217 Mail-Right Show With Special Guest Jennifer Gligoric & Brian Price
We Discuss All The Semi Legal Stuff That You Need to Know As a Real Estate Agent Professional
Teaching real estate agents, investors, and entrepreneurs why the operating entity structure matters, even in the beginning. How asset protection and wealth-building go hand-in-hand pitfalls and risks of doing everything in your own name why anonymity is important to provide a barrier to lawsuits.
Jonathon: Welcome back folks to the Mail-Right Show. This is episode 217. I thought I was only going to have one guest, but it’s actually worked out great folks, and I got two guests for you. I’ve got Jennifer Gallo and I’ve got Brian Price of Leafy Assets with us. Unfortunately, my normal co-host Roberts has bailed out, he has gone off roaming this week, off somewhere, so he’s not available. You’ve just got me as your host folks. So, Jennifer, I’m going to let you just introduce, so can you quickly give us like a 10-15 seconds intro Jennifer?
Jennifer: Sure, I am the co-founder and COO of Leafy Legal Services and we help protect, we are an asset protection legal services company for real estate investors and entrepreneurs. We help you protect your assets, plan your estates and have different tax structures so that you can be your own bank and have some tax-free benefits to it that’ll help you out. That’s kind of what we do and that’s my passion. I want people to have generational wealth and to think differently about money and protecting things so they don’t have to lose them.
Jonathon: So we’re going to– well, thank you, Jennifer. Now, Brian, do you want to quickly introduce yourself?
Brian: Sure, absolutely. I am the CEO and co-founder, the other co-founder of Leafy Legal Services. And yes, we have a great passion for helping real estate and entrepreneurs structure their business properly to protect their assets.
Jonathon: Oh, it’s great. And what we’re going to be discussing during the episode folks is everything legal and now it can be a little bit boring, but I’m sure Jennifer and Brian are going to lively it up. I’ve got a sense of that folks. But on the other end, it’s rather important and not having the right legal structures or not knowing something info about these can cause you a lot of pain in the real estate industry. So Jennifer, let me start off with you.
I think as we were discussing before we went live with the recording and you agree with this. I think as a new real estate agent realizing that you’re actually running a business. Yes, you might be working for a brokerage but you’re self-employed and if you don’t have the right legal set up, you could be exposing yourself, your family, and family assets to being sued and possibly losing your home and a lot of your family’s assets. First of all, would you agree with that? And secondly, for the single real estate agent starting off might be in their second year. What do you think is a good way of trying to protect your assets from, let face it, the very legal kind of soothing atmosphere that you find in North America?
Jennifer: Well, okay, so first let’s just talk about the reality of statistics. And I know it’s boring, so I’ll make it super-duper quick. So, like last year there were 100 million lawsuits in the US, now that assume for everything. So that means about 25% of all Americans will get sued sometime in their lifetime for whatever. However, if you’re a real estate investor, if you own more than one property or if you’re certain types of entrepreneurs, you have a 95% chance of being sued in the next 20 years, so that statistic goes up so exponentially. The question is not if I’ll get sued, it’s when you’ll get sued. And a real estate agent, even if you just sell, you don’t own any houses, which is kind of rare. Once you get to doing it, you’re going to see the value of having a buy and hold rental property or maybe doing a flip, to see how it is.
But let’s say you’re brand new, your face and your name are on all these cards, all these billboards, and if you’re in a big company. Let’s say you’re in Re-Max or whatever, home, Caldwell or whatever, and then you are going to be on billboards. You’re going to be out there and the assumption is that you’ve got loads of cash. Now, we all know that that is not really how it works, but that is the assumption and that’s all a predatory attorney or some predatory criminal would need and they do all sorts of crazy stuff. So, the first thing you need to do is realize that you’re in business, so because a lot of realtors are well, I shouldn’t say that. It doesn’t matter if you’re male or female, but I think it’s even more important if you’re female, is that you have to approach yourself as a business person now.
One of the best ways to position yourself is to have a company to sign your contracts as your company. You’re no longer using your name on the back-end because you have a company in your business. And it is amazing how that mindset will trigger a different behavior in the people that you come into contact within a business sense. It’s not just with realtors, it is with graphic designers. Hey, just give us a new logo, Cindy. You know what; you do those all the time. Can we have it for free? Oh, come on, Jane is a realtor should maybe she’ll cut her rate for your house.
