#133 Mail-Right Show We Discuss Asset Protections With Scot Smith

We interview Scott Smith founder of the Royal Legal Solutions we discuss how you can protect your and your clients property assets.

Did you know one in four Americans will be sued in their lifetimes? Real estate investors are targeted even more frequently. If you get sued, the only question that matters is whether your assets are legally protected. We interview Scott Smith about how you legally can protect your or your client’s real estate assets.

Asset protection is like fire insurance, only instead of saving you from fire damage it prevents lawsuits from wiping out your assets. Proper asset protection provides full coverage, from before a lawsuit occurs to after a judgment is made.


Here’s Full Transcript of Our Interview With Scott Smith

Thomas: Welcome back my friends to the Mail-Right Real Estate podcast show. You’re on episodeScott Smith of Royal Legal Solutions 133 with Jonathan Denwood and myself Thomas J. Nelson and today we have a very special guest with us. We have Mr. Scott Smith, Esq. That’s right Esquire folks because we’re talking to an attorney. And Scott is the gentleman that founded and owns Royal Legal Solutions and you know what, if you’re an Investor or if you represent Investors or you’ve become suddenly a landlord because you inherited a property, this is the guy you want to listen to today because he is going to save your assets, assets, excuse me. And without further ado, I want to welcome Scott to our show. Scott, welcome and thanks for being here.

Scott: Hey. Thanks, guys. Really great to be here with both of you here today. It’s a pleasure to have an opportunity to be on Facebook Live where is everything is candid. And one thing I can promise you here today is that I’m a very candid, very laid back person so there’s no topic we can’t get into, talk about, whether it’s nitty-gritty, the scary stuff that nobody else wants to talk about. I have an opinion on it. I guarantee. Let’s get into the weeds.

Thomas: All right. We’re going to do that in just a minute. I want to give Jonathan the chance to introduce himself and tell everyone a little bit about his services.

Jonathan: Oh, thanks, Thomas. I’m the founder of Mail-Right. We’re a website marketing platform aimed at Real Estate agents and aimed at getting them quality leads. Back to you Thomas.

Thomas: And I’m Thomas J. Nelson. I’m a Residential Realtor and an Investor here in San Diego, California and I’m with Big Block Realty where you can find me on thomasjnelsonrealtor.com, representing Investors, military and yes, helping people work through that divorce. I have a special niche working with divorcées helping them make informed decisions before they settle. All right. We’re going to get into our show today. We have a lot to cover so I want to dive in with Scott. Scott, I want to come right out of the gate with, people that have invested in Real Estate or planning to, one of the things they have to think about is asset protection. So, what are some of the things you can do to safeguard your properties that you’re purchasing to buy and hold for rentals?

Scott: Yeah. Really, it depends on where you’re at and how many properties you have. A lot of people don’t have anything that’s worth protecting, right? So, if you don’t have anything, don’t waste the money on setting up company structures. But once you have about 50,000 plus in equity, then it starts making sense to start looking at how do we protect our assets from lawsuits. And one of the key things that I think that a lot of people don’t talk and if you haven’t heard this following phrase, then you need to start down your journey of looking at asset protection. If you don’t know the value of separating all of the operations of your company from all of the assets of your company, you don’t even really understand the first step of what’s available and legal strategies to help protect yourself.

Thomas: Could you explain that a little more because I have a feeling you’ve already got question marks popping up?

Scott: Yeah. So, what happens with lawsuits is that I can only sue somebody that I’m connected to, right? Somebody has to say something to me or have a document like a contract. There has to be some type of interaction for me to sue somebody.

Thomas: Okay.

Scott: And so, what we do for Real Estate Investors is we take all of their money, all of their properties and we put that in one LLC. And then, we take a completely separate LLC and we use that as an operating company. That operating company is their face to the world. It’s the one that signs the contracts, makes the representations, does everything. Because that’s the one we want people to sue, is the one that’s making all the representations. Imagine how cool it is, is that the only one they can sue is the one that doesn’t actually own anything, right? And everything else is protected over in this little castle.

Thomas: Okay. So you raised a question because, in my training, I’ve learned that essentially I was told by an attorney years ago that for every property you own, you should have an LLC attached to it. And then, I’ve heard people contradict that. So, can you clear that up? Is that an LLC per property or that encompasses all your property? How do you set it up?

