#139: Scam Proof Your Real Estate Assets

Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and your investing with The Accelerated Investor Podcast.

Josh:Hey, welcome back. This is Josh again at Accelerated Investor. Thank you so much for joining me. Today I have a special treat for you. I’m going to be interviewing Garrett Sutton. Garrett is a bestselling author and one of Robert Kiyosaki’s Rich Dad advisors. He authored a book that I read years ago called Loopholes of Real Estate. I did the interview with you to be here in a second. He’s been referred to it as loopholes and he’s also written books called The ABCs of Getting Out of Debt.

Josh:He’s written a book called Run Your Own Corporation Loopholes of Real Estate, writing your own business plans, buying and selling a business. Start your own corporation. He is an attorney and he is also the founder of a company called Corporate Direct. Corporate Direct is actually a company that I’ve been using for years to set up new entities. And in this interview, you’re going to hear me talk with Garrett about setting up companies, LLCs and corporations in Nevada, Delaware and Wyoming.

Josh: And why setting up a new company, whether it’s for real estate investing, whether it’s for e commerce, whether it’s for some other new business. Why setting up entities in those three states, Nevada, Wyoming and Delaware, why they offer extra layers of asset protection. In this interview, Garrett’s also going to talk about his brand-new book that’s coming up called Scam Proof Your Business, which is going to be available in both Amazon Kindle and were audio books are sold. And as one of Robert Kiyosaki’s Rich Dad advisors, I personally got my start in real estate reading a number of Garrett’s books. So it’s a pleasure for me to now welcome Garrett Sutton onto the line. One of my early mentors and advisors to finally interview him for the Accelerated Investor podcast is a real treat. So hope you love the interview.

Josh:Garrett, thanks so much for joining us today on Accelerated Investor. So why don’t we start out by just having you tell me and our audience. From your perspective, Garrett, from your point of view of seeing these thousands of businesses that you’ve helped incorporate, thousands of companies that you’ve consulted and worked with? What is asset protection and why is it so important in this digital economy?

Garrett: Well, Josh, thanks for having me. Asset protection is the method for, as the term implies, protecting your assets. We live in a very litigious society. We have attorneys on contingency fees, meaning they get a percentage of what they’re able to collect. And, you know, in the car wreck case, this this works because most people don’t have a lot of money to pay the attorney to collect on a car wreck case. And so having the attorneys do all the work and get a percentage of what’s collected. Now, it’s kind of a fair system in that regard. But the contingency fees apply to other activities. Attorneys will go after business owners, real estate owners. Some of these cases will be frivolous.

Garrett: They use the power of the legal system to, in some cases, let’s be honest, shake down businesses and real estate owners, especially on the construction defect stuff, all those kinds of claims. A lot of those are not well-placed claims. And so knowing that we have to protect ourselves. So the law allows for a contingency fee attorneys. The law also allows for asset protection. All 50 states allow you to set up corporations and LLCs. All 50 states allow you to take the advantage of these protections that state law offers. Now, it’s interesting, Josh, they don’t teach this in school, right?

Garrett: I mean, it would be great if they taught this in school, I think in 12th grade to have a legal class. It would keep people in school so they would you know, they’d be interested in learning this stuff, but they don’t. So you have to get this information on your own, which is why I’ve written books, which is why you do podcasts. People need to gain this information that they don’t teach.

Josh: Now in the books that you’ve written, you wrote an amazing book, Loopholes of Real Estate. And a lot of that includes asset protection. You’ve got a new book coming out, which we’re going to talk about a lot on this call. How to basically scam proof your business, whether it’s real estate or whether it’s e-commerce or some other type of entity. Obviously, there’s a lot of scammers out there making phone calls, trying to steal credit cards, filing frivolous lawsuits, or is all this kind of stuff going on? But, Garrett, from your perspective, you’ve started this company, Corporate Direct, which I’ve personally used over the years to set up my own LLC season entities and SCorps, which has been great.

Josh: I’ve got my corporate binders like in the next office right over there, which is fantastic. But where does it start? So let’s start with let’s talk to our audience right now who’s maybe brand new or just getting into real estate or maybe starting an e-commerce business or just have, you know, entrepreneurship on their mind and they’re thinking, I’m going to do my first deal, whether it’s in real estate or some other place. Do they need an LLC? Should they file SCorp election, where is kind of the beginning, sort of the elementary starting point of asset protection?