You hear this all the time with people, but if you’re like, well, I don’t know, I work with this and I can’t do this, it changes your mindset a little bit. And then if you have the other structures, onion layer, especially the way we do it, then you are providing layers of protection between you and everything that you own. So you are doing business under this one LLC, but then your actual assets and what you own are an entirely separate structure and we have arms-length clauses between them. So you accept rents or you pay people or you do things in your name. You get a mortgage in your name because you’re using your credit, so it’s really difficult and expensive to get a mortgage in the name of a trust or the name of an LLC.
Most people won’t do that, you don’t have to get it in your name, but then you immediately need to take that deed and put it into, let’s say a trust. If you do something like that and you have the right setup, you will avoid the due on sale clause and then it is no longer in your name. So if someone sues you, because we can’t stop people from suing, there are sue people everywhere, right. But what we can–
Jonathon: Well it does seem to be America’s hobby.
Jennifer: Yes, it kind of is, right. And desperate times come from desperate measures. So whenever you get these things like, Oh, there’s going to be a recession, Oh there’s going to be a this; Oh we don’t like the president. Oh, you know whatever. It causes people to feel desperate and you’ll see lawsuits kind of go up too. So you don’t have to worry about that anymore if you’re properly protected. If you get a suit, there’s nothing for them to get.
Jonathon: Yes, anything to add to that Brian, and the other thing Brian, I forgot what the term is that you got to my sure is it called the veil of–?
Jennifer: Corporate values.
Jonathon: Separation; Maybe you could add a little bit about what that’s about.
Brian: Sure, absolutely. It’s a kind of follow on of what Jennifer is talking about; you definitely want to protect yourself. There are different onion layers as we talk about. Mostly what we suggest for people that are in real estate investing is a series LLC and kind of gives you that veil of protection from the corporation as well. Because what it does is it has a corporation that houses other corporations that have the different assets that you own in them.
So what that does, it gives you that extra layer of protection of someone that’s trying to sue you. For example, someone’s trying to sue you personally if you own a property or something like that. And so what that lawyer’s going to do is they’re going to bring up everything that you own. And if you had everything in your own name every property that you own will up immediately. And they’ll say, okay, this is a good person to sue because it’s all right there, versus having like a series LLC. What they’ll find, when their lawyer does that is, they’ll look and they’ll see you own this one corporation and then there’s a company that doesn’t really own anything.
It has these other trusts that are in there but they don’t really know and they don’t know until they can actually come into that corporation and then look at each of the other ones and try to get into each one of them.
Jonathon: And when they go out they literally start spending some money.
Jonathon: They’re probably going to be a little bit deterred by that and go to the next poor person, and they got to–
Jennifer: You have to think about it as and I hate to bring up this guy but I’m bringing him up because he’s been in the news. Look at someone horrific, right, like Jeffrey Epstein. Now if you’re a criminal doing criminal things, the government will get you. But yet it’s such powerful structures what we’re talking about that is taken the might of the United States government, St Thomas and other places. And they are still piercing the corporate veils that he had and protections in place wondering where did this come from, where did this come from because you have to break open trust.
So if you have an anonymous trust that holds a series LLC or you have a Delaware statutory trust depending on where your properties are at and where you’re at, which one’s best for you, then that takes a lot of time and effort to do that. And you have to know the name of it. So, let’s say you’re a realtor, and you’re showing property and some guy slams on his brakes and you end up rear-ending him, right. That’s not going to affect maybe a rental property you have or something else, think again. The first thing that guy is going to do is try to pin it on you. You are falling too close behind, go to, especially if you have like, your realty tags all over your car and everything else.
The first thing his lawyer’s going to do is, go to a program like Data Tree or another program like that and then pull up the name. And because you get mortgages in your name, if you’re not transferring them over into something that is anonymous, all of that pulls up and he puts liens on all of it. So even if you settle out of court and the police end up saying, okay, it wasn’t your fault, no harm, no foul you still have to pay for the lawyer that had to work to try to protect all of those things. If you had nothing, to begin with, it’s going to be a lot less of a legal fee, right. And most people won’t go through that, they’ll just settle.
So you will settle all of these liens that they have for one little amount and then they’ll take them off. And many people don’t even realize they have liens because the lien system in many counties, in many States, until they go the close, who’s going to pay this lien? That is actually a thing that a lot of local and county governments are working on right now. I live in Galveston, we had a problem here with a guy who put liens on all these empty lots and he was able to do it for quite some time. And people went to closing and rather than lose their buyer, they would pay it because he didn’t do it in huge amounts.