Scott: So, I look at this question from a businessman and an investor. I look at what is my cost for the actual structure that I’m putting in place and I weigh that against how much equity that I’m protecting. That’s why I think that $50,000 mark is really like a good realm for me to say, “Okay great. Well, now I’m going to start looking at putting in an LLC”.

So, what you want ideally for asset protection is every asset compartmentalized, right? So every single property would be in its own LLC and we want the company and the properties held anonymously. So that way nobody can connect up our properties to us or our company to us in any way. So, that’s your ideal situation. Then the question becomes, well, how expensive does that get and how much does that complicate my life? Right?

And that’s what separates an average CPA or an attorney from specialists like myself that use structures that are efficient, don’t complicate our lives and also gives us those types of protections. But you really want to think compartmentalize every asset and let’s hide it so that way when people look to sue us, it doesn’t look like we own anything.

Thomas: Okay. Now, what about, because I’ve heard this misconception, what do I need to do that for, Scott? I’ve got insurance.

Scott: Yeah. Insurance is great. I have great insurance too and everybody should, right? This misconception I think and correct me on that is not that, “Should I have insurance?”, is, “I have insurance so I don’t have to be worried”. Is that right?

Thomas: Right.

Scott: Typically what that is, right? Well, the piece about insurance is that insurance only protects you against accidents, right? And in legal terms, we call that negligence on your property.

Thomas: Okay.

Scott: It’s not going to protect you against every other type of legal claim that exists, right? So, that includes even gross negligence, which is a really bad accident, right?

Thomas: Okay.

Scott: Insurance companies don’t cover that, right? And you’ll find that insurance companies are really in the business of collecting premiums and denying coverage. So, when a lawsuit happens, that’s a really bad one, they can always fall back on some of these legal loopholes like gross negligence to be able to deny you coverage and leave you having to defend yourself and suing your own insurance company.

Thomas: Wow.

Scott: I don’t like to be in that position.

Thomas: Right. Okay. So let’s talk about, from your experience, what are, I know there’s probably a plethora of scenarios but let’s just say maybe the top five things you see property owners get sued for by their tenants.

Scott: Yeah. So you’ll get tenant lawsuits that’ll happen and those are relatively small potatoes really, right? That’s why we have insurance is because we want these nuisance lawsuits to go away. And that’s why you want to be well insured for a lot of that. And those lawsuits typically will be against whoever the leasing party is. So if that’s you, if you own a property in your individual name, you’re in the worst possible position, right?

If somebody sues you and something totally unrelated to your real estate in personal life, they can come and take your real estate. If a tenant sues you, they can come and take your real estate because that’s a lawsuit against you because you’re the property manager. What you want is “My property is protected in LLC. So if somebody sues me, they can’t get to the property. If a tenant wants to sue me, they sue whoever signed the lease, which is where I want that also to be the operating company, that shell company that enters into those contracts with people”. Because what we want to do is say even if our worse scenario happens with this lawsuit and we lose and it’s a really bad judgment, at the end of the day, it’s a shell company and there’s nothing that they’re going to get after the fact.

Thomas: Okay. So, now, we’ve probably got some people listening that are signing leases in their own name and don’t have an LLC and we’ve now put the fear of God in them. So, what do we do to get them right? What are the steps somebody can take with an already signed lease, with a tenant in place to make these corrections and get these protections in place?
Scott: Yeah. So, don’t be afraid that there’s no hope out there for you, right? The reality of the situation is that if you’re somebody out there that owns property in your own name and has the leases that you’ve been signing, is that you’re just like 90 percent of everybody else that’s got into real estate, right? I mean, Rich Dad Poor Dad taught you the exciting parts and the lucrative part about buying a property but it sure didn’t teach you about how to take it to a really professional level, right? They kind of stopped 70 percent along the way and then you have to do a lot of exploration after the fact.

And if you’re working with someone that’s experienced inside of asset protection with company structures, you should be able to get fully protected within a week. Because we’re talking about, there aren’t huge timeframes to be able to set these entities up. You’re basically talking about filing a company, composing some trust documents to be able to use to hide assets and hide the ownership. And then, a number of deeds to get filed with the County clerks. That’s as complicated as it really gets, I mean, from 10,000 feet up. We’re just establishing a structure, taking some deeds and moving title. How do you do that to actually have an effective system? Well, that’s where the magic comes from, right? But that’s essentially the nuts and bolts of what’s going on.

