One Lawsuit Away: Real Estate Asset Protection Strategies Every Investor Needs

Matt Meredith (00:00)
What I always like to tell people is you’re putting all this thought all this heart into building something Let’s do it correct from the get-go Let’s go out and build it that it’s going to have the opportunity to grow that if something bad does happen Everything you’ve built all at once is not at risk We can compartmentalize risk in a way that hey, there’s no guarantee We live in litigious society

Michelle Kesil (01:59)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil, and today I’m joined by someone I’m looking forward to chatting with, Matt Meredith, who is a lawyer working with real estate investors, helping them create their structure and operation companies. So excited to have you here today, Matt.

Matt Meredith (02:21)
Thank you, thank you for having me.

Michelle Kesil (02:23)
So let’s dive in. First off, for those not familiar with you and your workout, can you share what your main focus is?

Matt Meredith (02:31)
Definitely, we do a lot at the Meridian Legal Advisors, but one of the things that we work with very closely are real estate investors. And in this matter, what we do is we build out structure for them.

focus on anonymity, asset protection, tax strategy, so that as they grow they have somebody trusted that they can call and add to their overall portfolio. Make sure things are protected. Make sure they’re not paying.

tons and tons of taxes when they can be making savings. And so our whole focus is to help real estate investors not have to worry about the things that they don’t want to worry about and let them focus on growing a portfolio.

Michelle Kesil (03:19)
Yeah, amazing. And which markets do you operate in?

Matt Meredith (03:25)
So we can set structure up in most states. I am in Texas though, and so.

With Texas, if you come to me, we can do a lot more because that’s where I’m licensed to practice. But we do have attorneys in other states that we can help out with. One of the things that when it comes to tax strategy, stuff like that, we can do that pretty much in 50 states. That’s federal. And so anybody who needs help with tax strategy, tax planning, anywhere for real estate structure and in-depth real estate structure, pretty much Texas.

Michelle Kesil (04:03)
Awesome. And so what does the process look like when an investor reaches out to you?

Matt Meredith (04:09)
So normally at that point we’re going to have a long conversation. It’s let me understand what you’re doing, what you’re wanting to do. What do you have now?

How are you protecting yourself now? I always start with a simple question. If somebody falls through the roof and turns around and sues you, what’s at risk? And it’s the little things we don’t think about. Of course, we’re going to go get insurance. We’re going to try to protect our assets from these type of liabilities. But what if they’re spillover? And so we’re going to discuss that. And then it’s really kind of a breakdown of what is your goal and what are we trying to achieve? There’s so many options.

when you get into this type of law on how can we protect you? How do we help you grow?

that you really just start somewhere in the corner and you start expanding yourself out from that point

so you can really see what’s going on. And then once the facts are known, we’ll turn around and we’ll start building out the process. In the meantime, we’re gonna talk with the CPAs and the tax attorneys and make sure, hey, is everything working out properly for you? Are there ways that we can adjust some things to save you some money over the course of time?

it really just becomes once the structure is set up, a lot of times we’ll do kind of subscriptions where, hey, come back with questions. Don’t worry about every time I have a question, I’m gonna have to pay this hourly fee. No, we set up an easy subscription so you can call, you can email, you can ask your questions, you can ask tax questions. And so it’s this ongoing process of…

Let’s stay in touch and make sure you’re being taken care of. And then from there, it really just becomes helping you grow as you go out and find properties or find assets that you’re wanting to do. It becomes, hey, let’s do a cost segregation on something like this. hey, Matt, let’s go ahead and I’m going to purchase this property. How does it fit in? Can you build it out so that this property will come into my structure with no problem? And that’s really becomes more on.

The upfront part is always the boring, let’s build some businesses, let’s separate operations from the actual holdings and the portfolio itself. Figure out the taxes, nobody likes doing that. And then it becomes ongoing maintenance and support.

Michelle Kesil (07:27)
Yeah, amazing. And so what are some of the common obstacles you see investors navigate that you help them overcome?

Matt Meredith (07:38)
A lot of the things I see is the eggs in one basket. Or even worse, they’re not really in a basket, they’re just in your name. And so the typical example I use is I know a real estate person who owns seven properties all in their name. There was a lawsuit. All of these properties are…

disadvantage at this point. If this judgment comes through, now there’s a lot more assets in the person’s name versus had you done it in proper structure. And so that’s the main thing. Set up the proper entity to protect yourself.

Another thing I see very common is when people don’t separate the assets from the actual operations. So a lot of people, they will properly go out and create, you know, an LLC type holding company for their products, for their portfolio, but they also operate in that same.