It was literally this crook source of income. He finally did it to the city of Galveston on a plot of land that they built five low-income houses on that you had to make under $105,000 a year, and have at least a six 80 credit score Then you had to fill out an application, not only some people applied. A lot of people applied for that because they were raised up, you didn’t need flood insurance, and they were very nice. They went to closing and there was a lien. There wasn’t a lien when we bought this, the city said, and now the guy is getting in a lot of trouble because now he did it to the city.
Jonathon: Oh well, he deserves it. We’re going to go for our break folks. I’m actually going to be asking you some more questions about liens actually when we come back because it’s something that fascinates me, being, I’m originally from the UK. We don’t have liens. We’ll be back in a few moments folks.
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Jonathon: We’re coming back, I’m not with my co-host, I feel a bit empty not having Robert to tease actually. But I’m sure he’s resting not putting up with my teasing. My beloved listeners and viewers, you know that I do tease Robert a bit, but there we go. So, we have been talking about all the nice things in the first part of the show, bankruptcy being sued and all the things you look forward to in life. It’s an uplifting episode of this show but a realistic one. And my two guys seem very, very nice people, so they seemed to be up for it.
So like I said in the first half of the show, Jennifer and Brian I’m originally from the UK. You would know this obviously, we don’t actually have liens, and we don’t have this structure of liens. And you were remarking Jennifer about a certain case in the first half of the show where somebody put liens on a whole city by the sounds of it, very active. What is this business with liens, because [inaudible 14:50] the newer agents, like say in the first, second or third year? What is the structure of liens and it does seem to cause a lot of problems in the property industry in general?
Jennifer: Yes, well, it’s because a lien– and we have things called contractors lien. That’s usually on, most people understand lien and it started out with the home building industry of the contractor re-modeler and you don’t end up paying them. They can, when you get a new kitchen or whatever, they can put something called a lien.
Jonathon: They don’t– but in the UK, if there was something like that, you can get a judgment, but anything like that has to go through the magistrate court system in the UK, it’s got to the court. But with this lien system in the US you don’t actually have to go through the court, do you?
Jennifer: No, no.
Brian: You just have to file really, you just have to file and if you have a judgment, whether it’s a contract judgment or something like that, it actually goes on your house before you even have to prove it’s correct. So like a contractor’s lien is one way, but if it, like we were talking in the first half of the call about a judgment lien that got someone suing you, which is why you don’t want your property in your own name, because not only can they put it on your property, but it comes on your personal credit as well.
So if you’re trying to get double duty, and this is before a judgment even happens, which is pretty amazing how that can happen. But if you’re trying to buy new properties or you’re growing your property or just get a credit card, it can affect your credit even before it’s even decided that it’s not even the right loss.
Jonathon: So, are they no penalties for people like the individual that Jennifer described in the first half that obviously almost makes this situation in their quasar business, as a kind of business model. Are there no consequences for the individuals that kind of handed out liens left, right and center, with no justification?
Jennifer: It depends, number one, it depends on where you live and where the laws on where you live, and depending on how many people have paid off and who is going to sue them back. So it’s the same thing, the squeaky wheel gets the grease. The sad thing is, criminals are going to criminal and then they’re going to do it in such ways that just make it such a pain for the innocent people to fight it, that they’re just going to be willing to just do whatever to get rid of it. In a lot of cases that happen and also to the money, you would need a tremendous more of budget and raising people’s taxes to try to come back this too.
So they try in all these different areas to come up with new laws or new little hurdles that people will have to do. But then they also don’t want to penalize people who’ve been, excuse my language, just screwed over by someone. And so now they’re out money they’ve had to pay for roofers, they’ve had to pay for shingles and everything else.
Jonathon: So really, if you’re in the real estate industry, as an investor or as a real estate agent, you really need to investigate, if, are there any liens on these properties as early as possible before you start spending money on any legal investigation, or checking the property over. Any of that, you really need to– this is probably why you need a good real estate professional if you’re buying property as an investment.
Jennifer: Oh, absolutely. And most investors, and if you go on to really good like investment forums, like Bigger Pockets and places like that, there are more than enough places you can go to that will help you research it, do deed research it and just do your due diligence. With anything, you want to do your due diligence.
