Have you been paying attention to the legal side of real estate? It seems obvious, but having a good lawyer or team of legal experts will ALWAYS benefit you in the long run. Join Ken McElroy and Rich Dad Advisor, Garrett Sutton, in a conversation about corporate lawyers, specialized attorneys, and why you need to be paying more attention to who you have on your side.
Transcripts from this weeks podcast
Ken McElroy:
Hey guys, it’s Ken McElroy here and I’m here with my good friend, Garrett Sutton, and Garrett is a fellow rich dad advisor. In fact, he was one of the original rich dad advisors. He is the advisor that does a lot of the legal for Kim and Robert Kiyosaki directly. A lot of the advisors, we do a lot of our legal with him, and he’s gotten my butt out of a lot of jams over the years, especially, but when I need them to, you know, ask all the kinds of questions that happen, uh, he set up our corporations, uh, our S-corp and our C Corp’s our LLCs for our individual properties and helped me personally, uh, welcome to the show, Garrett Sutton.
Garrett Sutton:
Thank you again. Good to be with you again.
Ken McElroy:
So I know you have a lot of experience here and you have thousands and thousands and thousands of, of people that, that, uh, you handle. Um, you know, one of the things I get a lot, I get this question a ton is, you know, how what’s the best way to actually select and then manage an attorney because those two things are very different. As you know,
Garrett Sutton:
That’s a great question, you know, in terms of selecting an attorney, uh, you know, I, I tell my clients, cause you know, we set up the corporations in the LLCs, but we wouldn’t be someone to evict a tenant in Tennessee, right? You need a Tennessee attorney for that. And my clients will ask me this candidate. I think it’s important to have an attorney that also invests in real estate. I think if the attorney understands what it is to invest in real estate to deal with tenants where it’s, it’s his property on the line, um, I just think that you have a better depth of understanding, you know, they come at it not only as a lawyer, but as an investor. And so if you can find that attorney that, uh, also invests in real estate, I think that’s good, uh, in terms of managing the attorney, um, you know, good luck.
Garrett Sutton:
I mean, I think you need to set expectations. I think it’s fine for, uh, people to ask how much legal fees are gonna cost when I deal with attorneys, I do the same. So I mean, why shouldn’t you, uh, I, I think it’s important to understand, uh, what the costs are going to be, what your expectations are. Um, and so you also want to develop a relationship with a guy. I mean, you, you, you just, you want to feel like, you know, that attorney, especially if it’s going to be kind of this long-term, uh, relationship. So I think that’s an important element as well.
Ken McElroy:
Yeah, I think that’s a really good point. I think a lot of people think of attorneys as kind of transactional, and I think you really got to think of them as a long, longer term team member, uh, because you know, like I have obviously, you know, you handle a lot of our stuff on our LLCs and things like that, but I, I also have, uh, an attorney that specializes in securities. You know, I have a securities attorney that handles our PPMS or private placement memorandums as an example, and he has his specialty. And then I have an attorney that handles our, you know, the operating agreements and things like that for, you know, on the loan side. And, you know, when we’re, we’re, uh, we’re actually closing a deal and those are their long-term team members, you know, on every transaction we have at least three attorneys looking at different things. And, and so how important is it to select a lawyer who specializes in your specific needs?
Garrett Sutton:
It’s key. Can, I mean, the law now is so broad and so specialized that you can’t expect one attorney to know everything about everything. Uh, you know, when I was growing up my dad, he was a county judge and he said, you know, the days of the attorney and this was in the sixties and seventies, the days of the attorney, which, you know, in the thirties and forties attorneys did everything, but the, the days of the general practice attorney have been gone for 60 years, uh, you really need to find people who specialize in a niche. Uh, you know, don’t talk to me about employment law. You’re going to hire an attorney that specializes in employment law, because another thing can, is these areas are constantly changing. Um, you know, the case law changes the legislature’s in session every year. Things change all the time and you need to find someone who specializes in that niche, uh, you know, to really help you with your specific situation.