Thomas: Okay. So, what would somebody expect to pay and I know this varies depending on who you hire and what state you’re in. But, like if somebody came to you, you’re in Texas, correct?

Scott: Yeah.

Thomas: Okay. So, let’s just say I’m a property owner in Texas and I’ve just had this realization of my exposure and I come to you and I’ve got one single-family property I want to do this protection plan for. In that week, how much time or how much money am I typically spending to convert to an LLC?

Scott: Yeah. So, we work with clients that are here in Texas but also clients that are nationwide. My limitations and our limitations as a firm is that we can’t step into court anywhere.

Thomas: Oh, okay.

Scott: But what we do is we’ll set up people, you know, people come to talk to us and we set them up as a Texas representation for an out of state representative. Anybody can do that, right? That’s not anything special. But to get to your question on that, is what do typical costs look like? It really depends on what you want, right? If you’re just looking for anonymity and you just need a land trust, an anonymous land trust in combination with a deed, you’re talking fees at around, typically around $400 to $500 to be able to set that up. If you’re saying, “Hey. If I have one property, I want an LLC in that”, maybe you’re spending anywhere between $1,500 to $2,000 to have that piece put together. An LLC, you probably wouldn’t spend more than $1,000 for. If I’m looking for the more sophisticated structures like a series LLC, which I could establish in Texas and use it anywhere in combination with anonymity trust, I’m probably talking anywhere between $3,000 and $5,000. And the most sophisticated structures that we use for California residents is a Delaware Statutory Trust, which if properly structured avoids franchise taxes in California while giving them all of the series protection, all of the compartmentalization. And those structures are typically running anywhere between, I would say, markets around $6,000 to $9,000 to set up.

Thomas: Okay. There’s a menu of services and they’re appropriately priced. Now, what about from a tax perspective? Am I double taxing at this point because now I have an LLC? Does that affect me tax wise?

Scott: No. Your taxes will actually stay exactly the same way they are right now.

Thomas: Okay.

Scott: Because the whole entity structure will be completely pass-through and you’ll report it on the Schedule E of your personal income tax return.

Thomas: Okay.

Scott: If you’re a single person or a married couple. Did you know about this 2018 tax bill though with some people that are looking at establishing C Corps to hold properties now?

Thomas: Yeah. I was going to take the conversation there later but since you brought it up, let’s go.

Scott: Oh, okay. Sorry to jump the gun on you.

Thomas: No. That’s okay.

Scott: on taxes, you know. Yeah. Well, it’s really interesting, right? There’s people out there that are toying with the idea of saying, “If you don’t ever need the property distributed to you and you’re just going to hold it inside of a C Corp, then you can actually have a lower affected tax rate at that point”.

Thomas: Than an LLC?

Scott: Yeah. Well, it’s the C Corp in particular, is the one that you would end up doing that in, right? Because I think it’s, what is it? 18 percent or something like that for the 2018. I’d have to look back at my notes. But in any case, it’s always going to be lower than your, if you’re at a higher tax bracket, it’s always much lower than that, probably like half, I think.

Thomas: So, in other words, if I had LLC and I’m at whatever I’m paying. Let’s say I’m at 35 percent. And then, I decide, “Hey. I’m never going to liquidate this property”, that would be cause to go into a C Corp? Because then I can lower my taxes and not worry about the double taxation on the gain if I did sell it back to myself or sell it on behalf of myself, that is?

Scott: Yeah. That’s right. For an LLC, all of the income has to be distributed to you at the end of every year to avoid LLC tax.

Thomas: Okay.

Scott: So, if we’re going to keep all of the income year over year in the C Corp, then we can leave it in there and as long as we don’t need it, then we can build our resources more effectively inside of the C Corp. And that can make a lot of sense if you’re doing, like you’re combining your business expenses with things that you want to do in your normal life anyway. Like if I really want to get that jet, then what I really need to do is start thinking, “Okay. How can I use the jet with the C Corp because that’s where I really need to go to Milan because that’s the Real Estate Conference?”.

Thomas: Right.

Scott: You know, like you start playing this game of like, “Where do I shelter expenses and do what I want to do?”.

Thomas: Okay. But let me be clear because I’ll be the first to admit. I’m a little confused here. Is this strictly regarding the sale of the property or is this saying that even the rents I’m collecting need to stay in the C Corp and I can’t touch those as income?

Scott: Yeah. Nothing, right?

Thomas: Okay.

