In the classroom today, Gene Guarino talks to us about ways to limit your liability and protect yourself and your assets.
By separating your business from the real estate, you’re about to effectively limit your liability. Find out more from our expert, Gene Guarino!
Mike: Welcome back to the FlipNerd.com REI classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Gene: This is Gene, the founder of the Residential Assisted Living Academy and your host for the REI classroom. Today we’re going to talk about how to limit your liability when you’re doing residential assisted living.
Mike: This show was sponsored by passiverental.com.
Gene: See, I know that’s one of your questions. You’re saying, “What if somebody falls? What if somebody dies? They’re going to sue me.” Hey, let’s face it, the milk man could slip and fall on your front porch, if they had them anymore. Right? Or the post man, you know what I’m talking about.
You always have to have liability insurance, protection for unlimited liability, and what I say about that is you have an umbrella policy. Somebody could come to your house just visit selling Girl Scout cookies. We want the policy for that. But I’m going to show you how to limit your liability, doing it properly, if you’re going to do residential assisted living.
So here we go. Number one is, two. Two entities. The first entity owns the real estate. It is an entity that stands alone and just owns the real estate. The second entity owns the business, the operations, the business itself of the residential assisted living. So the business will lease the property from the ownership who owns the real estate. So two separate entities, one leases the property from the other.
Now, this does a couple of things for you. Number one, it separates things. It limits your liability because we have separate entities. If somebody slips and falls in that real estate, whether it be the Girl Scouts with the cookies, or whether it be grandma in the home, that property itself has its own liability policy – umbrella liability.
On the other side, you’ve got the business, and it has a very specific type of liability insurance. It’s specifically for this. It’s for residential assisted living. So your insurance agent will either have that or know where to get that. That insurance, by the way, is not that expensive. It’s about a dollar a day per resident. So if you have 10 residents in your home, that’s about $300 a month. That’s it. It’s a line item in the regards to the business. So you’ve heard me talk before here in the REI classroom, making $5,000, $10,000, $15,000, $20,000 a month in positive, after all expenses, cash flow doing this. That line item of $300 a month for the liability insurance is just in there. It’s already paid for, don’t worry.
So the entity that runs the business has a liability policy. It is leasing the real estate from the entity that owns the real estate, it has a liability policy. Keep them separate, each one is insured, this way they are each protected. If you do that, and follow the other tips I’ve given you, you can be very successful and you can breathe easy.
It ain’t a doctors, it’s not a nurse, it’s not a hospital, it’s a home. It’s a group home for seniors. The liability is not as big of a concern as a lot of people think but you know what? I’m okay with people being scared away. I like that there’s some barriers to entry. There’s people out there that haven’t learned what you’ve learnt, and they’re going to say, “Oh, I can’t do it.” Bad for them, good for us. You want to learn more? Keep listening right here to the REI classroom. This is Gene, we’ll see you soon.
Mike: Passiverental.com is your source for turnkey, done for you rental properties. If you’d like to be an investor, and not a landlord, please visit passiverental.com to learn how to purchase cash flowing, professionally managed rental properties in the hottest rental markets across the country. We can also help connect you with financing for your next property. Invest the easy way today, and get started by visiting passiverental.com.
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