Brian Baker wrote:Jesus, as far as success goes, it is all relative and I have a lot to learn in this business if I want to truly be "successful".
This thread is about knowledge-sharing. Steve Labus needed three years of full-time investing to get to the point where he had to hire staff to help him with his burgeoning business, but you had to pay top dollar to get a general manager to help you after just one year, and even more amazingly, investing is just a side gig for you--you still hold down a 40hr/wk corporate job!
Stop with the false modesty. Surely with all the success you talk about, you know things worth sharing.
When people who have done a lot of deals speak on this forum, people like Tim Cook, Robin Carriger and many others, their words are full of experience. "If your property has a pool that you want to fill, you will need to check local ordinances to see what permits and requirements are needed. I filled a pool without doing that and the city busted me hard."
That type of real and usable content isn't really very present in your posts, Brian. You talk, a lot, about all the success you've had, but if you never show that you actually have any experience to draw upon, I fear you may come to be regarded, rightly or wrongly, as a poser. You had a golden invitation to show off your chops about a topic you repeatedly claim excellence in, and all you have are platitudes like "study hard" and "dot your I's", and an observation that some people like Series LLC's but others don't?
I was hoping for something like this:
The David Weiss Approach to Risk Management
(Note that I'm not a lawyer and I do not advise you do what I do. Talk to a lawyer yourself. Most are nice people and want to help you and many won't charge you for start-up advice. I highly recommend Milt, who sponsors this club. See the sponsors page.)
I have a four-tier risk management approach which consists of the following:
- Asset Protection: I do not worry about wrapping my asset in a corporate entity if my exit strategy is to wholesale the property, but for both long term (e.g. rent or owner finance) and any other short term (e.g. rehab flip) properties, I put each into a separate corporate entity. I do this via a Series LLC. I am careful to maintain the integrity of the protection my LLC offers by never using my personal bank account for corporate expenses or my corporate account for personal expenses.
(For those not in the know, a primary goal of asset protection is to limit how much a person can sue you for.) (There are more advanced forms of asset protection, from using land trusts to complex shell corporation structures. Given the repeated claims of protecting himself to the max, I'd expected Brian to be able to speak fluently about these sorts of things.)
- Insurance: Asset protection and insurance are not the same thing. Again, I do not bother with insurance if I am wholesaling a property but otherwise I consider insurance a must. There are incidents where insurance will cover you if you do not have asset protection, and instances where asset protection will cover you if you don't have insurance, but I prefer to have both in place. It's not that expensive, especially compared to how expensive it is to need it but not have it.
- Over-Disclosure: For better and worse, I am not terribly risk-adverse in most areas. Litigation is an exception. It's too easy for a deal to turn into a serious financial sinkhole if it results in a lawsuit. To paraphrase a lawyer, people tend to turn to the law when they feel they were taken advantage of, and people are far less likely to feel that way if they know all the risks up front. I think that's excellent advice, and so, for example, I don't just give the five-day wrap notice to Buyer's as required by Texas law, I clearly explain Due on Sale risks to both Buyer and, if I'm buying Sub2, the Sellers as well.
- Partner Selection: I will not engage and maintain business partnerships, whether short term or long term, with people who do not have approximately the same ethical disposition as me. I also make sure we see eye to eye on the details of the business (how we'll do the deal, exit strategies, criteria for buying, conditions under which we might switch exit strategies, etc) before the deal is consummated. There's too much strife otherwise. Even if the other party is only writing checks for the deal, I want them to know what we're doing (see over-disclosure above) and give their buy-in for the strategies and operations.
I only have 3 deals under my belt. I've spent a lot of time focusing on this area of my business in particular, but acknowledge that there are those with far more experience than me. If anyone has ideas on how I might strengthen my risk management, I would love to hear your thoughts.
David
