Continued from last week…
JMD: Have integrity. What I mean by that is if you agreed to something, then follow through with it. Sometimes I’ve had to adjust my billing because I said, look, we can do it for this amount and then it wasn’t quite as simple as it looked, and we had to put in more time to do research on this one. Keep your word. You know, even if it hurts, even if you may have to eat some of the profit in this deal, because that integrity will follow you through. In business, it’s not a one-shot deal. You’re not going to make one sale and if you want to make one sale to one client and that’s it, then you’re done. Your business is over. You did one sale and it better be a multimillion-dollar profit because then you can retire. But unfortunately, there’s very few businesses that can give you that. So, you need to have that integrity and build trust and build relationships because if you don’t have those relationships, people aren’t going to come back for more. They’re not going to refer their clients. And unfortunately, the nature of humanity is for every happy client, you have only one in ten that is going to say something nice about you. For every pissed off client, you have, they’re going to tell 10 people about it. So, you know the math is already working against you. You’ve got to always do what you say and always follow that. What happens is people who have heard the bad talk are going to see that doesn’t make sense because every time I’ve seen him, he says this he does exactly what he says. So, you have integrity.
Kash: Follow through. Be a business man or woman of your word and ask for the sale. I know you’ve got some more but I do want to touch on that you are writing on another book.
Kash: What’s the name of that one.
JMD: That one is called The Three Bucket Method.
Kash: Ok. We are going to get the three-bucket method. We got an exclusive. So, what is the three-bucket method?
JMD: Well, it’s The Three Bucket Method for Asset Protection. I stole the three-bucket method idea from Scouting; so, all you scouters out there, you know where I got it from. But basically, it is a way of evaluating risks in a person’s portfolio. Okay. Now everything you own is part of your portfolio. So, you know you start off with your operating business. Okay, that is the highest level of risk because in that business you’ve got employees, you’ve got equipment, you’ve got contracts, you’ve got all kinds of things that can go wrong that are not in your personal control. You may wind up in a situation where your employee went to go grab lunch for the staff and was in a car accident. Right. Okay. And so and then they get a TV attorney to represent them and now your business is pulled into this mess. Now you’ve got this situation where your business is on the hook now. If you haven’t set up an LLC or a corporation or you haven’t set up a business entity to protect you from your business, guess what? This thing is going to follow you until they get everything, or you claim bankruptcy, and nobody really wants to do that. So, when you separate that that first bucket you’ve got the moving parts. That’s what I call the moving parts bucket. And from here, you can have different types of businesses, different layers of businesses in different entities. You want to separate those from each other. The second bucket is what I call the dirt bucket and like the name says, it’s real estate. So, in here, my recommendation and what I like to do is not have more than five hundred thousand dollars in aggregate value. So, you have multiple casitas that you are renting out. You don’t want to have more than one with five hundred thousand dollars of value for a single property in one LLC.
Kash: What happens if I go outside of the five hundred thousand? And why the $500,000?
JMD: $500,000 is because that’s all I’m willing to bet on. The misunderstanding people have about how LLC’s work and business entities work for asset protection is that they protect you from you as the owner and that they protect you from what happens inside. So, if in real estate, let’s say you have a little rental house that’s worth fifty thousand dollars and you have a million-dollar ranch and you put both in the same L.L.C. because you say, well, I want to spend more money on two LLC’s. Well, that little house burns down. Somebody gets hurt. They sue. You say, Hey, well I did an LLC, so I know I’m not going to be personally liable. OK, but LLC is liable and what does the LLC own? The million-dollar ranch. So, guess what? That ranch is going to go to two to that attorney and you’re going to lose what’s in there. If you just had the three little houses there and then you had the ranch in a separate LLC and you have that same situation happen, your ranch is protected because it’s separated from everything.
Kash: And the funny thing is that nobody thinks about that and we don’t think about that enough. We don’t think about liabilities and we think, “Oh! That’s not going to happen to me”. And then when you start getting into the meat and potatoes of assets and as a sole proprietor, a corporation, LLC, all of these partnerships…all of these things are super important questions. I have talked to a lot of people here locally and nobody talks about liability. And I’m glad you’re bringing it up because, man, it is something you really need to think about. Something happens, you’re right, you have an employee there in the company car that they crash, and they hit somebody. Now your business is on the line.
