Financial freedom is something we all worry about when it comes to real estate investing, you think about what could happen to you so you get to work to get it over with. You think you'd be free if you just invest in all you can. The reality is, financial freedom is much harder to attain than it seems. There’s the management of the income, the legacy building, protecting your assets, and a potential lawsuit. That’s where Scott Royal Smith, advocate, attorney, investor, author and CEO of Royal Legal Solutions comes in! He is a real estate investor himself, with property in 10 states. His Austin startup, Royal Legal Solutions, has a different take on protecting real estate investments and already serves thousands of clients across all 50 states. His purpose is to protect clients, and their assets and prevent lawsuits. Listen to the latest episode of Exit Strategies Radio Show to hear what he has to say!
What You’ll Learn From This Episode:
Scott Smith’s story of real estate investing
How do you get to true freedom?
Should you divest individually or under an LLC or corporation?
Selling the property versus selling the LLC
How do you choose the right tax solution?
Risk of exposing your property
Taking risks in important decisions
What is the real goal of wealth building?
Connect with SCOTT@:
Scott’s LinkedIn: https://www.linkedin.com/in/scott-royal-smith/
Website: https://royallegalsolutions.com/
Connect with Corwyn @:
Contact Number: 843-619-3005
Instagram: https://www.instagram.com/exitstrategiesradioshow/
Youtube: https://www.youtube.com/channel/UCxoSuynJd5c4qQ_eDXLJaZA
Linkedin: https://www.linkedin.com/in/cmelette/
Email @: corwyn@corwynmelette.com
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Episode 78: Durable Financial Freedom in Real Estate Investing
CORWYN:
Good morning, good morning, and good morning guys. Welcome to another fabulous episode of Exit Strategies Radio Show. I’m your host, Corwyn J. Mellette, broker and owner of Exit Realty Lowcountry group in beautiful North Charleston, South Carolina. Guys, this is like the culmination of a number of shows, we’ve just been kind of over here, just kind of mixing this thing up. And guys, I want y’all to first of all, I want you to make sure you grab your pen and paper because you’re going to want to make some notes. But I also want you to make sure that you pay attention to today’s show. So for our listeners, from one end of the low country to the other, from those from around the world, guys, hold on to your seats and your socks, because we’re going to have a great time today. All right, so many of you have been tuning in, you’ve been sharing with us this journey of educating people on not only the benefits but numerous ways to invest in real property, whether it be your first home, whether it be your first rental, whether it be your first apartment building, apartment community, stores, whatever it is, we’ve been doing and covering a number of different facets of real estate investing, to demonstrate to you how diverse and how opportunity is, in this space. But we’d be remiss if we didn’t bring you back to and give you the baseline reality. So today, guys, I’m super excited to have with us none other than Scott Royal Smith, with Royal Legal Solutions. Scott, how are you doing today?
SCOTT:
I’m doing great Corwyn, blessed to be here. Thank you.
CORWYN:
Awesome, awesome. Thank you. So if you don’t mind, I know what you do. So tell our listeners, if you don’t mind, to give them a high-level overview of who you are and what you do.
SCOTT:
Yeah, so I actually bought my first piece of real estate while I was in law school. The transmission and auto repair shop. And I bought it for $10,000 in back taxes and flipped it to graduate from law school without any debt. And as I was working as a litigator, suing insurance companies, after I graduated, I continue to invest in real estate until I was making more money in real estate than I was being an attorney. And then I left to just do real estate full time, I realized pretty quickly that– the stories that everybody told us about financial freedom were mostly lies. They told us that once we had all these assets, and all of a sudden we would be free. And the reality of the situation is that you get them to have a dependable income. But then there’s the management of the income, there’s protecting the income using asset protection and holding it anonymously, there’s how do I pass this down to my legacy and my heirs, and there’s all the insurance needs that come with it. There’s all the strategic planning that you have to do around taxes as well as different exits to your portfolio and how to strategize around those. And so what I found, what really happens is that you just trade one job for another unless you have a team. So I spent years building my own team so I can have the money and the time freedom. And now my company Royal Legal Solutions, takes that team. And so we’ve expanded it now to about 30 team members to help a select group of real estate investors and entrepreneurs be able to accelerate their path to financial freedom and time freedom by leveraging the practices that I built for myself. So now my life is mainly doing things to attract people that want to have true freedom with time and money. And teaching them here’s the best practices about how to do that as an integrated holistic system with a team that I’ve personally trained. So that way I can do fun things like I’m about to go do now: I’m about to go spend a month with indigenous people in the rainforest called the Awanawa tribe because it’s something I’ve wanted to do for years. And I know my company is gonna run perfectly smooth with all the people we’re helping in the meantime. And those are the things that I now teach here, how can you have this kind of lifestyle? And how do you really get to true freedom?
