As a physician, I know all too well about the risk of malpractice liability - which is exactly why we physicians carry malpractice insurance. Let’s face it, we all live in a litigious society and the last thing any investor wants is an investment that brings them more liability.
 
Whether it is medical malpractice liability or investment liability, I am extremely sensitive to the concept of liability - and minimizing it. At LRG Properties, we create a platform where our clients can invest worry free in commercial multifamily investments WITHOUT LIABILITY!
 
Let’s first discuss the types of liability we face as real estate investors, and then discuss how we eliminate potential risk. Firstly, as a physician, I understand that bringing excellence to my medical knowledge and procedural skills plays a key role in significantly reducing liability. LRG Properties’ brings this same mentality to commercial multifamily investing. We do one thing and one thing only – commercial multifamily real estate. We are not holders of multiple unrelated asset types. We are professionals who work in the best markets in the country with a competent team of affiliated partners (attorneys, property management, brokerage partners, CPA’s, etc.) who are industry leaders within their fields. Our acquisition strategy is to focus on B grade properties within certain build year parameters – limiting liabilities from things like lead and asbestos. We also limit the markets that we invest in to those with favorable landlord/tenant laws.
 
Within the large arena of real estate, we also face liability from a lending perspective. Within residential real estate and smaller projects, lending is typically full-recourse. What this means is that if an investor defaults on a loan, the bank holds them personally liable and can come after the investor’s personal assets. However, with larger commercial multifamily investments, non-recourse debt is the name of the game. With this type of lending, the lender gives up the right to hold the owners liable should the property default. Consequently, they cannot come after any of the investors or their assets for any reason. The only means for recuperation is the property itself and the income the property generates. Why are lenders willing to do this? In short, due to the safety profile of this asset class. Of course, lenders will need to see that the borrower is strong financially with necessary experience. At LRG Properties, we are able to offer such and use only non-recourse debt – removing all debt liability from the investment for our clients.
 
Another type of liability we will discuss is legal liability. An example would be a tenant who tries to sue its owner for any reason. This legal liability is removed by using a certain legal structure, known as a LLC, to hold the property. LRG Properties acquires properties and forms sole-purpose entities (LLCs) which own the asset. Each of our client investors is a fractional owner, known as a member, of this sole purpose entity which owns the asset. 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. Just as non-recourse debt shields our investors from debt liability, an LLC shields from legal liability.
 
Lastly, how do we keep the business safe? After all, there is no ironclad failsafe method that can prevent a business entity from being sued. In medicine, physicians strive to follow best medical practices. Similarly, with commercial investing, it is critically important to follow a set of best business practices. LRG Properties maintains excellence of operations, strict adherence to applicable federal, state, and local laws, as well as maintaining relationships with highly qualified and competent legal counsel. In addition, at LRG Properties, we also ensure that each investment contains adequate levels of insurance – commercial property coverage, general liability insurance, business interruption or loss of income insurance, and commercial umbrella insurance.
 
LRG Properties takes a conservative, professional, and proven business approach to apartment investing - creating investments free from personal and debt liability for our investors. It’s good to know that you are safe from liability when you invest with us, so that you can focus your attention on “Innervating your Investments.”

To learn more about commercial multifamily real estate investing with LRG Properties, download your free report.

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