Lawsuits Are a Big Business—Here's How to Shut Them Down

As a real estate investor, you have to understand that lawsuits are a business. If someone is looking to sue you, they’re looking to get your money. A solid asset protection strategy keeps people from finding out what you own. And if they try to sue you, it limits what they can get from you.

A great asset protection strategy exhausts your opponent’s will and their resources and keeps them from continuing with the lawsuit. In most cases, it stops the lawsuit before it even starts or (at least) encourages the plaintiff to settle early.

How Do I Protect My Real Estate Investments?

You get a proper asset protection strategy.

A proper asset protection strategy prevents your assets from being seized by somebody via a judgement. It makes people (attorneys) believe they’re not going to get anything out of a lawsuit.

Lawsuits are only paid for in two ways: Either the plaintiff pays an attorney to sue or the attorney takes the case on contingency.

Let’s say I’m an attorney who wants to sue you. While researching, I find out you’ve qualified for food stamps for the past five years. How much money do you think I’m willing to risk for a judgement which is merely a piece of paper? Without an asset to seize, a judgement is worthless.

If their side researches the real estate investor (you) and finds no assets on paper, no attorney worth his salt is ever going to take a case like that on a contingency. Contingency is free for the client. The attorney risks everything. That’s why attorneys only file cases that they are very confident they can win and collect on.

So, when you ask yourself, “How do I protect myself from a lawsuit?” what you should really be asking yourself is, “How can I make it seem as if I don’t own anything?”

Asset Protection: Make Litigation a Nightmare

If anybody looks to sue you, you want to look like you own nothing. You want to make it impossible for them to try to come after you. One of the ground rules of asset protection is that you need to make litigation a nightmare for them.

And what does a nightmare in litigation mean? It means risking thousands and thousands of dollars with only the smallest hope of being able to get money out of you, the investor.

Now ask yourself, as an investor and as a business person, do you go gamble in Vegas expecting to win big? Probably not, and neither will an attorney asked to take the case on contingency. Most attorneys will take only guaranteed wins.

When we make it a gamble for them to try to come after your money, they just won’t do it.

Do you have an asset protection strategy?

Tell us your thoughts in the comments.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.