build a house once and that it\u2019d be good for forever. There\u2019s always additional updates that we need to do and we all know every year Congress tries to act even though they\u2019ve had a hard time recently with that, but they want to pass laws that are always changing and that you would need to be able to keep up with.<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em><strong>Brandon: <\/strong><\/em><em>What, we have to work together to pass laws, what?<\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><strong>Josh: <\/strong>Right? Like why can\u2019t we all just be friends?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>So, on #5 is a takeaway when we talk about looking at costs. The cost of a good asset protection plan is approximately, in my experience, it\u2019s about half the cost of the attorney fees alone in a single lawsuit. So, apart from saying that you had a judgment against you or anything like that, we\u2019re talking about even if you were to go get sued and win, the cost of that is half the amount to be able to have an asset protection plan as it would be the cost of having a lawsuit. So, you can look at it as having a 50% savings right off the bat if I go ahead and be proactive about this. And remember that real estate is the hottest litigated industry. It really shouldn\u2019t be an issue of when you\u2019re going to get sued. It shouldn\u2019t be an issue of <em>if <\/em>you\u2019re going to get sued, it\u2019s just a matter of <em>when<\/em>. And being a nice and honest person doesn\u2019t protect you from lawsuits. It\u2019s not a legal defense.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>Hey, Scott. How do I go about finding a guy like you? I mean, obviously, we know you\u2019re open and available, yadda yadda. You guys hit up Scott, he\u2019s the man, yeah yeah yeah. But hey, I\u2019m in Maine and I want a guy who\u2019s in my area \u2013 how do I find a good attorney who knows his stuff like you cold in this stuff, the asset protection.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>That\u2019s kind of the same question of asking, do you have a good doctor, right? Have you ever asked somebody if they know a good doctor? They always say, oh no, my doctor is the best. Because nobody wants to believe they have a crappy doctor. It\u2019s the same thing that happens with attorneys, right? If you ask your buddy, do you have a good attorney? Well, hell yeah, I have the best attorney, is what would end up happening here.<\/p>\n<p>&nbsp;<\/p>\n<p>It\u2019s also the same type of thing as saying like how do you know a certain doctor is good? Well, we don\u2019t really, as I\u2019m not a doctor, I don\u2019t know the criteria of what makes a good doctor and really know how to judge the quality of work they do. So, I would say that if you\u2019re looking for somebody that\u2019s in your area, which isn\u2019t necessary \u2013 you don\u2019t have to have somebody in your area. If you can find somebody that you like that\u2019s not in your area, you can still use them potentially. They can\u2019t practice law in your state but there\u2019s other ways around that. But I would go take out your smartest attorney friends for a really nice dinner and have them do some work for you to vet some people on your behalf. And perhaps you can skate out of there for the price of a nice steak and a great bottle of wine.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>There you go.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>All good advice. I have one more question before we head out.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>Of course you do. Me, me, me, me.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>No, this is not me. So, I\u2019m a brand new investor. I\u2019ve never started investing in real estate yet. Does any of this matter to me? Why should I care? I don\u2019t even have a single property yet other than my own house. Why should I care?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>So, if you own nothing, then you own nothing and you have no money and you\u2019re trying to get started then you don\u2019t really have any assets to protect. But say, if you\u2019re really anybody else that owns any property at all, whether it\u2019s a car, a home, or anything. That means you have exposure whenever you\u2019re entering into any type of business arrangement. And that\u2019s really just what real estate boils down to. Now, you\u2019re operating your own company and you have exposures that anybody that starts a company would have. No good company starts without having some type of structure in place.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>Makes sense.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>I love it. Fantastic. Well, I don\u2019t know about the rest of you guys but I\u2019m probably going to have to rewind this and listen a couple of times myself and so hopefully you guys enjoyed this. We haven\u2019t done a ton of shows like this and I do think they\u2019re extremely valuable and before we head out of here, I think we need to hitch around.<\/p>\n<p>&nbsp;<\/p>\n<p>First of all, you\u2019re doing real estate yourself, right? You\u2019re focusing on commercial. Is that right?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>Yeah, I do some work with commercial real estate, residential real estate, and doing some nodes. My focus really has been on developing these type of cutting edge strategies that end up happening with asset protection unless on the investment side, apart from structuring a lot of the bigger development deals that comes around across my plate.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>Gotcha. All right. Why don\u2019t we get to this <em>Famous Four<\/em>?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>All right, these are the questions that we ask everyone and we\u2019re skipping the fire around today because I don\u2019t want to drill you with a whole bunch more questions because I already asked you like a bunch of specific legal questions, so we\u2019re just going to go right to the <em>Famous Four<\/em>.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>So you get to ask your questions but people here don\u2019t get to ask theirs.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>Yeah.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>Wow, look at you. All greedy and stuff, man.