- Hey everyone, Clint Coons here.
And in this video, I wanna talk about
why I always tell people to put one property per LLC.
Because I get lots of questions on this
why I'm making that recommendation.
I figured, hey what, you know what?
Let's cut a video and we'll go into it.
Okay, so let's get started.
(upbeat rock music)
One property per LLC.
Now I know you've probably talked to individuals before
attorneys or CPAs, and you say, hey
I heard this guy talk about setting up one LLC per property.
And they said, well that's overkill.
This is gonna be expensive.
You don't wanna do that.
Well how much are you trying to protect?
Really it's only the equity.
Well, the fact of the matter is when you're investing
you have to put it in perspective.
What is at risk when you're a real estate investor?
If you're looking at your deals such as the equity
in the property, then is that the only thing you're risking
if something were to go wrong?
So many people fall into this trap.
They set up a limited liability company,
and rather than look at what the LLC is gonna do for them,
they tend to look at the cost of the setup.
And they say, well an LLC is gonna run me $1,500
to have an attorney set it up.
And if I need six limited liability companies,
now I'm at $9,000,
that's just too much money to spend to protect my assets.
Instead, what I'm gonna do is I'm going to take
all six of those properties and put it into one LLC,
and then my next six I'll group into another one.
So what are you really doing here?
You're taking this one LLC,
and inside of it, you're sticking six homes.
Now, if you know from my other videos,
what is the problem with putting six homes in one LLC.
That is if anything goes wrong with just
one of those properties, what's at risk?
I mean, everything inside of there.
I mean, stuff does happen.
Let's assume that you have a tenant
in this property right here.
And he's got his own little home-based business going on,
which requires a use of battery acid, cough syrup,
and other stuff he buys at the drug store,
and he puts it on the stove and he mixes it all up,
and he produces something that is called meth.
Now during the process of cooking up his meth,
he passes out, place catches on fire,
and he burns down and he's killed.
Now what does his family do?
Well, they bring an unlawful, a wrongful death action
against you and they sue the owner of the property.
Why did they sue the owner?
Because the property itself didn't have working
smoke detectors they determined, when the fire marshal
came in and look at what had occurred.
And why didn't they have working smoke detectors?
Well, obviously because the meth head disabled them
so he could cook meth.
But that doesn't seem to get you out of it.
In fact, that is a real client scenario
I've just shared with you,
that someone is going through right now
because their tenant killed themselves
while they were cooking drugs on their stove.
So now that type of case, it has a potential to wipe out
all of these properties.
So what do most people say?
Well Clint, this property right here has $30,000 equity.
This one has $20,000 equity, this one has 40,
this one up here has 20, 30, and 30.
So you add all of this up.
We got 30, 60, 80, 100, 170 in total equity.
So all I've risked is $170,000.
Do you see the flaw in this thing?
Yes, you've risked $170,000, but why are you investing?
Are you investing for appreciation?
Most people that invest for appreciation
are called flippers.
If you're investing for long-term income, for legacy wealth,
appreciation's nice, but you're not intending to sell
these properties anytime soon.
You wanna generate the cashflow that comes in off of them.
So to say you're only risking $170,000 is missing
the real truth that what's being put at risk here.
It is the cashflow.
'Cause look at this.
Let's assume that, out of all you have six properties,
and those six properties bring in $900 a month each,
is what it amounts to.
So what's nine times six?
That's $3,600 a month
is what you're cash flowing at,
times 12, it's 36 what's that?
Say $43,000 a year.
Now for you at home watching this,
you're doing the math and I probably got it wrong.
Don't put a comment on there.
I'm blonde, I have an excuse.
So you're making $43,000 a year.
That's what you're risking.
Yeah, you've lost 170,
but really you've lost $43,000 a year.
Multiply that by 10 years, that's $430,000
you just gave up because you decided you wanted to have
six properties in a limited liability company.
I've never met an individual once that's been involved
in a lawsuit that came back to me and said,
Clint I really regret making an investment with your firm
of X amount of dollars because it just saved me 15 million.
I haven't seen that happen.
But I've seen plenty of individuals come to us and say this.
I wish I knew then what I know now
because it would have meant the difference
between me filing bankruptcy and losing everything,
had I had that information.
That is what I'm getting at here.
You can't go back and fix this.
So by isolating each of these assets
into their own limited liability company,
what we're able to do now is ensure
that if one of them goes wrong, this is the drug house,
I've only lost $900 a month in income.
So instead of bringing in $3,600 a month now,
I'm gonna bring in $2,700 a month.
So yeah, you're gonna take a hit, but at least
you still have your cashflow from your properties.
That is why I recommend creating
or setting up one LLC per property.
Or maybe you're using a series LLC,
watch my videos on series.
Put them in different cells.
However you do it, think about it from this standpoint.
Why are you investing?
If you're investing for income, then you wanna make sure
that you can do everything you can
to preserve that income stream for as long as possible.
Many people fall into this trap of looking at
it purely from a cost basis, do not do that.
Hey guys, if you liked the video, give me a like,
make sure you subscribe to my channel.
I got great content coming out on a weekly basis
on how to structure your real estate investing.
Take care.
(upbeat rock music)