Garrett: Well, everyone’s situation is different. But as a general rule, Josh, when you buy that first piece of real estate, you’re going to hold title in an LLC. When you start that first business, you’re going to set up an LLC and probably have it taxed as an S corporation. The important thing to know is you’re getting into business and you may not have the money to set up a corporation. And plenty of people say, well, geez, I’ll do it later. I’ll operate as a sole proprietor. I’ll take title to real estate in my individual name. And when I can get to it, I’ll set up the LLC. What happens is you get busy in business, the crush of commerce, and you never set it up. And then someone sues and you’ve been operating the business in your individual name. You’ve been holding the real estate in your individual name.

Garrett: When someone sues, you have no asset protection. They can go after all of your personal assets, the money in your bank account, the equity in your house. So right off the bat, you put yourself at a disadvantage. So it’s important to know at the start it’s not expensive to set up these corporations. You need to do it right at the start to be protected because if someone sues you. We’ve had cases where this happens. Someone says, you know, I just can’t afford that, LLC, I’ll do it later. And then they come back to us and say, you know, I’ve been sued. I’d like to set up that LLC now. Well, it’s too late. You can’t put the seat belt on after the car accident.

Josh: That’s right. Now, I want to take this conversation sort of down a very selfish path for me. I’ve got a very complex financial situation. We’ve got an education, publishing and coaching business. We own over two thousand seven hundred units of apartments as a general partner. We raise capital from real estate investors and we syndicate those deals. We also own a significant amount of residential rentals, duplexes, quads, five units, stuff like that. And we flip real estate as what we call a transaction entrepreneur. Could be a commercial building, could be a small, single family home that we either wholesale or that we buy and rehab in flip. So we do a little bit of everything, but are primary focus is just continuing to build this big portfolio.

Josh: Now, from a selfish perspective. I know you’re not going to necessarily give me financial advice, but what are some thoughts on what are some of the states right now that are some of your favorite states to set up New LLC? We can start with that. So if I was going to set up a new company, a new LLC, new SCORP, is it Nevada, is it Delaware or is it Wyoming? Is it some of these states that have been really popular in the past and then the more complex someone’s situation gets? Help me understand, what are some of the more advanced techniques that are available to entrepreneurs and investors who really have kind of a thick financial picture like I do?

Josh: All right. Well, you’re doing well. That’s great. And so, you know, our favorite states are Wyoming, Nevada and Delaware. And it’s great because I get that right. All right. Right. But most countries that you thought you filed for the corporation at the national level, but as a result of the American Revolution, where they had. They were fighting the British East India Company. And these states hated these corporations. So instead of having a national corporate law, it’s state by state, which is great for us because it means these states compete against each other to be the best. And Wyoming, Nevada and Delaware do compete against each other to be the best state for setting up.

Garrett: Of the three in an LLC situation, I like Wyoming. They don’t list your name on the state website. The annual fee is fifty-two dollars a year and you have great asset protection. Nevada and Delaware and Wyoming are virtually equal in terms of asset protection. In terms of corporations, I like Nevada. Nevada is the only state that offers charging order protection, which is the key feature of LLC asset protection. Nevada is the only state that has extended that to corporations. So if you if you’re going to set up a corporation, you want the asset protection, Nevada is your best choice. So it sounds like you know the three states.

Josh: Yeah. Well, we’ve got great consulting not only from local attorneys, but also in talking with people at your company, you know, through corporate direct and in setting that kind of stuff up and then, you know, places hiring an agent to kind of take care of the mailing and those kind of things. So what makes specifically an LLC, what makes Wyoming, Delaware, Nevada better? Like, what is it? Is it protection from a piercing the corporate veil? Is it privacy? For somebody who doesn’t know and never set up a corporation or only has things in their own local state. What makes them different or better?

Garrett: OK, those three, Nevada, Wyoming and Delaware, offer the charging order protection for LLC. And what that means is if you get sued from the outside, you get in a car wreck and someone wants to get it. Your assets, if your assets are all held by Wyoming, Nevada or Delaware, LLCs and they get a judgment against you. They’re in a car wreck. You’re responsible, Josh. The insurance doesn’t cover it. So they’re going to go after your assets. If your assets, all that other LLCs that you have are held by these Wyoming, Nevada or Delaware LLCs, the exclusive remedy that that car wreck victim has and the attorney that wants the contingency fee. The exclusive remedy they have is what’s called the charging order.

