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.
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 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:
These are just the very first of many benefits of equity stripping. But to be fair, let’s look at the downsides.
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:
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.
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.
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.
Ready to know more than your attorney? You'll get over two hours of instruction combined with five ebooks to teach you how to best structure your real estate investments.
Join thousands of real estate investors in all 50 states as they enjoy exclusive content, special promotions, and behind-the-scenes access to me and my guests. No spam, ever. Just great stuff!