- Hi, Clint Coons here with Anderson Business Advisors
and in this video, we're going to discuss
my zero loss real estate asset protection strategy.
All right, let's get started.
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So, here's the thing,
when it comes to investing in real estate,
everybody's all over the board
when we discuss setting up limited liability companies
and putting real estate into them.
Some people will tell you,
hey, if you're gonna go set up a limited liability company
why don't you put four properties into it.
Just like this, you got four properties inside of one LLC
and if you watch those other videos that I've produced,
you know my take on this.
'Cause if anything goes wrong
with any one of those properties, what's at risk?
Well, of course,
it's going to be the entire limited liability company.
You stand to lose it all
because one property can put the entire company at risk
and so all of that equity built up in your property,
more importantly, all of the cash flow.
Remember when it comes to investing in real estate
people often times get hung up on equity,
think about it from the cash flow perspective.
To me, if I have four properties generating $500 a month,
positive income and I have all four properties
in one limited liability company.
I am risking $2,000 a month income, $24,000 a year.
To me that's a lot of money
and I wanna make sure I'm protecting it.
So what do we often recommend?
I like to set up structures
where you have one LLC set up per property.
Now this definitely does give you more protection
because in this scenario if you have one LLC per property,
like we have here, then if one property comes under attack,
then the most you stand to lose is that one property.
But hey, every time I teach an event,
my one day live stream events that we do on Saturdays
and I ask people, how many properties do you wanna lose
in the event of a lawsuit?
It used to be people would put,
ah, five I don't wanna risk more than five.
A lot of people would put one
and then I started seeing zeros listed everywhere
and it was like, wow, that's great,
I never thought of it that way, but you're right.
Why lose anything?
Why talk about it in terms of
the most you stand to lose is one property.
How about we talk about it in terms of
let's set up a structure where
we don't possibly lose any properties
because we make the asset appear
as if it's not worth going after.
And think on this, so if you're an attorney
and you're coming after a structure.
Let's say it's this limited liability company
and we got a client,
and I notice that this property here has
$90,000 in equity in that property.
And you can figure that out online
'cause you're suing the limited liability company,
jump online, pull up the property
and you can figure out 90K in equity.
So, if I'm asking for damages of $650,000
and your policy limits are 500K on this property
there's $150,000 difference there.
Now, do I have an incentive to settle
and just say, I'll take your policy limits
and I'll walk away.
Why should I?
Because of the end of the day
I know there's another $90,000 available for my client
and if I can't collect a third of that
that's an extra $33,000 that I could potentially get.
So, what am I gonna do there?
Well, in this situation
we wanna make that equity disappear.
So you could do this, you could go to a lender and say,
hey, can you give me an equity line of credit
against my rental property?
I need to make that $90,000 disappear.
By the way, it'd be nice to have 90 K available
if I wanna make another investment.
Try it, you may not be able to get it
and that's what a lot of people face
when it comes to investing.
So what do we wanna do then?
Well, my zero loss strategy
is about making that equity disappear
and it's real simple if you do it the right way.
So one of the things you wanna create then
is a Wyoming LLC over here, a Wyoming LLC.
And I use Wyoming but it could be Delaware,
it could be another state.
The key in this strategy is that
you don't wanna be associated with that entity.
That is I don't want someone to jump online,
look up the LLC and say,
oh wow, Clint, yeah he's the manager, he's the member
and Clint's also down here in this LLC now
'cause I'm suing it
and he as the attorney he's represented it.
So I see that there's a related party transaction here
is what I'm getting at.
I don't want anyone to know that.
So instead of what I'm looking to do
is take this anonymous LLC
that you can't trace back to anyone
and have this anonymous LLC
enter into a line of credit agreement
between this LLC and this LLC right here.
So, what is a line of credit?
It's a HELOC but it's for residential real estate,
that's investment real estate.
So you create this line of credit,
it's simple, we have these forms available.
We create a line of credit agreement between your two LLCs.
Now, how much is that line of credit is gonna be for?
Well, you got $90,000 in equity
so I know should at least cover 90,000,
why don't we go a little higher?
'Cause we expect appreciation of the property
over the next couple of years.
So I would peg it maybe at 140 K.
So we put $140,000 line of credit there,
we sign a promissory note that this company agrees
to borrow from this company 140,000.
This one agrees to lend to this company 140 K
and in exchange for that loan,
it wants equity in this property.
So it wants to have security, a deed of trust.
So we file a second, I assume you have a first on here,
deed of trust on that property.
Maybe you don't, so then it's a first deed of trust.
But the point is is that
we're going to then have this entity here
encumber that property on title.
So if you look on title, it would appear now that
let's assume I had first down here with Wells
for a $135,000
and then I have this second with this Wyoming LLC for 140 K
so my total debt on this property is $275,000.
So that discourages creditors, it tells them,
hey, why deal with this property?
There's no equity there.
Attorney take your policy limits, go away
don't go after the property
'cause if you wanna to spend a lot of time
go to court, go after the property,
what title tells you is the property is underwater
and that's what I wanna convey.
Okay, so now hold on a minute.
All you naysayers out there that are watching this right now
'cause I know I'm gonna get a few comments are gonna say,
well Clint, that's fraudulent, you can't do that
because my LLC doesn't have $140,000 in it.
It needs to have 140 to enter into this agreement
and especially if you wanna follow
the zero loss strategy on all their other properties
and you put a $95,000 one here
and maybe you do a $250,000 to this free and clear property.
Where's all that money gonna come from?
Nowhere.
Why do you need to have the money?
Who are you committing fraud on?
Think about this for a minute.
Whose entity is this?
It's yours.
Whose any is this?
It's yours.
So, if you're committing fraud,
you're committing fraud on who?
Yourself.
Come on now, we know that's not going anywhere
that dog does not hunt.
We are not going to use that strategy to sue ourselves.
If you wanna do that call us up and Anderson,
we'll be happy to defend you on both sides,
we can legitimately double bill you then.
So just sign a conflict waiver.
Anyways, the point is
is that you don't need to have the money there.
Does this hold up if they actually go against the property?
No, it doesn't, because you never borrow the money,
you never loan the money.
The whole purpose of this strategy
is to make the equity disappear out of your property
to discourage someone from seeing some low hanging fruit
and saying, hey, there you go, I'm gonna go after that.
It's called my zero loss strategy
another way to refer to this is a friendly lean.
Once you get this set up you just go to your title company,
tell them you need it filed against the property
and then it gets recorded from there.
Last point I wanna make,
when you're ready to refile the property
do something different with it
because you're in control of both of these transactions
you can release it like that and away you go.
There you go guys, that's the zero loss strategy,
it works awesome.
I've done it for several clients over the years
and it's made their equity disappear
and I think it's worked 'cause it's discouraged lawsuits
and people don't go after their properties.
If you like this video,
make sure you hit it down at the bottom.
Any comments leave them for me,
love to get back and answer those questions for you.
Take care.
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