Garrett: And they go to court and they say I was in a car wreck with Josh. And the court in those states says, OK, Mr. Car Wreck Victim, all you get is a lien on distributions. Meaning if Josh is distributed any money, you get it. OK, but that’s not a good use of time for attorneys, right? They have to monitor this. They have to go to Wyoming to get the court order. They have to wait for distributions to be made. You may not make distributions. You may keep the money in the other LLCs above the holding LLC. And so and we talk about all this and loopholes because it’s kind of a complicated situation. But these states offer the best protection through the charging order.

Garrett: And they also extend the charging order to single member LLCs. One owner LLCs. So you own one Wyoming LLC. And the exclusive remedy is the charging order. No distributions are made. They get nothing. In other states, Kansas, California, Utah, other states, the law for LLCs is not as strong. All right. So the charging order, if you’re a single member, owner of a charging order of an LLC, for example, the court in Florida said in this one case, you know, the charging order applies when you have two members. In this case, there is only one member. There’s no innocent member to protect. Have at it go and force the sale of all the assets in the LLC. So it’s important to pick the right state, which typically are Nevada, Delaware and Wyoming.

Josh: Got it. And if somebody has some LLC, these are already set up, let’s say, in California, Kansas, Ohio, Pennsylvania, whatever. And they haven’t incorporated all their LLC in one of those three states, the preferred states. Is there a way to kind of fix that by having their new LLC in one of those states now own the equity in the shares in an Ohio LLC or a different type of LLC?

Garrett: Let’s say you have an Ohio LLC and a Florida LLC. And they’re set up. They’re on title of the property. That’s great. But you don’t have the strongest asset protection yet. So what we do is we set up a Wyoming LLC to own the Ohio and Florida LLC. We just put the Wyoming in as the passive holder of Ohio and Florida. And then you’re much better protected. So that’s easily set up.

Josh: Got it. Yeah, I’ve got a couple LLLCs in Ohio that that, you know, own some of my real estate. And for whatever reason, we didn’t set them up that way. So I’m going to take that note and call Corporate Direct and straighten that out as soon as possible. Now, Garrett, let’s talk for a second about your new book coming out here in the next couple of months. It’s called Scam Proof Your Business. Scam-Proof Your Assets. There you go. There’s the draft copy right there, which is fantastic. This is going to be out on Amazon, right. Coming up in the next six weeks or so.

Garrett: Comes out in October. And so it’ll be available everywhere. It’s a rich dad advisor book. It’ll be on audio kindle the whole, you know, all the formats. But I wrote it because, as you know, Josh, we’re just inundated every day with these fraudsters coming in, telephones, emails, bank fraud, real estate fraud. It’s everywhere. And so I wrote the book to help people through this. But, you know, one of the key things in the book is we say that, you know, it’s impossible to know every fraud. Right. I mean, they create new ones every day. Right. And so what you have to do is understand that they’re playing on greed and fear. Right?

Garrett:They’re playing on the fact that you want a good deal. They playing on the fact that you have an ego and you don’t want to miss out on the New Deal. And these are all common patterns that you see in all of these frauds. And so you just have to in the book we say we have to use your B.S. detector. Right. You have to be able to call B.S. on all of this stuff and ignore it in some cases. I do encourage people to report these to the federal government because not enough people are reporting these. The federal government understands there’s a problem, but they don’t understand the extent of it. And so it’s everybody, even if you’re not scammed, even if you brush it off, report that to the federal government. We talk in the book about how to do that. And we also argue that the federal government needs to use bounty hunters.

Garrett: They need to use cyber bounty hunters to go after these bad people all over the world, because right now in the United States, people are losing billions of dollars there. There’s mental depression associated with all these scams. There’s a lot of evidence of suicide, Josh, people are committing suicide due to the shame and embarrassment of being scammed like this. And so we argue that the federal government needs to step it up and go after some of these cyber criminals. And a bounty hunter is a way to do that. It’s allowed in the Constitution.

Garrett: So that’s why I wrote this book, is this is beyond party lines. This affects everyone every day. And it’s time we stood up to it, because if we don’t, these guys are getting more and more power. They’re going to be able to take down health systems, power grids, you know, they’re going to be able to take down key infrastructure items that we need for our protection and safety. And it’s about time we started going after them.

Josh: Yeah, what can a regular person do, you said? You know, lobbying, not necessarily lobbying the government, but letting the government know, having some common sense, basically reviewing things. And I’ll give you an example, Garrett. There’s a church that’s in the city over from me. It’s a church, actually, I grew up in. And they were building this massive, beautiful renovation of the existing church. This is a church I grew up in as a kid. I went to Catholic school there and new pastor comes in. He’s really good at sort of energizing the people that go there. They raise all kinds of money and they’re doing this massive renovation.

