Real estate without liability describes commercial multifamily real estate’s inherent ability to eliminate personal liability for the investors.
The dictionary defines liability as, “the state of being responsible for something, especially by law.”
Restaurant owners can be held liable for food that makes their patrons sick, doctors can face malpractice liability from suboptimal outcomes, and even attorneys can be sued by their clients if they aren’t satisfied with the representation that they received.
Let’s face it, we live in a litigious society. The last thing anyone needs or wants is investments that bring them more liability.
Unfortunately, we’ve seen many inexperienced real estate investor do just that. Unnecessary liability can be introduced through ill-advised practices like:
- Holding title in your name
- Obtaining full recourse lending
- Deferring maintenance
- Failing to remediate environmental hazards
- Employee discriminatory practices
- Violating tenants privacy
- Failing to comply with federal, state, and local housing laws
At 37th Parallel Properties, we strive to bring quality investments that are free from liability for our clients.
Here’s how we do it…
First and foremost, we know that liability is significantly deminished when you bring excellence of execution to your daily operations. After all this is what we do for a living. We aren’t weekend landlords, dabblers, or holders of a hodgepodge of unrelated assets.
We do one thing and one thing only; B-grade commercial multifamily real estate in the best markets in the country. It is what we do for a living, we are professionals, and our track record speaks for itself.
Our in-house team members are exceptional at what they do and our affiliated partners (attorneys, property management, brokerage partners, CPA’s and others) are industry leaders within their fields.
Our acquisitions strategy focuses on properties with build years that have significantly lower environmental liabilities from things like lead and asbestos.
We also limit the markets that we invest in to those with landlord/tenant laws that are favorable to landlords.
Additionally, we only utilize non-recourse debt when purchasing these properties. This is significant because with this type of loan, the lender gives up the right to hold the owners liable should the property default. Therefore, they cannot come after any of the investors or their assets for any reason. That removes all debt liability from the investment.
Removing legal liability using an LLC
To remove the legal liability, we use a certain legal structure, known as an LLC, to hold the property. As the name implies, Limited Liability Company (LLC) is a powerful legal tool for limiting liability. In fact, our investors are owners in the LLC and as such are referred to as “members.”
LLC law specifically stipulates that no member of the LLC is personally liable for the obligations of the LLC. Therefore, a member cannot be sued in connection with any matter concerning the LLC. That law shields our investors from legal liability just as non-recourse debt shields them from debt liability. It’s good to know that you are safe from liability when you invest with us.
Now how do we keep the business safe? After all, there is no ironclad failsafe method that can prevent a business entity from being sued. I don’t care if you are Coca Cola, Apple, Disney, or General Motors any company can be subject to litigation. This is why it is critically important to follow a set of business best practices.
Any business worth its salt minimizes its liability through excellence of operations, strict adherence to applicable federal, state, and local laws as well as maintaining relationships with highly qualified and competent legal counsel.
And of course, every business entity, regardless of the industry they operate in, is wise to carry adequate levels of insurance. Certainly, you wouldn’t operate a vehicle without car insurance or own a house without having homeowners insurance.
In our world, we carry a slew of insurance that includes things like commercial property coverage, general liability insurance, business interruption or loss of income insurance, as well as commercial umbrella insurance.
By taking a conservative, professional, proven business approach to apartment investing, we create investments free from personal liability for our investors. Furthermore, just like any other top business, regardless of sector, we utilize best practice standards and robust insurance to minimize the company’s liabilities.
You can sleep well at night knowing that your money is invested in high quality commercial multifamily real estate with professional asset managers who have eliminated all debt and legal liability for you.