CORWYN:
It’s funny, you know? So I’m gonna take you back a little bit, Scott, you know, the previous show that we did. Now, I was interviewing a gentleman who went from managing or acquiring apartment communities to acquiring and managing storage facilities. And we joked in doing the show that he got rid of the people but kept the stuff right. The reality is that everything you just talked about, is that there is a liability in all of it. And you figured out you put together a system to help people to navigate that liability successfully. Because as you said, most people believe they’re told that with property comes freedom, and there are some changes, but it may not necessarily be the freedom that you think that you’re gonna have. So if you don’t mind, Scott,
Kindly tell us– You started early. So kudos to you, man. You know, straight out of law school, doing your first property? Or what did you learn in those early years that really kind of influenced what you’re doing?
SCOTT:
Well, one of the things that happened to me really early on was that I had a friend of mine who lost $3 million in real estate from a single lawsuit. And he was very well insured. It really shook me, because when everybody had told me to that place is like, Hey, if you have good insurance like you have nothing to worry about. And what I learned was like, oh, no, insurance really is partial protection, it’s your best first line of protection. But insurance companies are profit-seeking corporations. And their job is to collect premiums and deny coverage. And that’s how they make money. So if you really want to establish durable freedom, right, not just short term, but you want to make sure that once you’re out, you never have to go back into the system, then you have to do things, you have to do things like asset protection, and then you have to ask yourself questions like, How do I make sure that like, my assets are going to be anonymous, so that way, people can’t find out what I own and stop lawsuits before they start? How can I create a structure that I can afford to have an infinitely scalable type of protection structure? So if I get sued, I lose little to nothing from any lawsuits. And that’s really the first step to being able to have that type of true freedom.
CORWYN:
So you know, this is a question as a real estate professional, that not only that, I get as a question, but sometimes I’m really asked to advise or sometimes we take a little bit of liberty to spur the question from the consumer. But as a property owner, should you purchase a property and divest it individually? Or should you do so under an LLC or corporation? So you set up an entity to hold your property?
SCOTT:
A common question and the answer I always give to that question is that there’s an appropriate level of doing the right things, no matter what stage of the journey you’re on, right? What’s very important is for you to learn how to do the mechanics of making money. And the mechanics of wealth, making money and wealth building, and entrepreneurship are actually boring. They’re intended to be boring if you just do the best practices, and just follow the playbook of people that have already done this repeatedly. Like we’ve worked with over 2000 clients over the last 8 years in all 50 states in real estate, what happens is you realize, oh, well, there are really cool things you can do. Like I can establish a series LLC in Delaware, Texas, Nevada, or Wyoming, and I can use that series LLC anywhere in the country based on the Full Faith and Credit Clause of the US Constitution, just like people use Delaware LLCs and use them everywhere. And then I can manage everything through a single bank account, a single EIN number, and a single set of books. And because of how series LLCs work, I can essentially create an unlimited number of LLCs on my desktop for free, which means I can compartmentalize every asset with no additional cost or complexity to my finances, or to my banking. So there are these like tricks that come into it about how do you do the things that the really wealthy people do. But you do it at a level that the average real estate investor, the person that has between, you know, one and 20 properties, and that’s looking to grow and looking to get to that next level and is able to do efficiently and effectively. And those are the things that I always look for when I’m looking to hire professionals, there’s that, as they tell me the thing that’s not, hey, do I need an LLC or not? Because great, well, you’re in the business of selling LLCs, so you’re going to tell me whatever it is, it’s gonna sell me an LLC? No, no, tell me about how this actually maps to the ultimate goal that I want to say, hey, I want durable financial freedom, I want to save the most money, I want to taxes, I want it to be able to pass on my legacy, my heirs, I want to know that as I change assets, how is this going to change with me? And those are the kinds of questions that tell you about the people that like, oh, they actually do that business. They don’t just like advice on that business.
