"The 2 Critical Mistakes Most Real Estate Investors
Make That Gets Them Sued"

I Was Sued and Could Not Make ANY MONEY or Sell Any Properties for THREE Long Months..

“I remember the day like it was yesterday, I received that feared knock at the door from the postal carrier, looking for me to sign a certified mail return receipt. I got sued, for the first time in my highly lucrative little real estate flipping business.”

 

I say little because I was only flipping about 12 houses and doubles a year, but was making anywhere from $20,000 to $50,000 NET profit per deal. This was back in my earlier days of real estate investing so I never thought that these things would happen, it always happened to the scammers. But there are also people LOOKING for someone to sue as well.

 

So the lawyer representing the plaintiff decided, unethically, to just attach every single property and asset to the lawsuit for a promissory note of ONLY $5,000. Yes, she tied up $500,000 in real estate for a note of $5,000. My attorney, upon seeing this, was shocked as well. Shark was the name he called her.

 

So to make a long complex story short, the whole process of fighting the other party, took 3 long months in which I could not sell anything or make any distributions of rental income. I had turned my Cleveland real estate flipping business into a lifestyle business since I was now running it on the Web full time, and doing from Cancun, MX before all of this happened, so the stress and anxiety was through the roof. Plus to not know what the outcome would be.

 

In the end, because I had a good attorney, I won and the plaintiff was forced to release and vacate ALL judgments from the court. In case you don’t know, that’s the absolute best outcome you could expect. I also forced the plaintiff to pay my legal fees. 

It turns out that she sued me not willingly, apparently the shark attorney in cleveland was very aggressive and used her sales skills to talk her into filing against me when she saw my assets and business overall.

 

But my lesson that I learned was: 

Lawsuits are like criminal charges, anyone can accuse you of anything and make your life a living hell, but it’s up to the court and judicial process to clear your name. So you can be sued for ANYTHING whether it is true or NOT.

Sample Check List..

  • How You Title Your Property
  • Use Multiple Entities (LLC's)
  • Get an Umbrella Insurance Policy
  • Never Sign Cognovit Promissory Notes
  • Never Act As the Statutory Agent
  • Don't Co-Mingle Business Funds

What you title your property in is paramount!

This can ruin your life, assets, financial affairs – so make sure you use LLC’s, in Ohio they are cheap and easy to form. If you need help filing an LLC, we offer this as a service for $99. 
Never own rentals or rehab properties in your personal name! Always use an LLC or other appropriate entity.

 

Do not use the same corporation..

..for all of your rentals, mix it up to prevent an blanket lawsuit. Always have enough property insurance, this is your first layer of defense, or your last resort. You have to have insurance on rehabs fixers and rental properties. And, it’s even better to utilize umbrella policies. There are investor insurance policies out there, use an insurance broker, as they have more access to programs versus a sales agent with a large corporation.

 

Never sign promissory notes that are “Cognovit” notes.

In other words, a Cognovit note gives the creditor authority to bypass your right to fight any repayment dispute and get an automatic judgment for monies owed in 1 day. Signing promissory notes is mandatory for any kind of secured debt like a mortgage, but most do not have the cognovit provision.
Never act as your own corporate agent, use a stat agent service in your state, stay compliant with the corporation, and don’t co-mingle funds. If you are proven not compliant, then your corporations can be pierced and then the attacker can come after you personally for whatever money and assets you own to fulfill the attackers claims.