If you are a landlord, you have likely put in a lot of blood, sweat, and tears to get where you are. Still, you have to put in a little bit of extra work to avoid the risk of losing it all in a lawsuit. 

Let's look at how landlords protect themselves from lawsuits and limit their liability exposure.

Asset Protection Is A Little Different for Landlords

While it would be improper to cast the landlord/tenant relationship in an adversarial light, the best way to protect yourself and your assets from lawsuits is to be a good landlord.

Don't get defensive; hear me out. This is easier said than done!

After all, no one sets out wanting to be a terrible landlord who will inevitably get sued by an angry tenant. For this reason, getting competent legal advice on how to effectively meet all your obligations as a landlord will be a huge step forward in making sure there is no grounds for any tenant to sue.

You can start by checking out these asset protection articles. As our backlog of articles will show, we're big fans of corporate structures that protect assets—structures like the LLC. As its name implies, a limited liability company (LLC) limits your liability exposure. Furthermore, if you set up an LLCs for each property you own, you can ensure that each property is isolated from the others in the event of legal action.

Beyond creating an anonymous structure to hide away your assets, you might also establish a shell company through which you manage everything. This keeps your assets from being taken from a lawsuit by making your shell company the entity that interacts in legal issues.

But let's not get ahead of ourselves. Let's look at ...

A Landlord’s Legal Duties

One of the most fundamental contractual agreements is that between a landlord and tenant. As such, there is a wealth of legislation and case law establishing the exact nature of that legal relationship. For landlords, it is vital to effectively discharge all legal duties in order to avoid a lawsuit.

These primary duties are:

• To provide safe and livable housing
• To address maintenance issues in a prompt manner
• To adhere to the terms of the lease
• To properly handle major concerns

Unless you have a particularly belligerent tenant, lawsuits will be the last resort for most. This means that there will be chances to remedy the situation long before you're facing legal escalation.

That said, it is worth noting the most common reasons a tenant will try to sue. In no particular order, they are:

1. Wrongful Eviction

Although landlords win 90% of all lawful evictions, a wrongful eviction is not good for anybody.

If you need to evict a tenant, seek legal advice so make sure it's done lawfully. You must obtain a court order before simply changing the locks, moving the tenant’s belongings out of the property, or cutting off utilities.

Additionally, a tenant has what is called a right to “quiet enjoyment”, this protects a tenant from harassment and privacy violations. If the tenant is compelled to leave the premises due to a breach of quiet enjoyment then this can be deemed a “constructive eviction” and is subject to be treated as a wrongful eviction.

As the penalties can include everything from legal fees to jail time, a savvy landlord looking to protect themselves will be best to only proceed to evict in a lawful manner.

2. Livability Issues

Another potential opening for a lawsuit is if the property has issues that make the property unlivable. A well-maintained property should not have livability issues. After all, you do want to take care of your investment, right?

Generally, a property will be considered to have livability issues if one of the following is present:

• No utilities or sewage disposal
• A rodent or insect infestation
• Lead paint hazards
• Structural damage
• Other conditions posing a health and safety (particularly fire) risk

As mentioned, regular maintenance means protecting your investment and rarely having to worry about these potential legal issues. Let's hope you never need it, but be sure to check out our article, When Should a Landlord Hire a Lawyer?

3. Misusing Consumer Reports

It is common for landlords to screen potential tenants by looking at their credit reports or by running criminal background checks. While a wise policy, the Federal Fair Credit Reporting Act has strict compliance rules for how you use the information obtained. If in doubt, seek qualified legal advice.

4. Misusing Security Deposits

If not handled properly, issues around the security deposit can be the most volatile for lawsuits. However, there are key things that can be done to protect against lawsuits:

• Require a standard amount and have a move-in inspection
• Keep the money separate and keep receipts for any deductions at the end of the lease
• Return the balance within the required period to avoid lawsuits from the tenant

Above all, know the requirements imposed by the law regarding security deposits as the risks are severe if these requirements are not fulfilled.

Additional Ways Landlords Can Limit Liability

At the risk of sounding like a broken record, getting a great lawyer to advise on this issue is essential. Every great player needs a coach, and every great landlord needs a competent lawyer to advise on winning strategies to limit liability exposure.

You should also limit your exposure as a landlord by ensuring that you have these forms completed. Here, attention to detail matters; every detail of the lease needs to be spelled out. 

Being a landlord is an achievement, and it is well worthwhile putting in the effort to ensure that your asset is protected from lawsuits. Along with being a good landlord, having a great lawyer is key to avoiding those pitfalls of legal exposure. 

Some of the basic questions we get about liability include: 

• What exactly is liability?
• Why does it matter for a real estate investor? 
• What kinds of situations can make a person liable? 
• Can you argue and win against these charges? 
• Are there ways to avoid liability?

Liability is basically any reason you might end up in court. Think of liability as the lifeblood of a lawsuit. Lawsuits tend to resolve in either settlements or judgments, some common misconceptions about liability and lawsuits.

