Real Estate Asset Protection Explained | LLCs, Lawsuits, Insurance & Investor Legal Strategy

Ted Sutton (00:00)
as my dad likes to say, DIY is D-Y-I. And what that means is if you do it yourself, you do yourself in.

There’s people who think that they could set up an LLC all by themselves. you know, I did the filing at the Secretary of State and I got some random registered agent. I should be good to go. ⁓ The fact of the matter is, unfortunately, that’s not the case. You know, there’s a lot of cheaper services out there that do that. ⁓

When you have a rental property, need to make sure that you don’t just have the articles, that you have all the documentation that you need.

Michelle Kesil (02:10)
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. Ted Sutton, who is a lawyer licensed to practice law in Wyoming, Nevada, and Texas, specializing in business law and supporting investors. So excited to have you here today, Ted.

Ted Sutton (02:33)
Yeah, Michelle, thanks for having me on.

Michelle Kesil (02:36)
Of course. So let’s dive in. First off, for those not yet familiar with you and your work, can you share about your main focus is?

Ted Sutton (02:47)
Yeah, so some of you might have heard of my dad, Garrett Sutton. He’s a Rich Dad advisor. He’s worked with Robert Kiyosaki. He’s written a bunch of books in the Rich Dad series. And so what our specialty is, is we specialize in asset protection for real estate investors. So what we do is we make sure that if you have a rental property, we set up the LLC for you and we have the right structure in place.

just to make sure that your assets are protected. Just because this is a very litigious society we live in, people sue over the most worthless things, they file a bunch of meaningless lawsuits, and if you’re a real estate investor and you have a lot of assets, there’s a target on your back. And so it’s really, really important to have…

this entity structure in place to make sure that your assets are protected and you can preserve your wealth when that lawsuit comes. So that’s mainly what we specialize in is just the entity formation and maintenance for real estate investors.

Michelle Kesil (03:54)
Amazing. And so what are some of the main problems that you find real estate investors have to go through that you help them resolve?

Ted Sutton (04:09)
Yeah, so I think when it comes to real estate investing, mean, it really is a team sport. And there are some people out there who think that they could do it themselves. But

as my dad likes to say, DIY is D-Y-I. And what that means is if you do it yourself, you do yourself in.

There’s people who think that they could set up an LLC all by themselves. you know, I did the filing at the Secretary of State and I got some random registered agent. I should be good to go. ⁓ The fact of the matter is, unfortunately, that’s not the case. You know, there’s a lot of cheaper services out there that do that. ⁓

When you have a rental property, need to make sure that you don’t just have the articles, that you have all the documentation that you need.

You you need to have an EIN number so you can get a separate bank account. You need to have an operating agreement to show how the LLCs govern.

You know, you need to have annual meetings and have annual minutes of those meetings. And you also need to make sure that you’re paying your filing fees every year to the Secretary of State. So I think where people go wrong is they just jump right into it. They buy a property in their individual name or they use a cheap service to do the bare minimum with an LLC and neither of those provide them with protection.

And you know recently we’ve gotten a lot of calls from people who want to switch over to us just because they used a cheap service and it ended up they weren’t happy with it and they didn’t get the protection that they needed. So I think from my perspective the biggest thing is that people tend to skip some steps along their real estate investing journey. And the easiest way to avoid that is just to pay a little more upfront to get your structure right.

⁓ You know the analogy I like using is that an LLC is kind of like the foundation of your house. You get it right and you’re going to be protected moving forward. But if you cut corners and you you don’t you do the bare minimum there you could have structural issues down the road. And so that that’s one of the things that I see and it’s just really really important to have that foundation in place because it’ll save you problems in the future.

Michelle Kesil (07:21)
Absolutely. And is this something that you do with investors that are just starting or is there a process for those that have been in the industry for a bit as well?

Ted Sutton (07:35)
Yeah, well I think for a lot of the people who start, we help people kind of all over the place. You know, we have clients that have built a portfolio of 30 LLCs, if not more. And so, you know, we’ve helped the experienced investors, but we do also help the beginning investors too. And you know, I recommend just coming to us first if you’re starting out.

Just because we can get that structure right, we can get that foundation laid. you know, whenever that foundation is laid, I mean it’s going to give you protection into the future.

Michelle Kesil (08:09)
Yeah, absolutely. And what are some maybe common obstacles that you see investors bump into?

Ted Sutton (08:22)
⁓ Yeah, I think the biggest thing is just not assembling a right team. ⁓ I think people, I would say not assembling a team and then not giving themselves enough time to get everything in place. I think there’s some people who have trouble finding a property manager or somebody who can lend them money for ⁓ the remaining balance of a mortgage. There’s all these things. I think people…

they tend to sort of do things in a knee-jerk way. And I think that could really hinder them because if you’re acting last minute, ⁓ you know, you may not be in the best situation. So I think it’s important to just take a step back and sort of plan things out ahead of time just to get that structure right and to have all the pieces in place, ⁓ you know, whenever you start your investing journey.