Scott: The whole point is to say that, “I’m never going to touch, it’s never going to hit my personal return”.

Thomas: Okay.

Scott: Everything is going to stay in the C Corp once it goes in.

Thomas: All right. Now I’m going to ask a dumb question but I have to ask it.

Scott: Yeah.

Thomas: So, what becomes of that money? Who is that money for eventually?

Scott: Well, nobody. I mean, what would happen eventually is you die, right? And then, it’s whoever inherits the shares of the C Corp, right?

Thomas: Okay. That’s where I was going. It’s an inheritance then for somebody essentially.

Scott: Yeah. Essentially, right? And then, during your lifetime, you have this little cash producing expense machine to do all of your expensive that you just need to do.

Thomas: Okay. So, this is a strategy then. If I’ve got this extra income that I don’t really need to live on, I’m comfortable the way I’m living now. And so, I’ve got this property that’s just kind of generating an account or a trust if you will that it will eventually be inherited by my son. When he inherits it, what kind of taxes does he face or what’s his responsibility to the C Corp?

Scott: Yeah. Well, he’ll end up inheriting a C Corp, right? And then, he can make choices about, in that circumstance of what they want to do. There’s a number of options at that point. But, what you’re essentially doing is, I don’t want to jump too far out of line here on a Live Facebook chat but if you start looking at saying like, “What are the scope of things that I can say are business expenses?”, it’s pretty broad, right?

Thomas: Right.

Scott: And so, what you’re typically doing is saying like, “Do I have a big bucket of money that I can use for expenses? I’m going to pass that on to my heirs”. At that point, you’re able to do a lot of taxation measures in preparation of that and you should talk to an Estate Planning specialist that’s going to help you be able to determine that effectively. If you’re just a typical Real Estate Investor, that kind of strategy with a C Corp probably doesn’t apply to a lot of people.

Thomas: Right.

Scott: But if you’re a typical Real Estate Investor realistically saying, “What are my basic structures I can put in place? How do I get good insurance? How do I look at my LLC? What’s my basic Estate Plan, like just a basic Living Trust and a Pour-Over Will to help my assets avoid probates? That way I can make sure that they’re protected and distributed how I want. Those are going to be like low hanging fruit that put you 95 percent above everybody else but just hasn’t even taken a swing at doing the right things. If you start making a lot of money and you want to hit me up about, “Hey, Scott. How do I take this and then really maximize it?”, you know, anybody can feel free to give me a shout if you have that extra million just sitting around, you don’t know what to do with it.

Jonathan: Oh, yeah, Thomas. I think we better go for our break Thomas. Obviously, you and me Thomas, we’re going to look at our jets this afternoon, aren’t we Thomas?

Thomas: Yeah. Yeah. I’ve got to make sure they waxed it up.

Jonathan: Yeah. I’m going to upgrade this afternoon Thomas.

Thomas: You know, Scott, that’s the beauty of working with Jonathan’s podcast is we all get company jets, company cars.

Scott: That’s good. I’m still waiting for mine to get delivered. It must have been delayed in the snow storm.

Thomas: All right Jonathan. We have to go to commercial, don’t we?

Jonathan: Yes. We’re going to have to go for our commercial break.

Thomas: All right. I’ll let you take it away sir.

Jonathan: We’re going to go for our commercial break folks and we’ll be back in a minute. And like I said, I’ve already scheduled to look at my new jet this afternoon. Be back in a few moments folks.

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Jonathan: We’re coming back. We’re talking about jets, taxes, and limited companies. Back to my co-host, Thomas.

Thomas: All right. I can spend all day on that topic because I have so many questions. But I want to make sure we cover a few more topics as we’re already halfway through the show. So, Scott, one of the things I know that you’re qualified to talk about and one of the things I’m seeing a lot of and done really badly, at least in Southern California are these teams that they get set up for the purposes of bird-dogging properties and bringing them back and investment teams. And I’m watching other teams come in to retail listings and trying to force fit a bottom line strategy in a retail world. So, what’s your advice for teams and maybe just some basics about what they should be doing to analyze the proper properties for their formula?

Scott: Yeah. So, I would say some tips on that would be, number one, is never hire a professional or do business with anybody that’s not in the same business you’re in, right? So, if you’re looking at hiring like a CPA or attornies or even like loan officers and what not, you want all those people to be in the Real Estate industry with you because that means they’ve actually gone through the muck of knowing how things really play out and how they relate to other pieces, right?