 Legal Definition of Liability

“Responsible for or answerable in law” is the exact legal definition of liability. Essentially, if someone is “found liable,” this means they are on the hook for any damage or harm caused in the situation and can be required to pay for your mistake or oversight. 

Liability doesn’t always include malicious intentions, such as blatant fraud. In the real estate world, most liability issues are accidents. A real estate investor can be held liable without intentionally doing anything wrong. Here’s a real-world example where an investor got legal documents online and ended up getting more than he bargained for: 

Example: When Online Contracts Come Back To Bite You

Paul decided to buy a small home in Florida and rent it out for profit.

To save on expenses, Paul decided to print a template rental agreement off of the internet. “Why hire an attorney,” Paul reasoned, “when I can find what I need online for free?” He read it over, and it seemed to cover all of the basics. He typed his name and address at the top and called it a day.

Paul quickly found a tenant, a law student named Ed, who paid him a $1,200 security deposit and $800 per month for rent. Ed signed a one-year lease and the aforementioned rental agreement. Ed was a model tenant. But a year later, Ed wanted to marry his longtime girlfriend and move in with her. He left the property in the same condition he found it, and asked for the security deposit back.

Paul referred back to his rental agreement, which stated that he would return the deposit within 90 days of Ed moving out.

Then 83 days later, Paul received notice that he was being sued. He was understandably confused—according to the document, both he and Ed had signed, he still had a week to make the payment!

Here’s what Paul didn’t realize: Florida law requires security deposits to be returned within 15-60 days of the tenant moving out. Ed learned this in a law class, and when he couldn’t immediately reach Paul, opted to sue for the return of the deposit. The suit pointed out that Paul also neglected to include a copy of Florida Statute § 83.49(3) in the lease, as is required by state law. Paul found himself in Municipal Court by a first-year law student and now had a whole new headache on his hands.

The first mistake Paul made was using Google, J.D. in place of an actual real estate attorney. A lawyer would have quickly caught the unenforceable part of the contract and made the necessary revisions. That same lawyer also would have advised Paul about his responsibility to include the state statute in the lease. By trying to save a few dollars, Paul ended up costing himself way more time and money dealing with the issue in court.

The second mistake Paul made was not handling the security deposit properly. Breaking a state law is pretty much a way to guarantee you will be sued. The moral of this story for investors is that you should always be educated on state laws and common situations that can turn into lawsuits. This is why you want a real estate attorney in your corner. We know attorneys aren’t cheap—but would you rather spend some money now to stay out of court altogether, or risk it all when someone does sue you?

To better understand how to avoid the courtroom, let’s look at five of the most common situations that can get a landlord on the business end of a lawsuit.

 Let’s take a closer look at how proactivity can keep you out of court.

Common Types of Lawsuits

Real estate investors should be aware of some of the common situations that get landlords into court. Once you are aware of these issues, you can anticipate them. Some of the most common types of suits arise out of the following situations:

• Discrimination. The Fair Housing Act (FHA) applies in every state in the United States. You can’t discriminate on the basis of sex, gender, disability status, or any other “protected” class.
• Security deposit issues. Each state has specific laws governing how much landlords can charge for a security deposit, how soon it must be returned after move-out, and where lawsuits over security deposits can take place.
• Eviction issues. If you’re going to evict someone, you must do so legally. For instance, you can’t kill the electricity to force a tenant to vacate.
• Repair and maintenance issues. In most states, you’re obligated to make repairs and generally keep a home livable. While there’s some murky territory about what constitutes habitable, it’s always best to make repairs as quickly as possible. Learn more about landlord obligations regarding repairs and avoiding this type of liability.
• Contractor and property management issues. You can be held liable for the actions of your employees.

Good communication, documentation, and legal counsel can help you avoid many of these issues. Still, you should approach all of the above situations with caution and be proactive.

Avoiding Liability

Fortunately, there are many legal tools available for real estate investors when it comes to avoiding liability. The basics include:

• Contracts. Well-written, crystal clear contracts (which include lease agreements) can assist every investor. Ideally, you want a contract that is detailed but clear. A skilled attorney can assist you with this matter.
• Corporate structures. The first rule of asset protection, and one we will drill into your head many times, is to never, ever own property in your own name. Instead, smart investors use corporations like LLCs, Series LLCs, etc.
• Trusts. The Anonymous Land Trust is just one example of the many options available. Real estate investors can use the land trust to avoid holding property in their own name. When paired with an entity like a Series LLC, Land Trusts can be a crucial part of your asset protection plan.

While a lawyer can argue against liability in court, we find that with asset protection strategy that includes these tools, you can literally stop a lawsuit before it’s even filed.

Bottom Line: Contain Liability and Prevent Lawsuits with Asset Protection

You’ve already taken a critical step toward protecting yourself as an investor. Now that you have a basic understanding of liability, you can begin taking steps to avoiding personal liability and liability for your business.