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>Well, my thinking was, one \u2013 every question is going to be like, it depends. A lot of that because we don\u2019t know anything about these people and what they\u2019re talking about, they\u2019re all short questions. So anyway, that\u2019s why.<\/p>\n<p>&nbsp;<\/p>\n<p>All right, moving on. <em>Famous Four<\/em>. Giving me a hard time, thanks.<\/p>\n<p>&nbsp;<\/p>\n<p>What is your favorite real estate book?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>My favorite real estate book \u2013 it\u2019d probably have to be the one I started with, was <em>Rich Dad, Poor Dad<\/em> and I know that\u2019s really clich\u00e9 but it was actually in part and parcel that he actually made this game called the \u2018Rat Race\u2019 that ended up coming about where it was actually a board game that would teach you about the way \u2013<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>That was an expensive board game, too, wasn\u2019t it?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>He\u2019s very proud of that board game [from Isaki][1:07:15] for a piece of cardboard cutouts because in that sense that board game shows a lot about saying that when you\u2019re younger and you can start taking a lot more risks with capital gain issues to build up that stack of money so you might be able to retire early and live the dream life, and kind of coaching about saying does it really make sense that you would only look at minimal cash flow properties if it takes you eight years to develop the capital to buy one property? Kind of just retouring the way that you approach what your strategy is depending on where you are in life.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>Right on.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>What about business books? What\u2019s your favorite business book?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>One of my favorite business books of all time that I always go back to reading is <em>The Four Hour Work Week<\/em> by Tim Ferris, which I\u2019m sure is also a book that a lot of people reference in here. The reason I like it is because I think it distills down a lot of principles that I\u2019ve read in other books so recently I\u2019ve been applying the principle of the one thing. In my personal life, in my health and in my business, I\u2019ve noticed that it\u2019s really made so much of an impact where I\u2019ve just been able to have that single focus, that Steve Jobs-esque kind of obsession of making sure that your one thing that day is prepared for, done correctly, and by doing that one thing everything else in your life either becomes easier or unnecessary.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>Love it.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>Brandon doesn\u2019t shut up about that one either.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>It\u2019s like sitting within arm\u2019s reach of me. That\u2019s how much I like this book.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>There you go. There you go. All right, hobbies. What do you do for fun, man?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>Yeah, so I live here in Austin. So, I rock climb, I run around the lake, I do some boating that\u2019s around here, I actually have been doing a lot of boxing recently which has been a lot of fun.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>No kidding.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>Yeah, we suit up with the head gear and stuff so my brain still stays intact.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>I didn\u2019t take you\u2019re a boxer, okay. You know, Brandon, whenever somebody \u2013<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>I\u2019m too pretty, is that what you\u2019re saying, Josh?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>You would never hit a guy with glasses, so \u2013<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>Yeah, me and Scott are going to fight at the next BiggerPockets conference.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>Yeah, we\u2019re going to meet up. Brandon\u2019s going to punch you.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>We\u2019re going to fight. It\u2019s going to be good.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>All right, my last question for you \u2013 what do you believe sets apart successful real estate investors from those who give up, fail, or never get started?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>I think what really happens here and what this question really delves down to is much more of a personal question. I think what actually separates out the successful people from the unsuccessful people is the ones that really know how to develop systems with themselves so they can be successful with. So, for me, for example \u2013 I try to work a traditional eight, nine hour block out of the day and segment all of that at one time and I realize that I was just wasting a lot of my time during the day on Facebook or whatever, just something to distract myself. So, I said okay, well, that doesn\u2019t work for me. What works for me is to say, do I know myself well enough to say every three hours, I need to go do some form of exercise? I think when you\u2019re talking about what makes a successful person and what makes a successful real estate investor is to know yourself well enough to know what type of business you can run and be successful at. And don\u2019t try to be Brandon Turner, don\u2019t try to be Joshua Dorkin, try to be you and running your type of business.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>That\u2019s great advice.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>You know, it\u2019s funny. I know me, I\u2019m an addictive personality and pretty much everything that I do, I go balls to the wall, so to speak, and I like playing video games and I used to have all these video games on my cell phone. What I discovered was, and it took a long time to figure this out \u2013 I discovered, I\u2019m in the bathroom on this game, I\u2019m in bed on this game, I\u2019m at work in between working on this game, I\u2019m constantly doing it. I\u2019m like, what am I doing? If I take this game off my phone, I\u2019m going to save hours and hours and hours a week. I\u2019m going to be more productive. I\u2019m going to be more successful. You know what, I love the game but at the end of the day, oh my God, this is such a distraction. And I think that\u2019s kind of what you\u2019re talking about. Find what in you helps you get to where you need to be. Get rid of the things that distract you and kind of cause issue and just go forward.