Jonathon: Hopefully you don’t mind me going through this, but I thought it was going to kind of be a legal episodes. So I thought we’d go through all that.
Jennifer: No, no, it’s important.
Jonathon: There is another area that seems to be reared its head in the real estate industry in 2019. It’s always been there, but it seems to be increasingly a topic, it’s exactly wire fraud because its internet fraud, Brian, there seems to be, when it comes to actually buying property in that they seem to be a lot of concerns around what is called wire fraud and it seems to be increasingly becoming a bigger problem. Would you agree with that? And you’ve got any tips or insights about the real estate agents [inaudible 19:48]?
Brian: Yes, anyway people can find a way to cheat the system, they’ll try. It’s always that way, so, yes, when it comes to any kind of transaction-based things, you definitely want to make sure it’s all on the up and up. Did it come from like a weird bank or something like that? Then obviously you want to make sure it’s probably going for the [inaudible 20:16].
Jonathon: Do you know, are there any kinds of specific areas that it seems to regularly happen is when you’re buying property, when it comes to wire fraud, are there a kind of trends or they are all individual?
Jennifer: Yes, like, if you need to vet you need to make sure you can vet on your client. You’re allowed and now this goes to acting like you own a business. You are perfectly allowed as a real estate agent to ask for contact information, to look up social media information on someone, do your due diligence. Most people would say, well, when can we meet? They only want to meet on Google Hangouts, they reached out to you through Craigslist and they only want to talk on Facebook messenger, right.
Now, I deal with people from everywhere. They say they’re in Schenectady, New York, but they want to buy something. One of the first things you should probably do is, do what we’re doing here, a zoom call. Go onto Skype and do a video call with them. I wouldn’t only want to talk to you; I want to get to know you better. Ask them about everything, from their style to this. Try to see if you can get to know them because people are getting scammed a lot with these wire transfer things. Some people are not even from the States and you can figure that out with smart little questions like, so what’s the time over there? Well, obviously there’s going to be a big difference between the lighting and area, from the UK or this and how they’re responding.
Jonathon: Well I never see daylight. I’ve always in this home office.
Jennifer: Maybe not you, but then they would say, so how long have you been in the state? So where are you living right now? And you know what if you feel any twinge of weirdness asked to see their ID or do a background check on them?
Jonathon: My better half actually has to commute [inaudible 22:05] to work, but I actually work at the home office which about I never leave actually.
Jonathon: There we go. So you’re saying really fundamentally it’s really getting to know the people you’re doing business with and doing some due diligence otherwise. When it comes to the actual transfer of actual money, you might be in full some bad shocks, that’s basically what you are saying, Jennifer?
Jennifer: Yes, it’s just communication. If it seems too good to be true, it usually is. If they’re not acting normal, there’s a reason for it. And forgetting to know someone better is only going to make you a better realtor, it’s only going to make the process easier. It’s going to make them feel that you really care about them and getting them a new home or their new investment property or new business. So you don’t have to be like chummy-chummy best friends, but elevate your customer service game and also to elevate your security game. As a realtor you put yourself out there at risk, not just from going to view properties alone with someone, always get a copy of their ID, if you’re going to visit a property, every single time, keep yourself, safe people. So basic little things like that, you can stave off a lot of the pass.
Brian: There is also software that can actually verify people’s identity, where they actually ask you to hold up your ID with you sitting in front of it and they can do recognition on your face and match it to your ideas as well, right away, before you even meet that person as well. So, if there is some suspicion around that, then you can use those. They work on smartphones and just say, hey, I need you to verify your ID, who you are so that I know this is how it’s going to go.
Jennifer: Ladies, he gives you a name at the club and it’s like some really great, cool name, say excuse me, get that app up, let me verify if you are who you say you are.
Jonathon: I’m not going there, Jennifer. Another area that I thought we could talk about is obviously we have listeners all over and we’re getting very grateful, we’re getting a lot of new listeners and viewers to the show every month. But we’re both, me and my co-hosts are based on the West coast and obviously, there are a lot of out of state, especially I’m based in Nevada, Northern Nevada, near to Lake Tahoe. So there are a lot of out of state investors that buy second properties in Lake Tahoe and other properties in Northern Nevada. Then on the coast, you’ve got a lot of foreign investors buying properties.