Michelle Kesil (09:20)
Yeah, absolutely. And what do you see as some opportunities right now for how you can help investors in a different way?

Ted Sutton (10:07)
Well, think, you know, in all honesty, the market’s been a little slow over the past few years. You know, when COVID hit and interest rates were at 3%, I mean, they’re at historical lows and properties were worth half of what they are now.

there was a really big boom. so, you know, right now interest rates are a little over 6%, you know, with the Iran war and everything that’s going on and property values are really high. So I think it’s really important to be able to crunch the numbers. There are good deals out there for sure.

⁓ But you know on our end we’ve noticed a little bit of a slow down. think people are waiting for rates to come down a little bit. People are waiting for more inventory to reach the market. And so at least on our end I mean it’s been a little slow. But there are opportunities out there. I think just having again knowing people who have leads, knowing people who can find you deals, doing the numbers, running a pro forma, you know looking to see what the cash flows.

was

going to be. I think that’s really important now. ⁓ I mean, I honestly wish it was a little better, but I think maybe we’ll have to wait a little bit. I don’t think rates are going to come down to 3 % though. I think that’s probably never going to happen, at least for a while, unless something catastrophic happens. ⁓

You know, I think people are just kind of hitting the pause button. And, but again, like I said, there are some deals out there if you know the right people and you know, the numbers make sense.

Michelle Kesil (11:46)
Yeah, absolutely. And what are you kind of working on right now in your business?

Ted Sutton (11:53)
That’s right. what I’m doing, I mean, we have this succession plan in place. So my dad started Corporate Direct, which is, you know, the business formation service. He’s been associated with Rich Dad. And so this has been in place for 25, 30 years. And so we have a succession plan in place to where he’s sort of phasing his way out. He’s working on a lot of projects of his own. I mean, he’s a very creative guy.

Never a dull moment with him. There’s always something going on. And so, he’s kind of leaning more towards that, handling more of that, and then I’m handling more of the management of the business. So, that’s been exciting. That’s been really fun. But I’m working on some projects of my own.

And, we were talking about this before the podcast. I’m actually writing a book that’s going to be released in the next few months. And the gist of the book is that it’s designed to simplify the law. Everything I learned in law school for kids who are ages 12 to 18. But it’s narrated by a dog whose owner is a lawyer.

And so it’s a really great story because the dog learns the law by sitting in a dog bed next to his attorney’s desk and he uses that, you know, he uses a story to teach the law to kids. unfortunately, the law is not a topic that’s taught in schools, kind of like financial education and real estate investing and all these other things. And so I’ve spent three years working on it just to make sure that it’s as good as it possibly can be. But

You know, for anyone out there who’s a parent that has kids that are in that age range who want to invest in real estate, I think this is a great starting point for them. I think there’s a lot of information in there for real estate investors or for anyone else that can really help guide them into adulthood and sort of prepare them for what’s going to come because I mean the law does work its way into our everyday lives and unfortunately right now people

don’t know much about it. don’t know how to handle it. And so that’s why I spent three years working on this book. It’s just to simplify the law and just give people a resource and a guide that they could use to tackle real world challenges.

Michelle Kesil (14:18)
Awesome! That’s such an exciting project!

Ted Sutton (14:21)
Definitely. It’s been a long time coming, so it’s going to feel really good when it gets published.

Michelle Kesil (14:26)
Absolutely. And so what are some maybe points you can give from the book about the law that most people don’t know but you think should know?

Ted Sutton (15:20)
Yeah, well, I think the first one is that your actions have consequences. I think most people get that, but there’s some kids out there who unfortunately don’t. You know, I’ve seen kids, I live in Reno and there was a vandalism at a local high school. And I know one of the kids who was involved in it. And I think there’s some young people out there who think that they’re invincible, that they could never get in trouble for doing something stupid. And that’s simply not true. ⁓

And you know, if you’re parent out there, you don’t want your kids to be irresponsible doing stupid stuff. So I think that’s a big thing. And you know, there’s no book out there that teaches you that. I think another thing is drafting contracts and being able to understand them. You know, when you get out of high school, when you graduate college, you’re going to sign a lease to live somewhere and you’re going to sign an employment contract too. And so understanding how that works is really important.

Unfortunately, there’s no resources out there that teach that to you. And so I think that’s another big point. And then another thing is just the Bill of Rights and civics. ⁓ You know, unfortunately, civics is not a topic that’s taught in schools. And people don’t know how our government works, which is really, really concerning. You know, there’s a lot of discontent and anger out there. ⁓ You know, people just get mad at whatever people see, you know, whatever they read on the Internet.

⁓ But it’s unfortunate because they don’t know how the government works. They’re just emotional and angry about everything. And so I think it’s important for people to understand civics and how things work because when you understand how things work, that’s how you can affect change. And so I think that’s another big point. ⁓ But again, it’s all the stuff that I learned in law school that they don’t teach to the general public.