The goal of asset protection is, obviously, to protect what you own. We found the best way to accomplish that is to make yourself impossible to sue. If you are sued, a properly-employed asset protection plan will protect your personal assets and make the target of your lawsuit a company that doesn’t own anything for the other party to collect even if they do “win.” If there’s nothing to gain, most people won’t bother with the expense of even filing a lawsuit in the first place. As with any fight, you shouldn’t make yourself an easy target.

Warning: We cannot print today’s pieces without a frank discussion of the “f” word. Yes, the “f” word.

Foreclosure. It’s a fate we all hope to avoid personally. But as real estate investors, we also know that foreclosed homes may offer us tremendous opportunities for profit, incredible deals, and epic upselling after appreciation works its magic.

Acquiring properties that have been foreclosed, are owned by banks, or are otherwise underpriced because of related issues is a smart investing strategy for many REIs. If you’re thinking about going this route, you can’t afford not to know the following information about why and how to buy these discounted properties. Read on to learn more about REO investments, foreclosure, and how to make these assets into your next profitable investment properties.

What is an REO Investment?

An “REO” is a term for a bank-owned property. “REO” just stands for “Real Estate Owned”--meaning someone already owns the property. In the case of REO properties, that someone is always a lender. These lenders are, more often than not, banks. So all “REO investment” really means is just that the property is purchased straight from a lender, not a person.

Another thing to understand is that these aren’t “short sale” homes. “Short sales” are usually where investors can find major steals. In these sales, a homeowner is selling their home for less than they currently owe on the mortgage. Foreclosed homes have essentially been sold in this fashion back to a bank.

At that point, most banks mark the price way up--back to what the asset’s original value was, most of the time. After all, even banks want to make their money back. By the time the foreclosure is complete, the bank becomes the owner and seller. They can make any demand they like. Smaller banks may offer great deals on their homes.

What are Some Benefits of Buying Foreclosed Homes as Real Estate Investments?

The foreclosure auction can be the deal-hunting real estate investor’s best friend in this department. This is just one of your options for shopping around, but first, let’s get into why you might want to:

• Easier negotiations. Some find institutions simpler to handle than people--and often, they’re much more transparent. The banks with tons of stock are going to be more highly motivated, and therefore the most amenable to compromise during the negotiations process. Others may staunchly and adamantly demand sticker price for a given property. Your mileage will vary.
• Below market price opportunities. Some banks are incredibly motivated sellers and will accept offers if their “inventory” of homes is massive or overstocked. Bonus points if you’re interested in an extremely unpopular or traditionally difficult-to-sell asset class.
• Sellers are legally obligated to disclose full property records. Anything the bank knows about repairs, the property’s condition, appraisals, changes in ownership, and much more is actually information you have a legal right to. This is great for due diligence purposes.
• Repairs and closing cost credit opportunities. Many institutions are all too happy to complete the necessary repairs to get your property habitable, and therefore sold. Some even will offer closing cost credits to expedite getting the property off their laundry list and into your hands.
• You can buy with ordinary mortgage financing. With foreclosed properties, mortgage opportunities for you as an investor abound. Buy the property in your own name, but only one you’ve already set up your asset protection structure. Have everything you need from a legal standpoint ready to go so you can minimize the amount of time the property, and all of its liabilities, are directly attached to your personal name.
  
  Note: You can still protect your property, even if you choose to buy in your own name to obtain financing. All you have to do is use an anonymous land trust to take the property’s title after purchase. From there, leave it in your land trust or move it into your asset protection structure. Whatever you do, your mortgage will stay the same assuming you execute these transfers appropriately and legally. An experienced real estate or asset protection attorney can ensure you do.

This is just the shor tlist of some of our favorite perks of these properties. Of course, you may reap additional benefits we can’t list because they honestly warrant an entire article of their own. But these are some of the very basic reasons why people love hunting for REO or foreclosed homes. They can be a dealmaker’s delight.

The REI’s Guide to Buying Foreclosed Homes

If the auction isn’t your scene, of course you can also buy a foreclosed-upon home directly. You’ll generally follow the same basic steps, but of course, check with your own real estate attorney before you purchase any major assets. That said, this is the basic outline of what you have to do to legally and safely acquire one of these properties:

1. Assemble your team of qualified professionals. Most folks like to have at least an attorney and a real estate agent on their dream team.
2. Defend your offer. Even a verbal promise is better than nothing, but ideally you’ll be protecting yourself down the line with real estate contingencies that allow you to back out at no cost if the property “fails” any of the next steps. See our previous pieces on crafting real estate contingencies to your advantage for more information.
3. Have the property thoroughly inspected. This will help immensely with the next steps.
4. Weigh the pros and cons of purchasing this investment. Consider your portfolio, return expectations, the amount of time you have (if any) to put into renovating this property, property management costs, and of course, a good 20% buffer never hurts a pro forma. You can also ask your team of advisors their opinion on your investment opportunity.
5. Get the property professionally appraised. Only a real-deal appraisal will give you the true value of the home. This is vital for determining whether your deal is worth the amount of time and effort (as well as money) that you have to invest in this new acquisition. It can also become enormous leverage at the negotiating table. Getting additional discounts on these homes is easy for the deft negotiator.
6. Bring in experts if necessary. Should any special issues arise during inspection around local law, water, ground coverage, or any other impediment to your ideal use of this property, don’t be afraid to have an expert in whatever subject come on down. You can usually secure experts quickly and easily on most common real estate problems, assuming both buyer and seller have a desire to fix the issue. While you get obvious negotiation power in such situations, you can simply ask to have the problem fixed. It’s best in our opinion to invest more in due diligence and addressing all potential issues prior to purchase than to buy on a whim and handle everything “later.” 
7. Make your offer. If you’re buying a bank-owned property, understand you’re likely to pay sticker price for foreclosures. If you know ahead of time sticker price is well within your budget, make the exact offer if you wish to expedite things. You can try to bargain, but frankly your odds of success may vary wildly between institutions.
8. Close. Grab your keys and get to work. You’ve either got some remodeling to do. some tenants to find, or some property management contracts to sign. Get any third parties you may need to run your real estate business.

Don’t Forget to Cover Your Assets

Buying a foreclosed or bank-owned property is no different than making any other investment from an asset protection standpoint. Ensure you handle this property exactly as you would any other REI asset from a legal standpoint. If you normally buy with your Traditional LLC, do that. If you secured financing in your own name and have a land trust ready to go, proceed with your plan. If you don’t have an asset protection plan at all, it’s time to start learning about asset protection at the very least. Ideally, real estate investors should have a trustworthy attorney who can answer asset protection questions.

Of course, asset protection experts and firms exist for a reason as well. You’ve got options for protecting your new asset, so get a plan that’s customized to maximize your business’s profits, tax savings, scalability, and success. You can find an expert on any budget to help you out, but above all, don’t hold any real estate assets in your own name over the long term. You’ve got so many alternatives that there’s no excuse, so start planning before you even think about buying.

Bottom Line: The Savvy Investor Can Win on Good REO and Foreclosed Properties

If you take nothing else away from this article, simply understand that making deals with the bank is a bit different than making deals with a person. This basic truth is the root of most of the confusion around foreclosed and REO properties. But since you’re no longer confused, you can start considering whether such investments have a place in your portfolio. Your answer will likely depend on many factors, including your age, sex, location, main career, investment class preferences, investment strategies, aspirations for your portfolio, and other highly personal details. 

But for now, at least you know the basics of how to intelligently vet and purchase these properties. Your team of advisors and even your personal investing network is likely full of insight on the foreclosure opportunities in their respective local markets. Asking around can often be the beginning of a beautiful learning experience. So don’t be afraid to ask around about how foreclosure and REO deals have gone for others in your personal and professional network.

Reverse mortgages have gotten more than their fair share of both good and overwhelmingly negative press coverage, so it’s no small wonder most investors and seniors are confused about what they even are. As retirees face longer life expectancies, many outlive their personal savings or Social Security plans, face mounting medical costs, and find life generally costs more than they’d planned for. A reverse mortgage may seem like an enticing way to solve many problems at once, but of course, you should never dive into any financial “solution” without understanding it well.

Today, let’s clear up some of the misunderstandings that make the world of reverse mortgages seem more mysterious than it is. We’ll talk about what a reverse mortgage really is, how this cashflow option can help certain secure seniors, which drawbacks to consider, and what to keep in mind when deciding if you’d personally like to exploit the reverse mortgage in your own real estate investing strategy. Making the best decision will require you to have lots of information. Let’s start with the basics and work our way out to the kinds of details you’ll want to ask about down the road.

What is a Reverse Mortgage?

A reverse mortgage is a type of loan specifically available to seniors over age 62 and federally insured. It gets its name from its unique ability to allow you to borrow against the equity stored within a home already. Those of you who own outright or are close to doing so may have even gotten marketing calls from institutions that issue reverse mortgages, particularly after your 62nd birthday.

Some of the basics to know about reverse mortgages include these rules:

• Loans or debts may not be outstanding on the home.
• You must occupy the property as your primary residence--sorry, no investment properties allowed.
• Older borrowers are eligible for greater total loan amounts because age directly correlates with limits.
• Loans aren’t due until the homeowner passes away or moves.
• Loan values may be influenced by the value of the home, how much equity is in the home, and other factors.
• Borrowers must continue paying property taxes, HOA fees, and maintenance costs.

Why Would Senior Real Estate Investors Be Interested in a Reverse Mortgage?

Well, first, only those over 62 get access to reverse mortgages at all. But beyond this, there are reasons certain seniors may want a reverse mortgage. There are still other reasons that are unique, or made all the more pressing, if the senior considering a reverse mortgage is also a real estate investor.