CORWYN:
That one’s massive right there. Because you’re right, what I didn’t know is that some of the other states Delaware out, you know, definitely familiar with, but you know, the other states that you can do this, cause what happens is and so for example, I don’t know if this is the same in other states when you go sell the disposable property. But if you have a property in an LLC in South Carolina, and you divest, you sell that property, that is the only asset that was in the LLC, so you have to report that some people just sell the LLC versus selling the property, which then allows them to just transfer the interest in the property never changes, which means you don’t have to update change deeds, just the ownership of the LLC changes. So as a thought process and as a question, have you seen that take place and do you advise or I’m gonna rephrase that? I won’t get you too far into it to advise it. But what’s up
SCOTT:
It’s okay! I can speak to that.
CORWYN:
So what’s your strategy or something like that?
SCOTT:
Yeah. So there’s the acquisition of new assets, and there are the current assets. And then there’s the disposition of an asset that you want to sell out of your portfolio, when you realize, hey, I can get better cap rates or better cash flow if I reposition that money into a syndication investment, or to some other type of one-off deal that I found. So any current assets or new assets, what we typically do is transfer those into Land Trusts, which are anonymous revocable grantor trusts with an attorney listed as a trustee. And this is how you’re able to hold the asset anonymously, with everything flowing to an attorney, and all that information is then protected by the attorney-client privilege. And so you can get the best financing rates when you do that way, because you’re getting the financing underneath your personal name, which is the conforming loans, and then you transfer that asset into a land trust, which is protected by the St. Germain act. So they can accelerate the note or have a due on sale clause come in, you get the best financing, and now you’re owning the asset anonymously. If you have it inside of a series LLC, then you have to compartmentalize that asset to make sure that if that asset is ever sued, you only have that asset at risk, you’re not at risk, and none of your other assets are at risk. And when it comes time to sell, you simply have to look at what are going to be the terms at which you want to sell, do you want to sell the LLC and the entirety? That child series of the series LLC or to the Land Trust? Or do they need you to sell the asset directly to the individual, all of those things are actually handled after the fact depending upon what the financing or the buyer’s situation is? And so all of these situations are very circumstance dependent on what’s going to be the most efficient and effective solution at any given time. All of these things work. They all depend upon the circumstances. And I think this is where it really plays to have good partnerships with people that are very experienced either inside of your own real estate network that works with kind of assets or with companies and professionals that do it day in and day out. And I’ve seen so many transactions to know here’s the efficient and effective tax solution as well as operational meaning can you actually get the deal done without absorbing tons of fees and tons of time?
CORWYN:
That’s the challenge right there. You know, Scott, and getting people that know, this, know that I’m bringing them all together. And sometimes we don’t think to explore beyond, we don’t think to look beyond what is right in front of us to make sure that we’re looking at this from different angles, we got to think it through as I was I’m having a conversation actually earlier that we sometimes well, I know sometimes we need to critically think of you want to get into real estate investing. Yes, it’s attractive, because you know, everybody has glitz, glamour, and glory. But nobody tells the other story. And so that’s what you have the experience in sharing, quote-unquote, that other story, you made mention of a friend that had exposure on a property from an intern had a significant loss. What other situations have you encountered that are along are similar to that, as far as where risk is actually conveyed? Let me say it that way.
SCOTT:
Yeah, so the worst thing you can do is own assets inside of your personal name. There are a lot of times when we see people get popped the worst, right. Because it means anything that happens within one of your properties, a car accident that exceeds the limits of liability of your car insurance policy. Any deal that went sideways on you that you personally signed for, Doing business and owning assets in your personal name is the worst possible thing you can do. Because that means if any one thing goes wrong in any area of your life, everything that you have is exposed. So yes, it’s the cheapest way to be able to operate. But the question that always comes into my mind is what is the real goal, if the real goal is to become wealthy, right, then what you need to do is take risks off the table. So that way, you’re making sure that your focus is always able to stay on the wealth-building components. You don’t get bogged down with a bunch of nuisance work, you don’t get bogged down with random events that can happen in life, you want to put yourself in a position to be able to say I don’t really care what happens because whatever happens, I’ve already prepared for it. I already know what’s going to happen when this event comes up. And I already have a team of people that I can tap into to be able to handle that situation. So I can go focus on making more money and accelerating my path to freedom. And so after that, the only thing you really need then is a team of people and a system that says great, can I take all of these risks off the table? Do I not have to go figure out a bunch of other stuff that I can be taught and go into a best practices system, and then the only thing I have to focus on is making money? So like my friend who lost $3,000,000 from a single lawsuit, we have these pop up for people that hit us up. They’re like, Oh, I just got sued for this one thing and it was a $50,000 judgment. And now what they’ve done is placed levies on my bank accounts, they put liens on my properties that I own, and I’m not able to sell them now. And what they do is the legal system from the people that know how to use it on the attack side is heavily weighted, to put an extreme amount of pressure on you to pay them off. It’s basically one large extortion scheme that comes into it from what these attorneys do. So what I’ve dedicated my life to is actually working in the reverse. And saying, Yeah, I used to play that game. I know that game. And that’s what I did professionally. And now my focus has been on creating a company that says, Well, let’s take all the things that I knew from that. And let’s be the worst possible person to come after, who would have the best protections in place, and be the worst possible target. So that way, if lawsuits come up in your life, you just don’t care. Right? This is what we call becoming bulletproof and having bulletproof to lawsuits.