LLC or that same entity. And so what happens is you’re not separating the operations which are really the risky side of it. So if there’s a dispute between a renter or a contractor, somebody working on the roof,

We want that to go to the operating company. We don’t want those assets sitting in the operating company because again, kind of like if it’s in your personal name, everything in that entity has risk of being targeted. So separating the operations from the assets themselves and then using that operations company to create the contracts to work with vendors to do the lease agreements. And so that company takes really all the risk and there’s not

much privy of contract with the asset holding company. So if there are lawsuits, typically they’re going to the operating company, which in most cases you’re not keeping a lot of cash in there. You’re keeping expense maintenance in there and money comes out of it and goes into a different type of company at that point to protect it. And so what often happens is somebody will sue the operating company and that’s when the attorneys get involved and say, look, there’s not

much money in here and you know if if my client has to file bankruptcy he’ll file bankruptcy but let’s be honest all that money is going to go to the bankruptcy attorney so why don’t we just settle instead and worst case scenario then you do file for bankruptcy and move on from there

Michelle Kesil (10:47)
Yeah, absolutely. I can see how that would keep a lot of people protected.

Matt Meredith (10:54)
As they say, you don’t sue poor people.

Michelle Kesil (10:58)
Yeah.

Yeah, definitely. And so once you get people set up and organized, what does the follow through look like?

Matt Meredith (11:15)
So I’m a very active type of attorney. I like staying in touch with my clients, previous clients. And for clients who are constantly building a larger portfolio, adding to things, or they’re doing tax strategy.

It’s not really a one-time relationship. There’s an ongoing relationship. There’s a lot of questions that come up as the person grows and they start having new concerns. And so then it becomes, Matt, how should I handle this situation? Can we take a look at it? Can we decide a path to take so that I don’t have to worry about it?

Or typically it’s, Matt, take care of my taxes, it’s that time of the year. Things like that. Tax strategy in itself is not something you do one time. Every year you’re looking for new type of syndications, oil and gas depreciations, short term rentals, all these different types of things that are gonna save you a lot of money over the…

of the year so that way you pay less in taxes overall. So there’s constantly communication going back and forth between myself and the clients. It’s a long-term relationship. There are those type of relationships where, I have one house, take it out of my name, my son’s gonna live in it while they go to college, I don’t want there to be a lot of risk that comes back to me if something happens. And those are…

pretty common, but we like to really work with the real estate investors who are trying to grow a large portfolio.

Michelle Kesil (12:54)
Yeah, absolutely. What are some tax strategies that maybe someone doesn’t know or hasn’t like isn’t as common that you help people understand?

Matt Meredith (13:09)
So real estate investors really have great opportunity to save money. If you’re an active participant, you can deduct your cost expenses against your actual income from other sources. If you’re not an active participant, a lot of times there are loopholes that we like to call them. So the short-term rental loophole.

Other types of depreciation type plays are out there. And so not just sticking to real estate, you can do oil and gas type syndications. These are like limited partnerships where in the first year you’re a general partner and you can take the deductions and the losses off of the depreciation. There are also simple things that we’ll do. Let’s analyze what you’re currently doing. A lot of people may have a W-2 type job where, we can increase

amount of money going to these retirement accounts we can take money off of your AGI so that you’re paying less in taxes overall. So it really just depends on what the client is willing to do what they feel comfortable with. But for real estate if they’re in real estate they pretty much probably already understand that hey I I can have a lot of losses every year. And so those are the type of people who we can really utilize our services for and help out a good bit more.

Michelle Kesil (14:31)
Yeah, amazing. And so what advice would you give to a real estate investor that’s maybe earlier on in their journey?

Matt Meredith (14:44)
I think the biggest advice is don’t have overconfidence. And I don’t mean overconfidence in the term that, hey, I’m not gonna be successful at this. I mean it in the smaller things we don’t always think about.

People sue in this country. It’s a very common thing. It’s not like these other countries I’ve gone to where you can get hit by a car, you can shake hands, the guy dusts you off and you just walk away.

Here, it’s a business. And so you need to plan going into that. How do I protect myself?

What I always like to tell people is you’re putting all this thought all this heart into building something Let’s do it correct from the get-go Let’s go out and build it that it’s going to have the opportunity to grow that if something bad does happen Everything you’ve built all at once is not at risk We can compartmentalize risk in a way that hey, there’s no guarantee We live in litigious society

if you haven’t been sued. It’s probably gonna come at some point

So let’s not worry about that aspect. Let’s more protect ourselves from the risks going forward. And then it’s one of the other things I see so often is don’t be lazy about it. Yeah, we question ourselves when we’re starting something like, I really want to put all this work into getting it started or should I just go out there and do it? For me, what I see most often is years go by.

before something is really taken a look at. And it usually happens when a complaint or a lawsuit is coming through. And by that point, it’s too late to do anything. When people come to me, hey, I’m being sued, all of my houses are in my own name, what am I gonna do? It’s normally, I can’t help you at this point. Let’s see if we can settle and then we can build something up going forward. So.