Josh: Well in the middle of it, they found out that somebody somehow, through their email, got access and was basically monitoring the email traffic back and forth within the office. And then somebody was able to pose as another person. And basically what they will do is pose as someone from the construction company that said, hey, why are the funds for this next drawer? Why are the funds to this account? Well, everything looked legitimate. One of the administrative people in the office sent the wire and it was hundreds of thousands of dollars and it was eight hundred thousand dollars is what I’ve heard. And nobody knew a thing for about 30 days.

Josh: Construction company all of a sudden calls the office and says, hey, we didn’t you know, we didn’t get the last straw. We don’t get the last draw from 30 days ago. And the office is like, hey, we sent it. Here’s the proof. And all of a sudden you’re like, oh, no, they match up the ACH and the wiring instructions. They’re different. Somebody stole eight hundred thousand dollars. Now, apparently this was covered through some sort of insurance, but that gives you the idea of the sophistication that we’re fighting against. Right. Then that’s the stuff that you address in the book.

Garrett: Exactly right. And they are extremely sophisticated. And, you know, when I buy real estate, I will get a cashier’s check in the bank and drive it to the title company. You know, I don’t even do the wires.

Josh: It’s one of the biggest ones is the wire fraud through a real estate transaction at a closing. These total companies, I wouldn’t want to own a title company right now. They’re going through all these extra hurdles. The verification of emails, verification of the… Wire fraud is amazing right now.

Garrett: Exactly. The other thing to know is and this would apply to the church, that you wouldn’t think that a church would need a really robust protection system for e-mails. But you really need to have those extra levels of security protection nowadays, even if you’re a church or a small business. What’s unfortunate is the government says, all right, you’ve been hacked and the information has been released on your customers’ information. And the government’s response is to hold the business responsible for not protecting themselves well enough and the criminals go free. Right. There’s no effort on the government’s part to go after the guys that did this. So it’s really a bad situation for small business because you are held responsible for these types of hacks.

Garrett:So one thing to do, Josh, is everybody should consider getting cyber liability insurance and you can get policies that will protect you in the event that you’re hacked. So that’s something to talk to your insurance broker about. If you do any type of business on the Internet, collect credit cards, anything. We don’t collect credit card information. We don’t keep personal information just because we don’t want to be responsible for someone hacking it. But we spend a lot of money protecting our systems. And you pretty much have to now because the government holds you responsible and not the criminal.

Josh: Yeah, it’s wild. I have a friend of mine who works for the largest insurance brokerage house in the Greater Cleveland area. They insure everything from the Cavs, the Indians, the Browns, bunch of universities. And whenever we go golfing, he’s always talking to me about he’s a good friend of mine. So he’s kind of nudging me quietly about buying a policy for cyber liability because we do have, you know, hundreds, thousands of students. I mean, we’ve sold tens of thousands of products over the last 14, 15 years. And, you know, we don’t keep that. We license a subscription through a third party that houses that stuff and they have those kind of cyber liability policies. But, you know, very, very important stuff to make sure.

Garrett:Garrett, when the book comes out, tell me in your own words, kind of let’s sell the book for a minute. Right. Give me your top three reasons why you think somebody must have your brand-new book. Well, if there’s three things that step out in your mind, maybe three things that you’re most proud of that are in the book that you want to convey to our audience today. Things they should do and why they should own that book. Tell them one of those maybe two or three reasons. And tell them where’s the best place to get the book when it comes out.

Garrett: Well, thank you, Josh. And my audience, like yours, are real estate investors and business owners. And so I wrote the book with those people in mind. And so if you’re in real estate, real estate, wire fraud, all the other real estate scams that are out there, you just need to be aware of them and have your Spidey sense up. The same with business owners. You know, people will come at you and you may not even know it. Like you mentioned with the church, I mean, this can happen and they’re gone. And 30 days later, your money’s in Estonia and there’s no way to get it back.

Garrett:So I think people need to understand that they need to have a higher level of Internet protection. They need to have the cyber liability insurance. But they just need to understand the patterns that are out there that these scampsters use. Because the scams are changing daily. But we just need to be attuned to the fact that they’re coming at us from every direction. And we just have to be extra cautious. Because if you get hacked again, the government is going to hold you responsible. And there’ve been businesses that have gone out of business due to a hack, and they weren’t even the ones who were acting criminally. It’s really it’s a terrible situation.