CORWYN:
What I just heard in what you started with this, Scott, and this is funny, I had to laugh to myself, because I literally just said this again, a little bit ago. I’m a Sonic fan, started a while ago and I talk about that with my folks. And like you. So where you went with that where you began was, if you’re looking to be a real estate investor looking to invest in a business or whatever, why are you doing it? What do you want to happen from it? Why? People start with the what? I want to invest in real estate, I want to be a business owner, I wanted this, I wanted that. That’s the “what you want to do”, why do you want to do it because that “why” is gonna carry you through. But also, that should help you build the strategy, and the processes for you to achieve that. So you don’t end up trying to accomplish a particular what, but you actually accomplish your actual why? What are you doing if you’re looking to create wealth, build a legacy, quote-unquote, you know, that dream of, if you will, freedom, like you said earlier, we just trade one thing for another. You’ve been doing this, you say your company? What about what you said 8 years? 8 years? Okay, what is the most outlandish situation that you can share?
SCOTT:
Yeah, I mean, we had a situation where with a client where she sold a property, she sold the property that she intended to flip and then there was an email exchange back and forth. And it was ambiguous from the email exchange, whether like, all of the plumbing in the house had been replaced, or just the plumbing that was underneath the house that was replaced. It wasn’t very clear. But there was the sale of the property that happened. And then fast forward 3 months later, the buyers are on vacation, and there’s a plumbing and the upstairs, that sprung a leak, and it costs $75,000 in damages to the house, immediately putting mad people do. Mad people want to go ahead and sue somebody because they don’t want to hold the bag on it. And guess what, they’re happy to lie about it, which is why it doesn’t matter whether you’re honest or not in the way you do your business because you’re dealing with somebody that’s mad, right? and mad people aren’t rational. And then– will do whatever it takes to be able to make sure they’re okay. So this particular client luckily was using a series LLC. So the asset was sold out of the series LLC, and it had no other assets on that child series. And the communications for my client went through an operating company, operating companies don’t own anything, but they do everything. Whereas asset-holding companies own everything and don’t do anything. That’s the nature of those two company styles. And everybody should have both in my opinion. But her communications on the email were from her operating company, with the ballpoint on the bottom. It was from her LLC and her as a manager of that LLC that making the communications when the attorney came to her and ultimately to me, because we handle all of the litigation and quarterback the litigation for all of our clients, we typically have about a lawsuit a month that I’ll handle, you know, I was able to sit with the attorney and just explain to him like, Hey, this is the structure. This is the protection structure that’s put in place, here’s the LLC, here’s where the communications are made, you’re not going to have a cause of action that’s directly against the client. Because communications came from the LLC, you could try to sue the child series of the series LLC, which was the owner of the property that sold it to you. However, it’s compartmentalized, there are no assets there, and all the cash from that child series has already been distributed. So there are no assets there for you to seize. So we’ll actually just give you a judgment, if that’s what you want, because you’re not going to be able to enforce it and to be able to get anything, and that lawsuit got dropped. And this is typical. This is typical when you put the right protection structures in place, that you arm yourself with such a strong defense that it dissuades the enemy’s desire to want to fight. It becomes much too timely and expensive and laborsome for them to try to pursue you.
CORWYN:
So you know, I’m gonna take what you’re saying, Scott, kind of swirl that around a little bit, because like what just stated in there is that when people are angry. Being reasonable, it just goes out the window. So in that situation, as a buyer, that buyer I would imagine either had, should have had, or taken the time to inspect the property, which means that there should have been some degree of inspection to understand what the condition of the plumbing was if the issue was even related to plumbing, if they went on vacation, one thing that we tell people, you leave the house and go on vacation, shut the water off to the house.