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>Yeah, absolutely. I don\u2019t think anybody can be a machine, right? If I offered you $20 million to work 24 hours a day for the next six months, it doesn\u2019t matter. You couldn\u2019t do that. No matter what I was offering you as a cur ad to be able to change your behavior, you really have to dial it back to say \u2013 all right, so my video game is a waste of time, it\u2019s distracting me. What is it that I can replace that edge? What\u2019s really going on with me that I\u2019m using this video game to kind of use as a crutch? The same way some people use smoking or eating snacks or chewing gum or something like that.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>I don\u2019t have a problem, man.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>The first step in the process, Josh.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>All right, man. Scott, it\u2019s been a pleasure, man. Really, you\u2019re fascinating. I thought most lawyers were jerks. You\u2019re not that jerky but you know. I\u2019m just kidding. Absolute pleasure. Where can people find out about you? I know you\u2019ve got a website. How do we get in touch?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>I offer myself up to anybody here personally. Just go ahead and give me a call. My number is 512-757-3994.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>Ring. The phone just started blowing up, by the way.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>Way to blow up here. I have all kinds \u2013 you\u2019ll likely get my voicemail but I always return calls the same day or if not the latest, it\u2019s going to be the next day and we can set up a time to talk and we can be able to look at exactly what kind of things , if anything, you\u2019re going to need. Or you can always shoot me an e-mail at <a href=\"mailto:scott@royallegalsolutions.com\" target=\"_blank\">scott@royallegalsolutions.com<\/a> . And you can find me on BiggerPockets. I usually try to post a lot into the forums and what not and it always has my contact information underneath every that I post as a pro member, so everybody should sign up for a pro account to have access to that.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>Nice, well done.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>A promo works both ways, doesn\u2019t it?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>You do realize your 24-hour response rate is going to change after today. It may take him two or three, guys. It may take him two or three. There\u2019s going to be lots of calls.<\/p>\n<p>&nbsp;<\/p>\n<p>Well, Scott, thank you so so much, man. Again, we really appreciate it and it\u2019s been a pleasure.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Scott: <\/strong>Well, I look forward to it, guys, if there\u2019s anything I can help out with in the future with anybody out here or to come back and talk more about these topics, I\u2019m always available and happy to do the research on the back end to be able to help out, whatever we can do for the BP members.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>Love it. Good stuff. Thanks, Scott.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>Thanks, Scott.<\/p>\n<p>&nbsp;<\/p>\n<p>All right, that was Scott Smith. The man, the myth. The guy who\u2019s going to save your &#8220;ass\u201d-ets. Scott Smith. Thanks again, we really do appreciate it. Otherwise, guys, thanks for listening. Hopefully you guys are loving the content that we\u2019re bringing you. Hopefully, you\u2019re getting a lot of value out of it and if, you know \u2013 is your brain still hurting?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>Yeah, a little bit.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>Yeah? Nice, nice. But thanks guys, for being our listeners. If you\u2019re not a part of our world, our community, jump in \u2013 join BiggerPockets.com today. It\u2019s the greatest thing since sliced bread. Actually, the greatest thing since a slice of pizza. It is good. It is yummy. It is delicious \u2013 I don\u2019t know.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>It is good.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Josh: <\/strong>Join up. Join up.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Brandon: <\/strong>I\u2019m getting some pizza right now. See ya.<\/p>\n<p><strong>Josh: <\/strong>Do it. All right, guys. It\u2019s been a pleasure. Check us out on BiggerPockets.com . Check us out on Facebook. Jump in, get involved, and make moves and we want to thank you and wish you a good week until the next show. We\u2019ll see you at 110. I\u2019m Josh Dorkin, signing off.<\/p>\n<p><em>You&#8217;re listening to BiggerPockets Radio &#8211; simplifying real estate for investors large and small. If you&#8217;re here looking to learn about real estate investing without all the hype, you&#8217;re in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com, your home for real estate investing online.<\/em><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>No one wants to get sued, but if you plan to build a real estate empire, the question is not so much \u201cif\u201d but \u201cwhen.\u201d However, we here at BiggerPockets [&hellip;]<\/p>\n","protected":false},"author":17340,"featured_media":119278,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4565],"tags":[],"class_list":["post-70273","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-biggerpockets-podcast"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/70273","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/17340"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=70273"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/70273\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/119278"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=70273"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=70273"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=70273"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}