Any senior experiencing cash flow issues, whether they’re as a result of an investment gone awry, out-living or under-projecting retirement savings, medical costs, the difficulty of living on fixed income, or any other reason, may consider a reverse mortgage if they’re eligible. If you have high amounts of equity in your home or own it outright, this loan option offers flexible disbursement options, meaning you don’t have to borrow the full value you can. Just take what you need.

Many seniors find this solution helpful when they have a definite, short-term need that a definite amount of cash to fix. If your need is more about your long-term budget, try to put a number on what you need for say, one year. Coming up with this type of metric will help you and anyone assisting with your financial planning determine your exact cash need, thus helping figure out what a good conservative loan amount for you might be.

What Are the Biggest Benefits of Reverse Mortgages?

Nobody would be getting reverse mortgages if there weren’t very real benefits for some seniors. The biggest issue to keep in mind as you learn about this tool’s benefits is whether they outweigh the drawbacks discussed later in your own personal situation. 

You may find that answering questions about your status and goals honestly saves you lots of time, and fees, on having to pay a lawyer to review the basics. They’re your advisor, not your teacher. Lawyers are all-too-happy happy to teach, just understand that you don’t need to pay for this service.

Flexible Lending Options

Investors may choose to accept the loan as one single lump sum, in monthly installments, or even as a line of credit. This amount of control the borrower has in this regard is greater than most loans. Borrowers may choose the most conservative option that will serve their needs, a luxury not typically afforded to those seeking loans.

Comfortable, Cash-Friendlier Lifestyle

No doubt, very little cash can be converted into a great degree of comfort if you’re smart about it. If you just want to live out your golden years comfortably, you can do so and even plan to pay your mortgage off while you’re still living. We’ll discuss below why to always account for reverse mortgages in your estate plan, but for now, if you want to live it up, a reverse mortgage is an option.

Interest Limits 

The reverse mortgage has an interesting set of rules regarding interest. On the plus side, you’re not charged interest while you continue to live in the reverse-mortgaged home as your primary residence. Interest is also capped on the first $100,000 worth of debt. 

What Are the Drawbacks of Reverse Mortgages?

There isn’t a financial option we’re aware of that’s all “pros” and no “cons.” Let’s break down the downsides of reverse mortgages.

Deceptive or Inflexible Terms

Sadly, not all mortgage providers are ethical. Those targeting seniors may attempt to exploit their clients perceived lack of sharpness or assume you won’t do your due diligence. To this, we say prove them wrong. Vet your company before considering a loan, and have someone you really trust who understands every word read the fine print. This could be a CPA, financial planner, family member working in the industry, or even another investor you know who’s successfully used a reverse mortgage and knows what to look for. You’re looking for anything that sales reps haven’t disclosed,terms you don’t agree to, or red flags of any sort. These are immediate cues to shop around and look elsewhere. Not all lenders will offer good terms, even if you’re lucky enough to only ever deal with the ethical ones (and few of us are so fortunate). Be on the lookout for inflexibilities as well as poor terms. For instance, reverse mortgages are often difficult to refinance, a fact that makes them less than optimal choices for some. See if this will be the case with your loan, and even ask your salesperson to see how honest their answer is compared to what their literature states. Any time a salesperson’s word vastly differs from a written offer, be skeptical.

Your Loan May Become Your Family’s Debt

If you fail to make an estate plan or somehow account for a way to pay your debt immediately in the event of your death, your reverse mortgage may be subject to probate. Your heirs, which for most people are their family and loved ones, don’t get to touch an estate while it’s being probated by the courts. If you die with a debt, it gets passed on, just like your assets and earnings do. So your heirs will be able to pay debts from your estate, but let’s just say the worst-case scenarios around this issue are heartbreaking, lengthy, frankly exquisitely boring yet brutally legalistic affairs. 

If you decide to pursue a reverse mortgage, you can offset this downside by minimizing your loan to what you’re certain you can pay directly from your estate and updating your estate plan to account for the reverse mortgage. This way, your attorney’s already involved and can give additional personal advice on how to address your situation. Often, you can make plans to avoid estate planning surprises--simply remembering to is the most difficult part. 

Our suggestion is to take care of this detail immediately if you end up seeking the loan. You may pay it off while alive or pre-arrange for your estate to make payments, but be advised interest will likely rise if you wait and let your beneficiaries pay off the debt. 

Assets Encumbered by Debt Can’t Pass to Heirs

Suppose you take out a substantial loan against your home’s equity because of its perceived safety. If you’re unfortunate to pass away before making payment or fail to update your estate plan, your heirs may be unable to inherit the home with the reverse mortgage until the loan is paid off in full. If you lack the funds in your estate, that could mean one less asset for your heirs, or at least a substantial barrier to receiving their full inheritances.

Limits and Difficulties Securing Other Types of Loans

Some seniors who take out reverse mortgages later find it difficult to secure additional lending elsewhere. A reverse mortgage is fairly easy to obtain if you meet the qualifications, but it doesn’t necessarily “look good” to traditional hard lenders. This can be problematic for investors who rely on good terms to make their deals profitable. 