And this is a resource that people can use to help them in their everyday lives. And I really hope it sells well. put a lot of time and energy into this. And I hope it has a positive impact on society.

Michelle Kesil (17:28)
Yeah, that’s awesome. think there’s not many people doing something like that so it should be something unique. Yeah.

Ted Sutton (17:35)
No. And that’s

why I did it. You know, I think there was a huge void there. ⁓

You can look on Amazon and there really isn’t a comprehensive resource that simplifies all this stuff for kids and young adults. And so, you know, the title is called Greenback’s Book of Law. Greenback is the friendly golden doodle who teaches people the law. And ⁓ it’ll be unleashed onto the market in the next few months here. So be on the lookout for it. You should be able to buy it on Amazon when it comes out.

Michelle Kesil (18:08)
Amazing. And so what do you feel are some of the main things that, you know, either just investors or other people in the real estate industry should know about the law?

Ted Sutton (18:28)
Yeah, well I think the biggest thing is that the law touches on everything when it comes to real estate investing. You know, when you sign a contract, when you enter into agreements with, you know, lease agreements, when you have, ⁓ you know, all these contractual obligations that are involved in real estate. ⁓ It ties into that. And then whenever you have a tenant, the lease agreement, that’s a contract.

But if Tenant gets injured on the property, then the law is going to tie its way into that too. So, I mean, it affects everything. It’s not just real estate investing. This is for any adult out there. ⁓ And so, you know, I think a lot of it in real estate ties into contractual and just general liability. ⁓ But again, just having a basic understanding of that.

will help people in the future because it will allow them to handle certain challenges in a certain way and resolve conflicts ⁓ more efficiently, if that makes sense.

Michelle Kesil (19:33)
Yeah, absolutely. makes sense. And so once you set up a client with like the structure for their business, is there any follow up support or it’s just that’s like the main purpose.

Ted Sutton (19:48)
Yeah, so that’s what distinguishes us from other people on the market is that in a lot of cases, people just recommend a structure without much thought. ⁓ We’ve had a lot of clients who come to us recently because they got set up and then there was no follow up after that. And so.

When it comes to having the right entity structure in place, it is an ongoing thing. There’s a lot of people out there and there’s a misconception that it’s just one and done. You get the LLC set up and you’re done. But in reality, you need to make sure that you’re maintaining that LLC into the future. ⁓ Just because you need to have a separation between your personal assets and your business assets. ⁓ And so, you know, we make sure that this…

the separation is in place and that you’re maintaining what we call the corporate bail where there’s a separation between your business assets and your personal assets. And so, you know, the ongoing compliance is something that ⁓ we take it in that we help people with and, you know, unfortunately a lot of other people don’t do that.

Michelle Kesil (20:59)
Yeah, absolutely. That makes sense. Well, that’s awesome that you’re able to offer that support.

Ted Sutton (21:07)
Definitely.

Michelle Kesil (21:09)
Yeah. Is there anything else that you would say investors should make sure that they’re getting covered?

Ted Sutton (21:19)
⁓ Well, I think having insurance is the first line of defense, so definitely that. I think another thing is just having a team of advisors who can help you ⁓ on your real estate investing journey. You know, it’s really important to find people who specialize in a certain area who can provide that support, because if you do it yourself, you’re going to do yourself in.

And so having a team of people who can help, know, property management, bookkeeping, legal, taxes, all these important things. If you have all those in place, you’re going to have the foundation to have success into the future. And so I think, you know, investing is a team sport. It’s really, really important to assemble that all-star squad who can help you.

Michelle Kesil (22:08)
Absolutely. Thank you for sharing that. And before we begin to wrap up here, if someone wants to reach out, connect and learn more, where can people find you and connect with you?

Ted Sutton (22:20)
That’s right, so you can go to corporatedirect.com. We have a lot of free information. We have a lot of articles there that you can use to sort of educate yourself.

And you know, if you want to schedule a free 15 minute consultation with one of our incorporating specialists, there’s a scheduling link on our home page. So you can do that. Another place is you can find us on YouTube. Corporate Direct is a YouTube channel where I post videos once a week. And there’s a lot of good content there, very educational. So you know, if you’re not looking to set up an LLC right away, there’s a lot of free information that we provide for you.

And when you’re ready to take that step and you want to have that structure in place, we’d be happy to assist you in any way that we can.

Michelle Kesil (23:10)
Perfect, well, appreciate your time, your story, your perspective. Thank you for being here.

Ted Sutton (23:17)
Sounds good. Thanks for having me on, Michelle.

Michelle Kesil (23:20)
Of course. For those tuning into the show, if you got value, make sure you’ve subscribed. We’ve got more conversations with operators like Ted who are building real businesses and we’ll see you on the next episode.