Ken McElroy:
I know that when we were doing a deal up in Oregon, you know, there was an environmental attorney and that was their job. They were, you know, and then, then I bought another property in, um, in Sedona, Arizona, and I needed an attorney that, uh, that, that new water rights and, and they’re very, very specific, um, these kinds of things. And I’ll tell you what I, my mind was blown with the amount of knowledge that they had around those issues. And I think a lot of times these, uh, an attorney will take your work and, you know, it’s like, it’s like the it’s like, whatever I talk to sometimes as the CPAs that, you know, that aren’t, that are doing the depreciation expense for people that aren’t real estate, you hear that all the time it’s because they don’t do it. They don’t know how to do it. And they’re not real estate owners that know it doesn’t even cross their mind, but they get paid to do your tax return. It’s the same thing.
Garrett Sutton:
Absolutely. Um, you know, the, the, the water rights attorney for someone like you can, is you wouldn’t think about it, but it’s hugely important. I mean, how can you buy a real estate property without making sure that the water rights are perfected? Um, and you know, they don’t teach that in school. You have to learn the hard way, but your attorney who may provide you with general advice, or maybe a real estate attorney, your attorney should be able to say, look, you need a water rights attorney now. And here’s some names of people that I work with that that’s a valuable service that your attorney can provide getting you to the right specialist.
Ken McElroy:
That’s right. I mean, I, I had a mineral, uh, you know, mineral rights attorney. I had an oil and gas attorney, you know, I’ve got all these different attorneys for these very specific things in the, you know, even the environmental attorney, there’s things inside of that environmental issues, that there are actual attorneys that specialize on things inside of the environmental piece alone. So it’s crazy. Uh, but the it’s really important to become specialized, I think. And, and, and, and to know that when you’re, when you’re, when you’re going into something like that, that you really need that kind of, of that kind of advice.
Garrett Sutton:
Well, and talking to your friends, if you’re going from, you know, duplexes up to a big apartment building, I might, you know, talk to friends and see what kind of attorneys that they use, because you’re making a jump there and you, you may need specialized counsel. You, you don’t know that if you don’t ask it, but you know, you, you, you really may want to consider having a specialized attorney once you make those kinds of jumps. Right.
Ken McElroy:
For sure. For sure. So we’re going to take a quick break here, Garrett, after the break, we’ll talk about managing attorneys a little bit more on how to keep your legal costs down. Uh, we’ll be back with Garrett Sutton right after this. Okay, Garrett, welcome back. Welcome back. We were talking about specialties and you know, how to hire attorneys that, you know, have specialties so that you can get the very best representation. So now that once you found them, I found that managing them can, can be a little difficult, you know, cause their caseload’s big. Right. And so it is kind of a squeaky wheel gets the grease, right? Like a ho what’s the best way from, you know, being an attorney. What’s what are some of the better things that, you know, clients do to manage you or, and, and advice you could give?
Garrett Sutton:
Well, you know, it’s kind of interesting, again, I hadn’t thought about this until now, but I actually liked some of my clients and I, you know, I mean, they’re good people, you enjoy talking to them and those guys I’m going to pick up the phone for it. Cause I like him. And you know, we have a rule here can then, if someone is rude to one of secretaries or to one of the incorporating specialists, we don’t take them as clients. So if you enter the door being rude, we’re not going to help you at all. And so how do you manage your attorney? Well, I think you treat not only the attorney, but their entire staff with respect and you know, you also don’t, um, you know, quibble too much on the bill. If, if something is wrong, yes, you should point it out. Uh, but if you’re going to be nickel and diming, every single bill, I certainly encourage people to look at the bill set expectations on the bill. But if you’re going to nickel and dime every single, uh, invoice you get, I mean, at some point the attorney’s going to say this is not worth my trouble. My staff is spending extra time to get paid and that can be a problem too. Um, so I just think, you know, it’s, it’s being a good person and a good, uh, you know, business person that realizes that the relationship is really important here.
Ken McElroy:
Yeah. Yeah. I found that my attorneys over the years, a lot of times, because I have a relationship with them, they, they, you know, if it’s five or 10 minutes, they don’t even charge me, you know, a lot of times, right.
Garrett Sutton:
Well, to charge someone for a five minute call costs more than the amount you’re going to collect. I mean, to send out a bill for five minutes, I don’t do that.
Ken McElroy:
Right. And by the way, sometimes a lot of times, especially for me, it’s a five minute phone call. Yeah. It’s just a, Hey, I’ve got this issue. How would I handle it? And it’s just nice to have that lifeline, but I love not getting that bill. You know, if I’m on an hour long call or even a half hour, I expect a bill of course, but not all small stuff.