Stay Out of Trouble if You Choose to Use Reverse Mortgages

As long as you understand the deal you’re going to sign, you should be able to intelligently decide whether the reverse mortgage will help you, particularly if you’ve got pros to help you make the judgment call. Even a close network of fellow REIs, homeowners, and smart borrowers with experience in reverse mortgages can be a valuable source of information, as can educational resources like this very online article. Learn what you can, shop smart, be skeptical. Professional advice, planning ahead, and practicing due diligence can keep you from becoming a horror story.

We are always getting questions about off-shore accounts here at Royal Legal Solutions. Perhaps this is because off-shore accounts are one way many investors become acquainted with some principles of asset protection, even though the subject is also frequently misunderstood. Regardless, we thought it was high time to give you a straight-forward guide to how these accounts work, what you need to do to open one, and how to manage an off-shore bank account like a pro. 

Are There Special Requirements for Off-Shore Bank Accounts?

Depending on where you open your account, you may be required to provide additional documents to verify your identity or even previous bank statements to verify income. Basically, you’re dealing with a sovereign nation that has its own laws, each with advantages and drawbacks. Many of the nations with reputations for being tax havens have implemented their own legislation to prevent blatant abuse of their banking systems. Such laws are generally designed to prevent money laundering and should not pose major problems for investors. One thing to consider when deciding where to open your account is which taxes exist in the off-shore destination. Many popular choices have no inheritance or capital gains taxes, and that’s just scratching the surface of this issue.

You won’t need anything terribly unusual to open your account. It’s ultimately up to the destination bank and country, but most investors find proof of identity sufficient. Occasionally you may be asked to provide bank statements or income verification to comply with the aforementioned security laws. But some countries may not ask much of you at all.

Operating Your Off-Shore Bank Account

After you establish your handy off-shore account, there’s the matter of actually using it. You may notice you have the option to select your preferred currency, a luxury most Americans don’t have. Some investors take great care making this decision, as this detail can be leveraged for greater economic stability (particularly where an investor’s local currency is volatile) and other opportunities.

How to Make Off-Shore Bank Deposits

Deposits into your account are generally fairly straightforward. The international wire transfer is by far the most popular way to fund such an account. This method of electronic funding is available worldwide, and therefore useful in its ubiquity. Some fees may apply. The smartest way to make deposits will depend on a few local and bank-specific factors.

How to Make Off-Shore Bank Withdrawals

Making withdrawals from off-shore accounts can be done a number of ways depending on how the account is set up. Let’s not forget that these are still real banks. You usually can get an ordinary business checking or personal checking account, or event separate accounts with separate cards to be on the safe side. Check local laws (and perhaps even double-check with a local professional from outside the bank) to be sure you can make withdrawals in the amounts and with the frequency you expect to. Always know which way your money is flowing, and what it has “touched” in terms of your assets. Simple hands-on management of your own assets and balances can save you some major headaches down the road.

Equity stripping can be a critical component of your asset and creditor protection strategy. This tried-and-true tactic for making your valuables less attractive targets works by disguising the true value of the property in a controlled, legal manner. If you want to brush up on the topic, you’re in the right place. Learn more about the key pros and cons real estate investors need to know about equity stripping now.

Equity Stripping 101

You didn’t think we were going to give you advice without covering the basics first, did you? Of course not. Equity stripping is an umbrella term that describes any maneuver designed to remove the perceived value of an asset. In the real estate world, we usually do this through creative use of harmless debts or liens. The idea, in a nutshell, is to tie up the asset in so much financial or legal red tape that it is unattractive to both creditors and the folks who like filing lawsuits against us investors.

Equity Stripping For Real Estate Investors: The Pros

Equity stripping can be beneficial for several reasons, and is indeed a tried-and-true method of asset protection.. Here are some of our favorite things about this tactic:

• Creditor and asset protection. Nobody wants an asset with no real value.
• Traditional LLCs can be used for this process, even if it’s one you already own. Some investors enjoy this convenience.
• Liens are as legitimate as loans, allowing investors to get creative with their use and financing.
• Friendly liens. Agreeable financing is often possible since you’re often basically lending money to yourself.

These are just the very first of many benefits of equity stripping. But to be fair, let’s look at the downsides.

Equity Stripping for Real Estate Investors: The Cons

Rare is a good thing in life without a few drawbacks or trade-offs. Equity stripping is no different. Some of its significant possible drawbacks include:

• Tax consequences for “friendly” loan arrangements and leans can be brutal. A CPA can help you avoid such problems.
• Interest rates can be absurdly high on certain types of loans used for equity stripping.
• Personal loans may not be taken as seriously if challenged legally.
• Not all equity stripping tactics are created equally. Some are even risky, like taking out a second mortgage--a move that would be unwise for most property owners.

Many of these “cons” can be addressed or avoided altogether with an appropriate asset protection strategy. For example, a professional can navigate the legal and financial implications of the smartest tactics for you.

