In a perfect world, honest real estate investors would never have to deal with frivolous lawsuits. But we live in the real world where being sued is a very real possibility. So, how do you protect yourself so that an angry tenant cannot get to your personal assets? What kinds of insurance do you need to protect your real estate assets from an ‘outside attack’? And where should you set up a holding company to take advantage of the strongest possible asset protection laws?

Garrett Sutton is a corporate attorney, asset protection expert and bestselling author with 30-plus years of experience supporting entrepreneurs and real estate investors. He serves as Rich Dad Advisor and asset protection attorney for Robert Kiyosaki and founder of Corporate Direct, a firm dedicated to supporting clients in protecting their assets, maintaining their privacy and advancing their financial goals. He has sold more than 850,000 books, including the invaluable Loopholes of Real Estate and Start Your Own Corporation.

Today, Garrett joins me to explain the ins and outs of asset protection. He discusses how the LLC protects your personal assets, why it’s important to set up an LLC from Day One, and how insurance serves as your first line of defense. Garrett offers insight around entity structure, speaking to the value of setting up a Wyoming holding company with charging order protection. Listen in to understand the concept of equity stripping to further protect your real estate assets—and learn to avoid personal liability by following the four corporate formalities!

Key Takeaways

Why it’s important to set up an LLC from Day One

• Too late once sued
• Plaintiff can reach all personal assets

How the LLC protects you as an individual

• Courts respect lease in name of LLC
• Attorney will work to get name off suit

The role of insurance in providing asset protection

• Serves as first line of defense
• LLC provides second line of defense

Why Garrett recommends an umbrella policy

• Extra coverage for home + auto
• Protects against outside attack (i.e.: car wreck victim)

How to set up the best possible entity structure

• LLC in state property located
• Several LLCs under Wyoming holding company
• WY = strongest asset protection laws, privacy

The value of a charging order protection

• Doesn’t allow forced sale of assets
• Victim must wait for distributions

The 4 corporate formalities

1. Annual meeting w/ minutes
2. Registered agent in state
3. Separate tax return
4. Separate bank account

The consequences of failing to follow corporate formalities

• Personally liable in any suit
• ‘Veil pierced’ 50% of time

How Corporate Direct can retroactively fix compliance issues

• Operating agreement, minutes + membership certificates
• Transfer ownership from individual to WY LLC

The concept of equity stripping

• Leverage debt as form of asset protection
• WY LLC provides credit, receives first deed of trust

How to notify your insurance company re: title transfer

• Use grant deed, inform of transfer to LLC
• Add LLC as additionally insured (avoid higher premium)

Connect with Garrett

Corporate Direct

Call (800)

Imagine having the financial security to do what you love, to pursue work that brings you joy—even if that work happens to be in an unpredictable industry. Mark Hentemann began his career in entertainment as a starving artist in New York City, often wondering how he would cover rent. Now, he leverages the cashflow from real estate investments to spend his days coming up with jokes in the writer’s room, without the stress of financial instability should his show get cancelled.

Mark Hentemann is a writer, voice actor and producer, working on shows like Family Guy, Bordertown and The Late Show with David Letterman. He is a two-time Primetime Emmy award-nominee for Outstanding Animated Program and Outstanding Comedy Series. In addition, Mark is an avid real estate investor, cofounding the multifamily investment company Quantum Capital, a firm focused on value-add assets in centrally located, growing neighborhoods of major metropolitan areas. To date, he has a portfolio of 185 units and earns $1M in passive income.

Today, Mark joins me to explain how a desire for financial security led him to invest in a duplex soon after his move to LA. He describes the moment when he finally understood the power of real estate and speaks to the advantages of house hacking as strategy to get started. Mark also shares his belief in economies of scale, discussing how he finds deals that make sense in Los Angeles. Listen in to understand why Mark is getting into syndication and learn how you can follow in his footsteps, leveraging multifamily real estate investment to pursue the work you love!

Key Takeaways

How Mark got involved in real estate

• Starving artist in NYC, needed financial security
• Move to LA, invest Family Guy income in duplex

Mark’s first real estate deal

• Duplex ‘rough around edges’ in improving area
• Listed at $380, won bidding war for $435K
• Sold in 2005 after remodel for $1.27M

When Mark realized the power of real estate

• Refi on duplex reduced interest from 7½% to 4¾%
• Rent covered mortgage, insurance, taxes + utilities

The advantages of house hacking

• Provides hedge against economic volatility
• Add value to force appreciation

Mark’s belief in economies of scale

• Realized benefit of larger multifamily properties
• Found and purchased 6- and 14-unit buildings

How real estate impacts Mark’s quality of life

• Takes financial strain out of equation
• Write for fun (without stress of economic instability)

Mark’s perfect day

• Write jokes and laugh during day
• Network and look for properties

How Mark finds deals in the LA market

• Chronic undersupply of B-class multifamily
• Look for 40-year-old buildings in up-and-coming areas
• Focus on low cost per ft2 (price comparable to land)

Mark’s experience with syndication

• Motivated seller with 3 buildings ($10M deal)
• Committed, then scrambled to find investors

Mark’s advice to aspiring multifamily investors

• Take advantage of house hacking
• Find 2- to 4-unit value-add in area on rise

Connect with Mark

Email markhentemann@me.com

Quantum Capital

Resources

Keith Weinhold on ABI EP034

Tyler Sheff on ABI…