JMD: And so those are the two big risks. Now the third bucket is what I call the paper bucket. So, the paper bucket is where you have your excess cash. You have your retirement stocks and bond accounts, where you would hold the shares of these other companies. OK. So, I know what you’re thinking, “Mike, you just told me that everything has to be separate. You’re putting everything together!” OK. Well let’s revisit the protection that the entities give you. Okay, so we are talking about the inside risk. Now, that’s the risk that happens when something happens inside the business: your employees, the property damage…whatever is inside. That risk can hurt you. In the paper bucket, we’ve eliminated that risk because this company only owns shares. It doesn’t manage the business, it doesn’t operate it, it doesn’t do anything, it doesn’t even own the real estate. It owns the company that owns a real estate. OK. So, the internal risk is eliminated there. Now, the external risk is, let’s say me as a human being has an accident and one of those TV lawyers is on the other side and they get a million-dollar judgment. Well, they’re going to come after it and say, “Oh great! It’s all in one LLC”. They’re going to come and the only thing they can get is a charging order. And that charging order basically is an order of the court that says if you make a distribution you’ve got to make it to the one that has the judgement. We’re never required to make distributions.
Kash: And it only affects that bucket, so to speak right.
JMD: Right. And this bucket is really at the end of the pipeline.
Kash: So, these other operations can continue generating income.
JMD: Right. And if you need cash you can get a salary from any of those companies. You can even get salary from this company and it won’t be affected by the charging order because that only affects distributions.
Kash: So, we go with the three-bucket method. Obviously, this is where JMD, attorney at law, comes into play and the business owner says, “Okay, want to be protected”. I come to you, you would then separate these entities and it’s called asset protection.
JMD: Right. So, what we do is we set this up, but then I tell my clients, okay, now yes, we have asset protection but that doesn’t mean to get rid of your insurance. Okay. You still want to have insurance because you want somebody else to pay for the lawyer. If there’s a loss, your insurance company will defend your claim if somebody sues you. Somebody has to pay the attorney and you’ve got to be responsible. If you or your company did something, you need to be able to step up and make it right. So, you need to have insurance. Now, we’ve created this structure. Well…how are we going to get that to your kids? So that’s where we need to then do an estate plan. And how are we going to pass this on? Are we going to do gifting? Are we going to wait till we pass away and have that pass under a will or do we want to create a living trust and have that just go outside probate and transfer directly to your heirs? So, it’s a big project to do this, but the earlier you start when you’re starting your business and you start off right and set up your entity to give you that protection, then you can say, “Hey, look! I’ve raised enough money to dip my toe into real estate and I’m buying little fourplex”. Well, let’s create the entity to buy the fourplex. So now you’ve got two buckets going.
JMD: And as you grow that, then you start seeing how once you have something to lose, you really start worrying about the risk. That’s when you would shift over and then add the third bucket.
Kash: And at that time, if we are already at a point where we’re on the edge, already going into some sort of litigation, it’s too late.
JMD: Correct. And if you wait until you get the demand letter from the attorney, it’s too late. Because anything you move after that could be subject to a fraudulent transfer. So, you will get sued again to undo that transaction. So that’s one of those things where you’ve got to do it before you need it, like your will. It doesn’t have any effect until you die. If you didn’t do it while you’re alive, it’s not going to be there. And it’s so much more expensive and so much more of a hassle to have to do probate without a will.
Kash: Yeah, especially when there’s like feuding family members.
JMD: The worst thing is when there’s no will and all there is maybe a bank account that nobody is the beneficiary on and the bank says I need to have a court tell me who I can give this to. But, you don’t know how much money is in there because they can’t tell you that either and it’s going to cost a whole bunch of money to be able to find out who it is. So, you may wind up spend five thousand dollars on a probate to get three thousand dollars out of a bank. So, a lot of times, people just say, “Well, I’m going to walk away from it” or they’ll spend the money and then they’re frustrated because they spent all this money and yet they don’t have anything to show for it.