SCOTT:
I think these are very practical things that people should do. And I think what I’m posting is a little bit more dramatic. What I’m positing is the fact that if you know how to use the legal system to protect yourself, you don’t care what the facts are, right? It’s mere preparation. And the mere tools that you’ve used on the legal side tell you to say, it doesn’t matter to me what the facts are, what people are alleging, or what they’re lying about, or whether was a representation about whether the plumbing was replaced or not. And so that’s no, we already have enough built in that by using the process of understanding how real litigation really happens, that you’re in this class of people, which is the top 1/10th of 1%. And what my company focuses on is how do you take those types of strategies, that type of tax and financial sophistication, that type of estate planning, and offer it to the average real estate investor.
CORWYN:
So that is a very good place, Scott, for us to drop your information, how can people get in contact with you? Because you just said a mouthful, man.
SCOTT:
Yeah, my man. So, really the best thing to do is to go to royallegalsolutions.com. And then watch the video that we have at the top of the page. It’s the best education that I’ve put forward. That goes into much more detail about how these things work holistically between asset protection, estate planning, tax or portfolio, and investing. How does it all have to work together? How do teams work to be able to support you in that, that video is the number one thing to watch? And if that excites you, after you watch that video, then I would recommend reaching out to the team because we have 11 ebooks, 2000 hours of videos, and full-blown courses that we give away everything for free on the information front, the only money that we ever want to take from you is when you say hey, listen, I want you to go build all of this for me and train me in on how to use it because I want to accelerate my path to financial freedom. And I want this all done for me. Essentially make you a CEO of a wealth-building company that we’re going to build for you and train you how to use so at the end of the year, you have the top 1%. 1/10th of 1% of education on what the absolute elite know and understand to be able to accelerate their path to financial freedom and all this starts with going to royallegalsolutions.com and watching that video that we have at the top of the page. And if you’re interested, maybe look at a couple of testimonial videos that we have from our clients who are joining our group coaching calls where our clients get together every week, if you didn’t want to meet some of the people there but just royallegalsolutions.com. Check out the video and from there we’ll be able to help guide you through whatever steps you need.
CORWYN:
So you know Scott while you were talking, actually, I went to the website, and pulled it up. So our listeners, guys, y’all go here there’s a plethora, there’s a wealth of information there on guys. So please make sure you go there and plug in. So Scott, my final question for today’s show. And we’ve had an amazing, amazing time today. Take away know if you had a nugget to drop on me like on my people like this is what you need to take away from today’s show. Can you share what that is?
SCOTT:
The biggest thing that’s made the biggest difference in my life is actually making scary decisions. And most of the time how I know this is a scary decision for me because it keeps coming up. Right? It’s in the back of my mind. Oh, should I be doing something to protect my assets? Should I be doing something to make sure my family is going to be protected? Should I be doing something with my taxes? Should I be doing something with like, what types of deals should I be looking at? These are how you know that you have what I call there’s like mental vampires they’re sucking your energy away from worry. The thing that’s keeping you from taking action on those is fear, it’s fear that you’ll you don’t know enough or fear that you’re gonna get taken advantage of or something like that, that comes with it. The intention that I’d love to sit with everybody has to find the people that you can trust and go take action, even if it’s scary, just do it. Once you start taking action, the fear goes away because you start to have a new experience of what it is to learn to change your mindset around it. If you sit in fear, you will constantly be dragged down by worry if you take action, even small action, as long as it’s deliberate. You’re going to find a path to freedom and a path to peace and a path to the security of knowing that your future is going to be what you want it to be. So just take action right now. It’s so simple. So I say just go to the website, just watch the video if that’s the only thing you commit to fantastic because at least you’ve done something to be able to get yourself onto the path.
CORWYN:
Scott, thank you so much for that. That right there, we always talk about mindset on this show about the action that we should take and the inaction at times that we embrace. So thank you so much for that. For our listeners, guys, we have reached the end of today’s show. Scott, I want to thank you again from the bottom of my heart for being a part of the Exit Strategies Radio Show family. Thank you for your time today. It has definitely been a wealth of information, not only for our listeners but also for me, so that we can continue to share this message with our fan base. For our listeners, guys, you got some good nuggets, you got some jewels today, I want you to take this information and apply it and utilize it so that you can expound upon your legacy that you can build and create just for you and your family. Guys, y’all know how I feel. Y’all know how I say, and what I say and I’m not going to disappoint you on this day. I’m going to tell you, I love you. I’m going to tell you, I love you. I’m going to tell you, I love you. And we will see you guys out there in those streets.