Thomas: Right.

Scott: one thing to be a professional in one category and not know how it works in the others. So, one of the pieces that I look for when I’m establishing teams and not just Real Estate but teams for any of the businesses I’m in, I’m always trying to find how I can contribute the most valuable pieces to, how can I be as most valuable as possible to any team that I would go into, right? You need one niche area that you’re really strong in. And then, you need a little bit of knowledge on everybody else’s. So that way it helps you identify who are real players and who are people that just like to talk. Because there’s a lot of people right now that’s super soft because money is so soft meaning everybody’s trying to throw it into Real Estate and Bitcoin and what not. What happens anytime you have a market like that is there’s a huge amount of people that are all getting into it and a lot of people are just throwing cash at it. So, me and my professional friends, what we talk about right now is saying like, “Man, the money is just stupid. People are throwing money at stuff because people are promising them a 20 percent IRR in the deals and I’m looking at these deals and I’m like, “This is not it. This is a crystal ball deal”, right? If you’re telling me you’ve got a crystal ball, you can know what markets are going to do, then I’m like, “I’m probably not into that because you don’t have it, I don’t have it”, right? When we’re looking at what teams that I want to partner with, it’s kind of like saying that you, like having a girlfriend in a lot of ways. What you want to do is start meeting her friends? That’s how we judge.

That lets you know if you’re going to have a good girlfriend or good boyfriend or whatever, right? If you start meeting her friends and all of her friends kind of suck, then you’re like, “Yeah. You’re probably not that good when all of this fades away”. It’s not any different investing with people, right? If they don’t have good contacts with who you’re meeting that they’ve done deals with and what not, then that’s how I know. Forget about like clothes and cars and all of the material stuff. Those are like glitzes and glamor that people will use to bamboozle you into thinking they’re successful. Really successful people have really awesome friends though.

Jonathan: There you go. That’s why I’m single Thomas.

Scott: Maybe Jonathan you’re just too choosy. You don’t accept below a certain high caliber and that’s okay too.

Jonathan: No. Thomas will tell you the truth.

Thomas: Well, he couldn’t be that choosy. He picked me as a co-host.

Jonathan: One of my better decisions.

Thomas: Well, you know, Scott, you bring up a good point because what I truly think I see happening, at least here in SoCal, is that they’re not all on the same page. Because I’ll often end up talking to more than one team member and you can hear two completely different philosophies about property that they’re discussing. The thing that frustrates me is as someone that invests, I look at a market like we’re in right now and there’s no way I would be investing in Southern California, not because I don’t believe in it, because there’s no ROI. There’s not enough return to even get a positive cash flow. By the way, I do my numbers and I’m pretty conservative. But what I’m seeing is these guys coming out and trying to force fit their model into retail properties. I guess occasionally it’s happening. But what I’m seeing is a ton of overpriced properties with no price reductions after 30, 60 days.

They’re $20,000, $30,000 over asking. You look up the tax records. You can see what they bought it for. You look at the property. You can estimate what they invested in it to get it to be a rehab and they’re just sitting there. So a lot of these guys end up renting the properties, which is not what they want to do. But I mean, what’s your advice to flippers because I’m a buy and hold guy. I’ve never believed in flipping properties. I understand there’s people that are really good at it. It’s just not my forte. I’m a buy and hold guy so I have a biased opinion about it to begin with. So I’d look to you for some advice on these guys that are going out and trying to flip in 2018. Do you have any advice for them?

Scott: Yeah. I mean, flipping properties when you’re coming down to it is that there’s a couple of ways that I see people really lose money. One way is that you buy bad, right? Like you’re just too excited about the market.

Thomas: Right.

Scott: And so, you’re really optimist about what numbers should look like.

Thomas: Okay.

Scott: And the question I ask whenever I have a client that’s a flipper and they’re talking to me about a deal they want to go into is 50 percent of this game is actually knowing your client and the other 50 percent is law and investing and how numbers work as an Investor, right?

Thomas: Right.

Scott: But the part of it I look on it and say, “I’m going to grant you the fact that you know the market better than me, right? Then even in that, can you tell me that these are actually conservative numbers? Because out of all of the unknowns, are you okay losing money on this property if it doesn’t go exactly the way you want it to? And if you are and you want to take a stab at it, fine. Go to Vegas, roll some dice, right?

Thomas: Right.