Garrett Sutton:
Right. And I find that I do not charge for that in part, because I’m willing to help out the client. And, and also it is costly to send out a bill for, you know, $20, $30 to send out a bill for $20.
Ken McElroy:
So I know lawyers can be expensive. I think you’ve done a great job on kind of packaging your services for an LLC. And then one of the things that I’ve always been impressed with is that you’re always taking a look at the, the costs of the filing fees and all that. I mean, I know you’ve, you’ve helped thousands of people come out of California and go to Wyoming and, and they basically, that actually pays for the legal services for you. Can you kind of walk through that because I think a good attorneys will help you do this, try to, especially in your field, you know, those costs, uh, my state are all over the map.
Garrett Sutton:
Well, California can being the highest at $800 per year, uh, versus Wyoming, a $52 per year, uh, for better protection and more privacy. But if you’re doing business in the state of California, there’s really no way around that $800, but we can use Wyoming to get you more protection. So there’s subtleties there, but you’re right, Ken, I mean, some of these states are getting more and more expensive. And if, you know, choosing the state of formation is kind of a constitutional right to travel issue. You can choose where you’re going to set up your corporation or an LLC. So why not set up one in a state where there’s no state tax like Wyoming, where it’s only $52 a year and you have the best protection in the country. It’s, it’s a really easy choice for a lot of people.
Ken McElroy:
So let’s walk through that. Cause I, I agree with you. And as you know, we’ve done this. So let let’s say I live in Phoenix and um, I want to set up something in Wyoming, as you, as you said, it’s 52, 50, 50, $2 a year for that. What, what do I do? What are the steps that I would need to do if I am physically located somewhere else? Well,
Garrett Sutton:
Well we would get on the phone and analyze whether you would have to qualify that a Wyoming LLC, into Arizona, if it’s California, the answer is yes, if it’s Arizona and most other states, the answer is no. And so we would get on the phone and just chart out a structure that makes sense for you. But an Arizona resident can choose to have a Wyoming LLC, and it will be, uh, set up in Wyoming properly and we’ll maintain it for you every year. If you don’t maintain it, you can lose the corporate protection, but it’s not a difficult transaction. Can, I mean, you know, you’ve done it a lot, but the, this, this protection of the Wyoming LLC, uh, versus holding title in your individual name or some of the weaker states, it just makes so much sense.
Ken McElroy:
Right? So hopefully you guys realize that you can actually own real estate in other areas and have it held in Nevada and Wyoming and Delaware, you know, you can actually have a right, right. Garrett. Isn’t that how it works?
Garrett Sutton:
And so let’s say you bought a property in Utah, we’d have a Utah LLC. Cause that’s where the property is located. We’d have title in the name of the Utah LLC, but you tell us a weak state. So we would have the Utah LLC owned by the Wyoming, LLC. Then you buy a property in Ohio. We have an Ohio LLC owned by the same Wyoming LLC. So Utah, Ohio owned by one Wyoming. And that is really good asset protection at a very affordable price.
Ken McElroy:
And where’s a, what makes like, say Utah, weak state?
Garrett Sutton:
Utah says that if you do the charging order and you can’t collect, then you can foreclose on the property. So you can go to court and force the sale of the property. That is not good asset protection. Right.
Ken McElroy:
I see. I see. Yeah. So it does really, it gets, uh, it gets interesting because I think a lot of people believe that wherever the state’s located, that’s where they have to, you know, that’s where they have to be. And what you’re saying is take a look at all the protections that are available. I mean, and this is literally $52 a year. Right. Right. Right. And you know, our office is in Jackson hole. So come visit us. That’s right. That’s right. I forgot you had an officer too. Even better. Okay. Good guys. So, uh, Garrett, now we’re going to hop over to our premium page for some bonus questions about red flags. You need to look for when hiring an attorney. If you’re not a premium member, go to KenMcElroy.com/Premium and sign up now. Garrett, thank you so much. I appreciate your time. What’s the best way people can reach you.
Garrett Sutton:
CorporateDirect.com is our website or 800, 600 1760.
New Speaker:
And don’t forget to pick up Garrett’s books. He’s got great ones. How to start your own corporation loopholes or real estate. And gosh, I know a ton of others just go to RDA, RDA, press.com. And you could find those as well. So Garrett as always appreciate your wisdom around the legal profession. And I hope you’re doing great and can’t wait to see you next.