Josh: Fantastic. Well, listen, Garrett, great stuff. So when the book comes out, it’ll be available, I assume, on Amazon and popular bookstores like all of your other books. The ABCs of Getting Out of Debt, Writing Winning Business Plans, Start Your Own Corporation. A lot of the books that you’ve done with Robert Kiyosaki’s Rich Dad advisors. I imagine it’ll be just about everybody, but tell our audience where’s the best place to get it.

Garrett: You know, I can’t sell it for less than Amazon. I don’t know how. They undercut even me. So it’s on Amazon, it’ll be on Kindle. I recorded the audio already, so it’ll be on audio book. So that’s a great place to go. It’s also a corporate direct dot com. So you can go to our main Web site. CorporateDirect.com. Get it there.

Josh: Fantastic. Garrett, listen, this has been an absolute blast. I would encourage all of our audience to follow Garrett on social media platforms again, get his books. I personally use Corporate Direct in my own business and have for years. So go visit CorporateDirect.com and, you know, use them to setup a new LLC in Nevada, Delaware or Wyoming, as well as get Garrett’s new book, How to Scam Proof Your Business. Garrett, thanks so much for hopping on today on Accelerated Investor. Really appreciate you.

Garrett: My pleasure. Josh, thanks.

Josh: So, hey, I hope you enjoyed that interview with Gareth Sutton. From everything we discussed regarding asset protection, all of his books and how to scam proof your business. If you’ve enjoyed it, please go into iTunes right now. Leave us a five-star rating. Leave us a review. And when you do so, take a screenshot of that and we will send you a free Accelerated Investor T-shirt. OK. Whether you leave that review on Google, iTunes or YouTube. Take a screenshot of it, then post it to social media and tag our team on Facebook or Instagram or send it into our customer service department. And when you do that, give us your address. We will send you a free Accelerated Investor T-shirt for doing that. I appreciate you engaging with us.

Josh: I appreciate you being here for this interview and all of our interviews. This has been one of my favorites, talking with one of my early mentors, Garrett Sutton. Thanks so much for joining us today on Accelerated Investor.

Hey, Josh here. And do you want to win a free Accelerated Investor T-shirt? All you have to do is give Accelerated Investor our podcasta rating and a review on iTunes. OK. Do that now then send us a screenshot on Facebook, Instagram or Twitter. What we’re going to do then is every week we’re gonna pick our favorite rating in review and we’re going to send that person a free T-shirt and maybe again, some other cool fun stuff as well from Accelerated Investor. So, again, don’t forget to take a screenshot, leave a rating review, take a screenshot, send it to us so we know exactly who you are. And then once a week, every week on the podcast, we will announce a new winner. Don’t forget to take a screenshot and send it to us so we know exactly who you are. We’ll announce a new winner every week.

You’ve been listening to Josh Cantwell and the Accelerated Investor Podcast. Leave a comment on our iTunes channel and let us know what you want to learn next, or who you’d like Josh to interview. While you’re there, give us some five-star rating and make sure to subscribe so you can be the first to hear new episodes. Follow Josh Cantwell and his companies, the Strategic Real Estate Coach and Freeland Ventures on all social media platforms now and stay up to date on new training and investment opportunities to start your journey toward the lifestyle you’ve always dreamed of. Apply for coaching at JoshCantwellCoaching.com.

The time to protect your assets isn’t when you’re getting sued for everything you’re worth. Give yourself the income and asset protection you need from the very beginning of your entrepreneurship journey.

Garrett Sutton is one of Robert Kiyosaki’s Rich Dad advisors. He’s written numerous books including Loopholes of Real Estate, The ABC’s of Getting Out of Debt, Start Your Own Corporation, and more. As the founder of a company called Corporate Direct that helps businesses set up an LLC or corporation in Nevada, Delaware, or Wyoming, Garrett wants you to know that every state doesn’t treat your LLC the same.

Garrett’s newest book, Scam-Proof Your Assets, comes out on October 27, 2020, and it’s designed to help you protect yourself from the fraudsters that are out there. While it’s definitely impossible to know every fraud, Garrett’s new book is going to help you recognize common patterns in scams.

I’ve used Garrett’s company Corporate Direct for years to help me with my own business needs. Please feel free to contact him with questions about your LLCs, business, or S Corp, and don’t forget to check out his new book that drops in October on Amazon.

What’s Inside:

  • Why is asset protection so important in a digital economy?
  • How Nevada, Delaware and Wyoming provide great asset protection.
  • Why you should consider cyber liability insurance.
  • Learn how to identify common fraud schemes.

Mentioned in this episode​

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