Scott: But if you’re really depending on making money on this deal and stamping out consistent returns, then being conservative on your numbers is the only way that really makes sense because there’s too many variables to be able to have consistency. But that being said, some people are hitting home runs and you’ll hear those stories more than all the people that lost money because people like to talk about wins and not losses.

Thomas: Right.

Scott: So, be careful about the stories you’re hearing and how practical it really is. That brings us back to something we’re talking about before we actually jumped on the phone, which is, do you feel comfortable having conversations with people about the bad stuff?

Thomas: Right.

Scott: Can you really get in there with somebody and develop that kind of intimacy in a relationship where you can feel comfortable talking about all the stuff that really went wrong along the way? Because if you haven’t, then you don’t have the best information.

Thomas: Yeah. I would agree.

Scott: And you’re blind.

Thomas: The team or the individual needs to be able to look at all aspects of this including the risk and the numbers don’t lie. You can’t force the numbers. They either add up to cash flow, break even or you’re in the red. And it’s like you said, I mean, some of the best Investors I’ve met over the years, they’re these very unassuming guys. I would tell you that the average guy I met is probably in his seventies in blue jeans and a Pendleton shirt and drives a station wagon or an old sedan. You would never guess the guy to be worth what he’s worth and these guys are worth multi-million dollars.

I worked with a lot of these guys during the ’06 to ’11 era of the great recession and I learned a lot from them. And that’s why I just scratch my head when I see this new generation of Investors coming into a market with a model that is probably a good 5 or 6 years too late for the average home that’s on the market. That’s not to say there’s not deals to be had but you’re not going to find them as much on the MLS right now. You’ve got to go dig for them. You’ve got to go find that non-performing property or that deferred maintenance property or that distressed property that’s not on the market and those are getting harder to find.

Scott: And that’s why you need a good wholesaler, right? That’s what Kiyosaki and all those guys talked about as the basics. It’s the three legs of the stool. You need a CPA, an attorney and you need somebody that actually is a deal maker. And you as an Investor have to find out where do you fit into that group, right?

Thomas: Right.

Scott: And if you’re like, “Okay. Well, I’m not a CPA and I’m not an attorney. I think I’m the deal maker and I have some cash”. Well, then, your job is to network with a ton of wholesalers to be able to figure out how they’re actually, what deals are they getting and then leveraging your network to be able to go that way, right? I’m getting this impression though from what you’re saying right now is that people aren’t even running numbers, like where you’re at and that because that sounds like insanity. I haven’t even heard of that among the people that I talk to.

Thomas: I’m guessing that because I mean, that’s what the end result is. When you’re seeing something that should be, let’s just use a one bedroom condo because I see a lot of those because they’re easy to buy for a first-time Investor. I’m right now representing a buyer that is in a $300,000 budget. And we’re looking at properties that I’m running numbers on that should be priced around $250,000, $260,000 that are sitting there at $280,000, $290,000 and there’s not a comp in a 6-month time frame or in a mile radius, which is essentially what an appraiser’s going to do that supports the price. And then, they’re sending me these comps that are 8 months old and they’re 2 or 3 miles away.

And I’m like, “Well, yeah, in that neighborhood, it is worth 290 but you’re a block off the freeway and that neighborhood’s a nice lovely side street where Leave it to Beaver music plays”. There’s a huge difference. They’re trying to force fit the comps as I see it and all I can imagine is, it was what you said earlier, they didn’t do the numbers or they have that crystal ball, “Oh, the market’s going up, up, up”, but if you’re paying attention to the market the last 6 months, it hasn’t stopped but it’s definitely slowed down and the rate of increase has definitely slowed down. Even though we’re still moving up, it’s not month after month we’re seeing these huge leaps and bounds like we were a year ago.

Scott: What’s going on when prices can increase but rents can’t because wages don’t increase.

Thomas: Right.

Scott: If you just look at it from just Macroeconomics of what’s going on that would tell you, “Okay. That sounds crazy. You can’t keep having that for forever”. And then, the other piece of it too is saying like, “Well, why wouldn’t banks be happy to lend to stuff when it’s $30,000 over market?”

Thomas: Right.

Scott: Well, maybe because they have a couple hundred years of investing experience, right?

Thomas: Right. Yeah. And we’ve all been through this just recently. It’s almost like everyone’s got short-term memory because I’m still licking wounds from ’07.

Scott: Yeah.

Thomas: The amount of short sales I had to do and watch people foreclose and just the carnage.