Kash: There was only three hundred dollars in the bank account. Grandma wasn’t specific. Would you say the Three Bucket Method is just another tool on our road map to rich?
Kash: So, I guess the one thing that I will say is that the road to starting a business or getting into real estate is not easy. It’s not an easy one and it’s not meant for everyone but for those of you that do have a business or thinking of starting a business I will say that it is definitely rewarding. If, you have not picked up a copy, where can everybody get a copy of this? It’s on Amazon, right?
JMD: Yes, you can get it on Amazon and right now we have a promotion. If you go to our web site or you go to our page on Facebook or Instagram, you can request a copy.
Kash: I got my autographed copy. By the way, how big is your wife been in in your life? In this? I see that you inscribed it.
JMD: Yeah… don’t read that because… I’ll tell you the story, it’s another story.
Kash: But let me ask…My wife is kind of like my business partner. Even though she’s not in my business but she’s my business partner. Would you say that your significant other your business partner?
JMD: Well my wife Cat, she handles all our all our marketing and so, a lot of the Facebook things that come out, the Instagram things, our newsletters… she puts it together. Things that require me to write, you know, she’s on me, “Hey, we need to get something out”. So, she handles a lot of that marketing. She coordinated this particular event.
Kash: She’s your manager.
JMD: Yep yep.
Kash: Well, shouts out to Cat. She’s a marketer. She does a really good job. And you know, the short time that we’ve known each other, I can tell you that from a marketer’s perspective, that you’re doing all the right things to promote the book and she’s helping you along the way. So, I did want to commend you guys on being a great team because you do need a team to make your business work.
JMD: You need to have that support. When you get home, you need to have somebody who’s got your back and is going to be on your case about, “Hey, this bill hasn’t gotten paid. What are you going to do and why are you still doing that if things aren’t working the way I wanted them to”. So, somebody who’s got support, who’s a support system. But who is also realistic, and they’ve got to bring you into reality because sometimes, as entrepreneurs we get so wrapped up in the deal, in the project that us. Forget about everything else.
Kash: We put out heart into it.
JMD: Yeah. “And you know like I didn’t notice we’ve been eating beans and rice for six months”. So, those are things that, you know, you got to have them be able to bring you back to reality but not slam you into the ground in reality.
Kash: We will end with this one… so, ten years from now, Joseph Michael Dickerson is….
JMD: Back in real estate. Maybe a few more book. Helping People.
Kash: Cool! Well, you’ve helped me with your book. I was really, like, Wow! I didn’t think about it that way. When I was looking at the road map and looking at some of the ideas, like “Have you tried this, and have you tried that?”. So, there’s really good pieces of advice, especially in the planning part of business, you know, have you have really planned it out this? Have you thought about it this way? And so, I really commend you on this book. It’s really well written.
JMD: It is on Amazon and you can pick it up or just on your Facebook page your page or on Instagram.
Kash: Either way, you can pick it up. It is the road map to reach a lawyer’s perspective on getting and staying rich. Joseph Michael Dickerson. Sir, it is a pleasure having you on. I appreciate it. Look out for the next book which is coming your way.
JMD: We’re still in the editing stage so we don’t have a release date yet.
Kash: OK. So, be on the lookout for The Three Bucket Method as well. I’m interested in checking that out. Excited for you. And it’s always cool because again, you’re from Laredo. You’re an author, you’re writing books. Not every day you run into an author from Laredo who is still writing and producing books on a regular basis. Thank you so much again for being a part of it. Ladies and gentlemen again I’d like and share our program. It is called Grow Yourself. It is all about the entrepreneur and self-development, helping you grow yourself, grow your community and again like and share photos on Facebook.com/growlaredo. A Big thank you to our sponsors Family Chevrolet and Family Nissan for keeping the lights on. We thank you all for watching. A big thank you to Joseph Michael Dickerson for joining us today. Again, this has been Grow Yourself. Take care yourself and keep on growing.