Have you got any kind of insights about if you’re dealing with out of state buyer and especially if it’s out of the US like from the far East, from China, Hong Kong or from Europe, buying property in the Bay area or in Los Angeles, got any insights, any tips or insights about how that affects?
Brian: Yes a lot of times when you’re bringing money from the outside you’ll want to get that settled as soon as possible. Because now, with like the Patriot and things like that, they really want to know where the money is coming from and how it’s acquired, if it’s coming from the outside of the U S. So, I would make sure the verification of funds and having a method that they’re going to bring them in is, how that’s actually going to be done. Because there’s a lot of bureaucracy happening, especially now depending on what country it’s coming from too.
Jonathon: So, It could really extend, so the agent’s got to be aware because it could really extend the actual process of buying a property.
Brian: Yes, I know like China, for example, there are times when it’s taken 90 days for them to get the funds through whatever red tape it has to come through in order to buy a house. So different countries have different levels of things you have to go through. Definitely, when it comes to the funds, they may have the money and it’s all valid, which is awesome, it’s just that getting it through the system and that the US wants to know where that’s all coming from too.
So just make sure that, knowing that time frame, how it’s going to come through and knowing what that process is definitely going to be worthwhile. And if they can start the process before they even start looking for a house, knowing how serious they are is also a good sign of what it’s actually going to be like.
Jennifer: And also, I just wanted to add this, on the case of foreign investors, like we have an attorney that works with us and he does offshore trust, offshore insurance and he also helps foreign investors invest in real property in the United States. Do not do a foreign investment unless you have an attorney here that is helping you because there are so many different laws and ways to structure it and if you’re doing it improperly, you might end up screwing over the foreigner.
There is like an EB-5 program and some of those are actually not good at all for that foreign investor because of their situation. There are other programs that will be very good for them. So if you have a legitimate foreign investor and they are going to invest not just in one but possibly many properties, you’re going to want to have an attorney who is going to look over the unique situation, get them vetted and then find out the best possible advantages and structures that can be offered for them. And then you will have a foreign investor for life and it can make you a lot of money if you just wing it, not too much.
Jonathon: Yes, oh I thought [inaudible 28:15] because I thought it would be areas that would be of interest to you as well because America and also the U K I’m not sure about other European countries. But you UK and America are one of few places in the world where a foreign individual using the limited liability company can actually still buy property. There’s a lot of countries that have regulations where you actually as a foreign individual, you’re not allowed to buy property in that country or you’ve got to buy with a partner native that has [inaudible 28:56] in that country. You’re not actually allowed to buy property totally.
I know Malaysia and a lot of countries in the Far East have these rules, so that’s why a lot of people look at America and still the UK because when it comes to actually buying property, it’s a pretty free set up isn’t it?
Brian: Yes, very much so.
Jennifer: Yes, I’ve had that. Our attorney told us once, and it may surprise you, but America is the tax haven for the rest of the world and real estate is the way for them to do it. Americans have to go somewhere else.
Jonathon: Well, I’m going to end the podcast part of the show. I feel have done reasonable job listeners and viewers without my beloved co-host and Jennifer and Brian have been up for it. So Jennifer, how can people find out more about what you and Brian are up to and about your company?
Jennifer: All you have to do is go to Leafy, L-E-A-F-Y Legal, L-E-G-A-L services.com, leafylegalservices.com and you can reach us. You can get a free e-book that tells you a lot more in-depth about what we do and it’s not boring, it’s fun, I think so, or just gives us a call. We have a free discovery call for 15 minutes so I’m happy to talk to anyone.
Jonathon: I think both of you come across great. I know listeners and viewers, we’ve touched a few of the more unpleasant aspects of doing business in the real estate industry, but on the other hand, it’s really necessary. I think both my guests, have given some great insights, I’ve asked them a broad number of questions and they seem very knowledgeable. So if you’re looking for advice, I suggest that you contact them, and they’ll cover any area that you might have concerns or have a client with. I’m sure they’re there to help.
We’re going to have some bonus content after the podcast, which you can go to the Mail-Right website and view on the Mail-Right YouTube channel, and that will be the whole interview plus the bonus content. I tend to publish on the Mail-Right YouTube channel the first. So if you want to listen to the latest episode of Mail-Right and I’m sure you are; that’s the platform to go to. We’ll see you next week. Hopefully, with my co-host, he must turn up; it’s going to be an internal discussion next week. And we see you say, next week folks, see you later, bye.
Brian: Bye guys.