Is Equity Stripping Right for You?

Maybe. It’s important to weigh the pros and cons before making moves, but many investors find that on balance equity stripping does them far more good than harm. Your chosen legal, tax, and financial professionals can best help you make the right decision. All you have to do is provide a clear picture of your motives and situation. Keep in mind that with all of the equity stripping tools available, equity stripping in general is likely to be helpful to you. Which specific methods will work best for you is the question to bring professionals in on.

Maintaining your anonymity can be harder than ever in the digital era. Anybody who can type can search for—and find—an astonishing amount of your personal information. Your name, insurance policies, companies you have an ownership interest in, and especially properties you own are all potentially compromising details that you likely don’t want spread far and wide.  

We also know that anonymity on the Internet is crucial to effective asset protection. So what’s the investor with an online presence to do? 

Your Personal Information Is Most Likely on The Internet

The simple reality is that unless you’ve taken measures to protect your personal information, it is likely somewhere online. Without taking precautions to preserve your anonymity, many of your personal details which you might consider private can end up on the public record. Anything on the public record can be easily located with a Google search. There’s no need for sophisticated skill sets or deep knowledge on the other party’s part.

Why is this a problem for real estate investors in particular? Frankly, we have more to lose from too much public information.

Of course, the simplicity of locating public records is one of the main reasons we encourage investors like you to never own property in your own name. This is just one of many steps you can take to secure your anonymity, and it is basic yet incredibly important.  When you own property in your own name, simply looking up the address leads straight to you, and by extension, everything you own. This is the most vulnerable position you and the asset can be in. Asset protection is largely about moving those easily seized assets out of your name and into a more secure structure under your control.

You might recall that investors can only lose money in two ways: bad deals and lawsuits. Anonymity helps address the threat of lawsuits. After all, for another person to successfully sue you, they will need to know who exactly you are. They will also need to prove your connection to the property or entity owning the property, a problem savvy attorneys can anticipate and prevent. Put simply, our job as asset protection attorneys is to complicate potential lawsuits as much as possible before they ever materialize. Anonymity helps stop lawsuits by complicating the initial research phase conducted by opposing lawyers to see if suing you is worth the trouble.

That said, you can undermine your own asset protection plan if you aren’t thoughtful about protecting your own privacy. The point is, the less information about you that is freely available online, the better.

Online Best Practices To Ensure Anonymity

Some common-sense techniques paired with simple awareness of the value of your anonymity can help you eliminate potential problems as you navigate an increasingly digital world.

Avoid Openly Discussing Investments or Finances

You’ll also want to steer clear of any behavior flaunting wealth. If you have it, that’s wonderful. But in order to keep it, it should stay your business. You can absolutely enjoy the luxuries of wealth, but you don’t need to Instagram your vintage Moet Chandon or post photos of your exotic car collection to Facebook. Instead, play it cool. Be mindful that the internet really is a public space.

Of course, it may be unavoidable for people to know that you are an investor. They do not, however, need to know the particulars of where you invest and what you own.

Be Wary of Info Scammers

Sadly, the web is crawling with scammers of all sorts. They come in the form of Facebook Marketplace ads that are a little too good to be true, leading you to a “third-party” registration that looks legitimate, but exists just to capture your information. They can also appear as friends of friends, love interests, wealthy relatives hoping to reconnect, and even as potential investing partners. Even if you realize you’re being scammed, some cons are so finessed that you won’t realize anything’s up until you get an obvious red flag.

Here are some quick and dirty tips that can help you avoid falling prey to scams that could compromise your anonymity on the Internet:

• Don’t talk to strangers. If everyone really stuck to this all the time, scams would hardly be possible.
• When you must talk to strangers, vet them. That mutual friend? Maybe see that they’re actually a friend instead of a victim.
• Be skeptical of anything that sounds too good to be true. The cliche exists for a reason.
• Observe Craigslist rules when making any large purchase. That means meet the person face-to-face, so buy locally when possible, and use cash or something that can’t be falsified.
• If you even hear words like “Western Union” or “Moneygram,” run.
• Last but not least, never ever give away account info, passwords, or codes generated by your services.

Bottom line: scams and breaches are best avoided by being tight with your security and smart.

Legal Solutions for Real Estate Investors Who Want Anonymity

There are also legal tools you can use to preserve your anonymity and limit the amount of personal information about you online. At the very least, you can obscure any connection between such information and your business and assets. Not everything can be “undone” online, and absolute anonymity is nearly impossible. What legal tools can provide you with is layers of protection that will make penetrating your anonymity, and therefore connecting you to your valuable assets and suing you for them, far more difficult.