Jonathan: I call it Financial Alzheimer’s disease.

Thomas: Yeah. That’s a good term. Now, a lot of the people I’m working with, Thank God they’re conservative and the number one thing that I encourage and almost demand of my clients is if this is the budget, stick to it. Quit fudging it. Quit saying, “No. Well, this property is the exception”. Well, why? What’s going to be so exceptional about it when the numbers don’t add up? You’ve got to stick to the budget.

Scott: Yeah. I mean, I would say so, right? The assumption is that like, “I can fudge numbers if the markets continue to improve. Because as long as markets continue to improve, then I’m cool, right?”. It doesn’t matter what I think because markets are going to continue to improve.

Thomas: Right.

Scott: But the question becomes and saying like, “That’s great. If markets continue to improve, that’s great”. The problem is it’s two-fold. If markets start to reverse, one, now you’re upside down on this house and you can’t rent it for enough to be able to cover the mortgage. So you just saddle yourself with like a life destructive financial event that you can’t get out of easily at all. And then, the second part is, is that once markets start to reverse, let’s say like we have this stock market, it wasn’t just a hiccup when we had the greatest loss, right?

Thomas: Yeah.

Scott: Well, let’s say something like that happens. Let’s say if you didn’t think 2008 they did the perfect thing to fix the economy and maybe they kicked the can down the road and maybe Real Estate markets might reverse and the stock market might reverse. The flip side of that too is is, is when markets reverse you also have up ticks and litigation.

Thomas: Yeah.

Scott: Because people also start to sue more because now the pie is smaller. And so, they feel like they need to take it from somebody else. So lawsuits actually go up. So imagine if you end up overshooting your property and you don’t plan for, “What position am I going to be in if things reverse or if things don’t go the way I planned?”. Then really what you’re saying is, “I’m really okay with taking a gamble and if I’m wrong when I buy this, I am okay with the next 20 years of financial pain”. Like what kind of insanity must you live in if that’s the world you live in because nobody taught you that. That’s just something you’re hoping. It’s going to be okay.

Jonathan: I think we need to go for our, to finish up on the podcast part of the show Thomas. And then, I’ve got a couple questions and I’m sure you have and that’ll be in our bonus content Thomas.

Thomas: Okay. Scott, Jonathan always cuts me off right when it’s getting juicy but there’s a method to that madness because we do bonus material and video folks. So, for those of you who are hearing us sign off on the podcast, you can continue this with us on YouTube or the Mail-Right website. But Scott, before we sign off, I want to give you an opportunity to tell people how to get a hold of you if they want to get more information about your services.

Scott: Well, I prefer singing telegrams. That’s a good way to get my attention.

Thomas: Nice. That’s a first.

Scott: That would be always a good one. Those are welcome. Fruit baskets are also welcome. Getting healthier this year. But you can also go to our website royallegalsolutions.com. You can reach us by phone at 512-757-3994. You can reach me by email at scott@royallegalsolutions.com. And no matter where you live or no matter what assets you’re dealing with in Real Estate, give us a call and it’s very likely that we’re going to be able to help you or connect you with somebody that can.

Thomas: Okay. Wonderful. Jonathan, what about you? If folks want to get their mail right, how do they do that?

Jonathan: Fruit baskets. No. You just go to Mail-Right website, got a phone number, email. I answer the emails and really easy to get a hold of Thomas. Back to you Tom.

Thomas: All right. And I’m on thomasjnelsonrealtor.com. You can also find me on social media which is predominately Facebook and LinkedIn for me. And, of course, the old-fashioned thing, give me a call at 858-232-8722. I’m Thomas J. Nelson with Big Block Realty here in America’s finest city, San Diego, California. All right folks.We’re going to jump over to video only now so come join us there. For those of you signing off with us on the podcast this week, thanks for joining us and we’ll be back next week with another exciting guest. See you later. Bye-bye.

Our Guest Contact Details

Scot Smith
Royal Legal Solutions
Phone: 512.757.3994
Fax: 512.842.9373
Website: https://royallegalsolutions.com

Here’s Our Contact Details

Producer: Jonathan Denwood
Call: (775) 237-3884 8am-5pm PST) Monday to Friday
Email: jonathan@mail-right.com

Producer/Co-Host: Thomas J. Nelson, Realtor
Call/text: 858-232-8722 (Mon-Sat 8am-5pm PST)


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