Smart Investors Protect their Investments
Today I want to share another excerpt from my interview with Curry Blackwell. If you remember from the last time I revealed some tidbits to you, Curry shared his secrets in an all-access interview with me on how he built a real estate empire of over 120 properties in less than 6 years. Curry bought his first rental property in 1997; it was a single family home near the Texas Tech University campus. Since then, Curry and his dad have bought and held onto many units and bought and sold several more.
Doug: I’d like to talk about asset protection. This is something I’ve been dealing with my own properties recently, so I’m particularly interested in it. Curry, do you hold your properties in your own name or a company name and why?
Curry: The partnership that we have established is what we’ve found to be the best way to hold the properties, a corporation is fine too. Obviously personal liability is something I would try to stay away from. Anytime you can put your properties within a corporation or a partnership, then you can conceivably protect your personal belongings from any issues. So I would recommend that.
D: So you put them into a partnership for yourself and dad?
C: That’s right. The partnership can be as many people as you’d like. Doing it like this also helps make some of the bookkeeping and paperwork a little bit easier than when you’re doing it as a sole proprietor.
D: Does it cause problems with your lender? For example, since they’re loaning to you individually that they want you to own it in your own name?
C: Well, now we’re talking about it from a financial liability standpoint, Doug. You’re still giving a personal guarantee. So from a financial standpoint, it really doesn’t change the dynamics of the fact that you’re still responsible for paying that loan back. The lender doesn’t really care that it’s under a partnership or not, you’re still giving your personal guarantee for the loan or for any of the notes. And the partnership has more to do with the liability issues.
D: Okay. Do you have any sort of liability insurance or umbrella policies on your properties?
C: We do have a liability policy. It’s an umbrella policy that is basically added onto our personal property insurance. We have not had any issues that have come up of any kind of liability; I don’t know whether it’s just an ignorance issue, but I think most tenants understand that they’re still responsible for their own well being. But we do carry umbrella property insurance and there’s a liability addendum on that.
D: I see. Would you recommend that other investors get a liability insurance policy and if so, for how much?
C: I think so, but all that depends on the value of your property. We’ve done it for upwards of a million dollars just because of the value in the property, but at the same time we’re just keeping that there as a safety net.
D: What do you realistically think are the odds of getting sued by a tenant or someone who gets harmed on your property? And have you ever gotten sued by one of your tenants?
C: You’re going to make me find some wood and go knock on it. We’ve never had any lawsuits of any kind against our properties for any reason. We’ve had some accidents on our properties that involved property, more like cars and vehicles, or a tree gets struck by lightning and falls on a car. But we’ve never had any issue where a tenant has wanted to bring suit against us for anything.
D: Okay, good for you! Where can people get liability insurance if they’re looking to get that for their rental properties?
C: You can find liability insurance through any of the major companies that offer property insurance. I think the Internet would be a good source, just type in your city name and ‘liability insurance’ and I’ll bet you at least twenty will come up. Then just contact some of them and say, “Hey this is what I’m looking for, I need an umbrella policy, what do you have?”
This posting is an excerpt of the two-hour interview I did with Curry Blackwell. The full interview is part of my Vault Investing System. The Vault contains 13 in-depth interviews with expert investors from across the nation and covers topics ranging from wholesaling to subject 2 investing to private money and more. Learn how you can get your hands on the Vault at a 36% discount by going to http://www.myhousedeals.com/thevault.
Until next time, happy (and profitable) investing!