• Anonymous Land Trusts. The Anonymous Land Trust is a tool you can use to remove your personal name from the title of an investment property. The trust will instead hold title for you, and may be set up in such a way that you receive any benefits or profits from the real estate asset, including rental payments.
• Delaware Statutory Trust for California investors. The Delaware Statutory Trust serves the same functional purposes as Series LLCs and Anonymous Land Trusts, but is friendlier to California’s tax law.
• Anonymous LLC Options. Some states require that you report each member of your LLC. When you operate a Traditional LLC as a single person or with your spouse, your names may be recorded by default. Multi-member LLCs may not be exempt, either depending on the state where they are formed. Fortunately, there’s a fairly straightforward solution: pair your LLC with an Anonymous Trust. For real estate investors, the Series LLC presents an elegant anonymity solution and an effective, scalable business entity.  The Series LLC may also be owned by an Anonymous Trust or make use of Anonymous Trusts at the “bottom level,” protecting each asset within each Series.

There’s always something new that investors can learn about defending themselves with the tools and strategies of asset protection. We also understand though, that this area of law is less commonly understood. Heck, there are even solid business attorneys even who know about asset protection tools but still have fundamental misunderstandings about actually practicing this legal art. In the interest of clearing away some of the mystique that surrounds our growing field, we wanted to begin answering some of the most common questions that we get from our real-life clients. Let us know in the comments section if you learned something new today, or what FAQ you think needs to be on our next list.

Which Asset Protection Tools are Right for Me?

Woah, we’re just getting to know each other. In all seriousness, we can’t tell you what’s best for you without knowing more about you, your goals, and of course, your business and major plans.

In fact, if anyone tells you they can divine the ideal tool set for you without knowing much or anything about you, your B.S. Detector should ding. There is no one-size-fits-all asset protection solution, and in fact, our circumstances are all so vastly different that there can’t be.

There are, however, some common basics. Most of us in the real estate world will need an entity as the foundation of our asset protection system. Limited Liability Companies are great choices, as they offer an easy way to both organize your business and have inbuilt mechanisms that prevent lawsuits. Your entity can also be used alongside anonymity tools like land trusts, and other legal work including strong contracts.

Full service firms like ours can even use retirement and estate planning tools to strengthen your asset protection plan. If you really want to learn about the best tools for you,  schedule a consultation with an asset protection expert.

The Entity I Want Isn’t in My State! What Can I Do?

Since the Traditional LLC is in all 50 states, we’re guessing you might be talking about our good friend, the Series LLC. This entity is indeed great for investors in most states, yet it isn’t offered in every state. Daily, we get emails and social media messages from investors scattered across the country lamenting that their state doesn’t have a Series LLC option.

It’s okay if your state hasn’t yet been hit by the Clue Train. You can always form a Series LLC in another state. For instance, many Royal Legal Solutions clients use Texas Series LLCs but haven’t even been to, let alone owned property, in Texas. Some leverage our presence here, cost-reducing flat fee offerings, and ability to serve as the Registered Agent for more effective Series LLCs than their home-state would ever offer.

Isn’t The Series LLC Structure Too New to Rely On?

We get this question and variations all the time. Perhaps a little history lesson will help. The first Series LLC was born in Delaware back in 1996--over 20 years ago. Let’s compare that to the Traditional LLC, which Wyoming pioneered not even 20 years earlier in 1977. Not so new after all, right?

So, the reality is that the Traditional LLC, so often hailed as long-established institution,  isn’t much older than the Series LLC. It’s not a huge departure legally speaking either, but simply an offering with more nuance and possible uses for the savvy investor to exploit.

Some criticize the Series LLC as “untested,” but this is also untrue. It’s simply harder to document the structure’s “wins” because of its defensive nature. You can see plenty of Traditional LLC court cases where the structure was “tested”--and lost. The absence of a reliable way for attorneys to pierce the properly-established (S)LLC structure is a huge point in its favor. It’s hard to count how many lawsuits didn’t happen. But this structure effectively stops them before filing.

Is Using Trusts to Disguise Company or Property Ownership Legal and Ethical?

If you’re using Anonymous Land Trusts correctly, meaning under an experienced attorney’s guidance, there’s nothing illegal about using them for asset protection purposes.

For the ethically concerned, consider that you are using tools that anyone can. Anyone with a wifi connection can read this article and others like it to learn about the power of trusts. So, you’re not getting an unfair edge. In fact, these tools were once so cost-prohibitive that only the exquisitely rich could use them. Why shouldn’t you? But some investors also mistakenly believe, or at least fear, that anonymity is only necessary for those with something to hide. Well, that’s just plain false.

Thinking privacy is just a shield for wrong-doing is a huge mistake. You want your privacy as a real estate investor, above all else, to protect yourself. The more difficult you are to connect to your valuable assets, the more difficult you are to sue: end of story.

Further, asset protection tools aren’t designed to help someone who’s up to no good or breaking the law. Your lawyer actually can’t help you break the law on purpose. These tools are all about preserving the wealth you’ve already built.

What Should I Look For in an Asset Protection Attorney?

Specific, tangible asset protection experience. Those like us at Royal Legal Solutions who are investors ourselves will also bring that experience to you. You can verify your attorney’s credentials with their state Bar, and your attorney ca