If you’re gonna do it, I always tell people, do it right from the get-go. Keep those sleepless nights at bay. Set it up properly and then don’t worry about it. And then, you know, maintain it. Don’t just set it and forget it. You have to maintain.

Michelle Kesil (17:43)
Yeah, I think that makes sense that most people don’t think about it until it happens to them.

Matt Meredith (17:49)
All the time and like I said at that point there’s the panic there’s the worry Had you just set it up properly then that’s a different phone call, which is hey, I’m being sued What’s at risk versus everything’s at risk?

Michelle Kesil (18:05)
Right. And so you mentioned set it up and then maintain it. What does the maintenance look like?

Matt Meredith (18:12)
So there’s a lot of different types of maintenance depending on structure. So typically when you’re doing these type of investments and holding these type of assets, if you’re segregating them, you have to maintain books separately. You can’t commingle in between things. You can’t commingle between yourself. And that’s where we’ll see a lot of the piercing of the corporate veil take place where they’re piercing through the protective structure and coming after you personally. So what

ways that would allow that to happen. One is of course commingling. That would be a perfect example of I use my business bank account as though it’s my own bank account. So I go out I buy my dinner with it. I’m constantly spending money on things that have no relation to the business.

If I am the plaintiff in a case and I’m seeing this in discovery, I’m going to make a statement that, this isn’t a legitimate entity. This is him. He just wrapped it in an LLC thinking that, okay, I’m protected. There are lots of problems where people will create an entity, an LLC, an S Corp, a C Corp, and they think that, hey, I’m protected now.

But this the course don’t really see it that way. If you’re not actually operating it in a manner that would suggest this is a legitimate business. They’re going to say it’s not a legitimate business and it’s really just you. And so what makes a business legitimate. Well when you set it up have you written out either bylaws or operating agreements. Have you stated the purpose of the company how it functions. Have you held meetings or done written

consents on actions. These are the type of things that you have to make sure you’re doing. Did I lose you?

Michelle Kesil (20:09)
I’m here.

Matt Meredith (20:11)
okay, perfect. Another thing to add to it is we mentioned briefly that the accounting, each property needs its own separate books. Doesn’t mean you have to have different huge amount of records, but if you have separate properties, keep separate books for them. Little things like that. That’s what protects you in the long run.

Michelle Kesil (20:35)
Yeah, absolutely, that makes sense to have all those things in order. And I’m assuming that’s when it’s the most helpful to outsource because I know like as an entrepreneur, it can be overwhelming to be like, I’m doing all this real estate stuff and I have to keep track of all these other things on top of it.

Matt Meredith (20:56)
Absolutely, I get overwhelmed with things even when I’m looking at my own type of stuff. Like I really understand the structure of it. And so when I’m looking for properties, if my wife and I are interested in doing something like a fix or flip, my problem is, is I go straight to the legal aspects of it. And I don’t care what the house looks like, like how much money can I make from this house? No, I’m looking at, well, if I get sued, what’s going to happen? And so that that’s the thing.

I find that we are very good at what we’re very good at, but the other things we normally need help with, and it’s okay to ask for help, it’s okay to go pay consultants, because ultimately that’s what protects you. And people say all the time, it’s too expensive to do it the right way.

It’s not though, because you could spend a whole year doing something and then something goes wrong and you lose everything your whole year versus having just done it originally paid a fraction of what you could actually lose and then you don’t have to worry the whole time. It’s I’ve seen people get get suits thrown at them.

It is not something where you read, you go to bed, and you’re like, okay, I’ll deal with it. Normally, it’s several months of stress, worry.

Wishing you would have done something different the whole time and it’s not worth it to me I’m getting too old in life to want to spend all my time worrying that what I built is at risk and so nowadays I I’m very adamant about it set it up right and Let someone else worry if they can get to you because you’re gonna know whether or not they can when they come after you

Michelle Kesil (22:38)
I think that is super good advice, so thank you for sharing.

Matt Meredith (22:43)
don’t know.

Michelle Kesil (22:45)
Before we wrap up here, if someone wants to reach out, connect and learn more, where can people find you and connect with you?

Matt Meredith (22:52)
Definitely the company is meridian legal advisors. You can find us on the web at meridianLG.com and that’s m-e-r-i-d-i-a-n-l-g.com I am on Facebook. I’m on LinkedIn. I’m on Instagram. I think I got tik-tok out there as well I’m not doing the dances yet, but you never know and Give us a call. Give us an email. We’re always happy to talk to anybody about what’s going on and how we can help them

Michelle Kesil (23:23)
Well, I appreciate your time and your story. Thank you for being here.

Matt Meredith (23:26)
It was pleasure, Michelle. Thank you.

Michelle Kesil (23:29)
course. And for those tuning into the show, if you got value, make sure you have subscribed. We’ve got more conversations with operators like Matt, who are building real businesses and we’ll see you on our next episode.