The real estate industry is highly profitable. But like all things that come with a great reward, there's also a great risk. And in this industry, you're risking your hard earned dollars.
All it takes is one lawsuit and you're out of the game, permanently. Insurance won't save you. (Surprise: It's not even meant to anyway.)
Let's go over how to protect yourself as a real estate investor.
You may have already heard of asset protection. If not, you're about to. Asset protection involves using legal structures and smart contracts anytime you do a real estate transaction. The legal structures I'm referring to include LLC's, Trusts, or shell companies.
Using those legal structures, combined with asset protection, allows you to stop lawsuits before they happen. Legal structures do this by first and foremost making you extremely difficult to sue.
It's not that people can't or won't want to sue you. It's just no lawyer is going to want to waste his or her time trying to.
Legal structures will allow you to mask your wealth. You could be worth well over 6 or 7 figures, and nobody would know. And even if they spent time investigating you, they'd realize you're extremely difficult to sue because you're using asset protection.
Think about it. Who's going to sue you if you have nothing of value to offer them? Furthermore, who's going to waste their time investigating you when there's no guarantee that you're even worth investigating? Nobody, especially a lawyer. (I would know, I am one!)
Without asset protection, you can lose everything. And no, I'm not joking. Real estate investors lose lawsuits everyday because they didn't have an asset protection strategy in place.
If you plan on owning several properties there's no reason not to get an asset protection strategy. The costs of asset protection are far less than the legal fees and time you'll spend defending yourself against a lawsuit.
You're vulnerable to a lawsuit every time you:
These are all things insurance doesn't cover. The only thing that's going to protect you and your hard earned dollars is an asset protection strategy. Period.
If you have any questions about how to protect yourself as a real estate investor I'd be glad to answer them in the comments below.
Learn more about asset protection.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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