How Investors Can Work With a Real Estate Lawyer?

 

Ryan Carson

Sarah: Ryan, the law firm dealing with more real estate investors than ever before. Today, Ryan, we'll be sharing some takeaways as to what he believes all investors should be mindful of. Welcome Ryan.

Ryan: Thanks very much, Sarah. And thanks, REITE club in general for having me on tonight. It's my pleasure to speak to you. Thought tonight while we would do is with my presentation, really just take the topic of what do you need to know about working with a real estate lawyer as a real estate investor and really just give you three or four points that I think are pretty crucial, especially in today's market, the climate, the way it is and so forth.

It's obviously, as everybody knows, extremely competitive out there. Not a lot of supply and inventory but there's lots of people who are hungry to get properties. It's a tough market out there to buy in. And so I think that the approach we're going to take tonight was just, what do you need to know about the current market right now?

If you're a real estate investor, what do you need to know about working with a real estate investor, lawyer, and what are some problems that we're seeing that might be overcome by some of the advice that we're going to just chat about? The first thing that I would say, and this gets said by lots of individuals, I think that get up and speak to you about real estate investor advice is make sure you have a really strong power team.
You want to make sure you have a good mentor, a good coach. Good mortgage broker, realtor. You want to make sure you've got a good accountant? Make sure you have a good lawyer. Make sure you've got this power team in place to help you to make sure you're getting started off on the right foot.

Ryan: One of the things that we're seeing right now and this is point number one about working with a real estate investor.

Three points that are crucial, especially in today's market:

1. Not everybody understands what real estate investors are trying to do or they're not aware of what are the trends that real estate investors are using for their business opportunities.

An easy example of that is wholesaling. For example, not everybody who practices real estate law understands or wants to even be involved in understanding what an assignment or a wholesale deal is. It's not probably good enough just to deal with any lawyer. And it might not even be good enough anymore to deal just with a lawyer that does a lot of real estate.

What you probably want to make sure you're dealing with is a real estate lawyer who is an investor. And so we've commented, started to call ourselves the real estate investor and lawyers because not only do we work with a lot of investors, but we are investors as well. And so we not only learn and understand what you guys are trying to accomplish and do out there.

Strategy-wise and business-wise and so forth, but we're doing them ourselves and we're passionate about it. The good part about that. We already have an idea and a headstart on what you're trying to do, whether you're a newbie or an experienced investor. We're going to think along the same lines as you. We've already gone through some of the pains that you might be going through yourself.

We might have some solutions, so I think it's really important not to just have a good lawyer or a good real estate lawyer, but make sure you have a lawyer who is a good real estate investor lawyer, whether that means they work with a lot of investors or whether that means they are investors themselves or both.

That's I think really one thing you really want to do as an investor is make sure when you're working with your lawyers specifically, that they understand what you're talking about and where you're coming from and where you want to. One of the other sub-branches of that point is the real estate lawyer needs to be introduced to your other power team members right away, as soon as you possibly can.

I think that's so crucial. And it's, I think, a point that we see a lot of our investor clients trip up on. 'cause you get so excited and you're so focused and hungry and passionate about the deal and tracking the deals down. And I get that because I'm passionate about that myself. But one of the things that you trip up on is realizing crap. I've got to make sure that my lawyer knows who my accountant is. He knows the tax structure I'm trying to do with my corporate structure and acquiring all these properties and so forth. I gotta make sure he knows who my realtor is so naturally the deals can get over to them. There can be input about potential clauses and stuff about the agreement.

He's got to know who the mortgage broker is. Because we got to make sure with these deals, we get instructed and funded, promptly and quickly enough. These are all key things that need to happen when you're working with the real estate lawyer because everybody plays a crucial role in this transaction of closing your real estate investment deal.

The lawyer though, if I can use a sports analogy is your closer, your lawyer is the baseball closer bottom of the night. You need three outs. He's the guy you're bringing in to close the deal. If that lawyer screws up or doesn't know what they're doing, or isn't well connected with your power team members, it's going to be a tough close, or you might not close.

And then not only do you have the issue of not having your deal done, but now you got your other power team members might be disappointed too, in the whole process, right? At the end of the day, it's really important. You have a strong power team. That's a must make sure the power team members all know each other.

I would make sure you're choosing a lawyer at the very least. Does a lot of real estate, but even more so is an investor or is a real estate investor, lawyer like us. I'll give you a couple real life examples that we're dealing with right now. Super busy, we've got tunnel work, which I'm very thankful for. We're really thankful to work with many of you. And so we've got a lot of work because of a lot of you. And so again, thank you for that.

One of the things that we're seeing with many of our clients. And in part, this is probably because of COVID I'm going to, I'm going to go out there and blame COVID because everybody gets the blame COVID right now COVID is really slowing down the process. And what I mean by that is everybody still wants to close in 30 days, give or take 30 days is like the expected timeline to close real estate deals. Maybe it's a little bit longer. Maybe it's a bit shorter, but everybody wants to get done in about 30 days. The issue is with COVID you have problems like appraisals can't get ordered as quickly as they did pre COVID.

You're having problems getting insurance appraisals done again, same thing because of COVID you can't get access to the properties. Then you have to do it through other means. Everything is slower to be quite honest, movement of money to us is slower from the banks, us moving money to other lawyers has to be done by wires. Typically. More secure, but it's slower. So even though everybody has the same expectation of trying to get deals done on the same timeline, or even. Because it's a really competitive market.

The problem is stuff isn't moving faster, it's moving slower. If we're not well connected with your other power team members. I'll just use the example of mortgage instructions, because a lot of real estate investor deals. Because there's added due diligence that the mortgage advisor needs to go through because this is not your primary residence and so forth. You've probably got other properties at the end of the day. It's a more complicated appraisal. It's a more complicated valuation for the mortgage agent to likely get approved and push through. And so it likely means instructions come to us.

The lawyers a little bit later in the process, a little bit slower. Throw on the top of that, that a lot of your deals will be financed from private sources. Not like TD bank or not Scotia, or not even MCAP or Home Trust or something like that. But private individuals or corporations or mixed will likely be a source of financing for a lot of you for a lot of your deals. They need to instruct through their own lawyer so you can see where I'm going here. The problem is it.

There's more parties involved and processes are moving slower because in part of COVID it's really important to get us connected so we can get the ball rolling with all the parties involved so we can make sure as you're closer, we're hopefully not going to be last minute closing. We want to make sure that we've got from our clients, the insurance information all up front, the week of closing to start the week of closing. For closing Friday, we want to have an insurance binder Monday. We want to have mortgage instructions on Monday. We want to be signing on Tuesday with the client processing Wednesday, Thursday, registering Friday. Boom. Perfect. Close. This is all reiterating, hopefully.

And supporting the point that I made, which is it's really important to choose a real estate lawyer who is a real estate investor as well, make sure they know your power team, introduce them to everybody, email, phone calls, zoom calls, whatever, and let us as the closers really work with your team and your other power members to get what we need from them as early in the process as possible. That's really crucial. That's I think something that we're seeing commonly right now with with the high volume that's been a bit of a struggle is there's so much volume out there that things are getting left to the last minute and getting extensions right now is extremely difficult because why would you extend if you're a seller, why you can put it back on the market and probably sell for more money.

You don't want to lose a deal. You don't want your name becoming synonymous with somebody who can't close deals. So it's really important to again, have a lawyer who knows real estate knows investors, even that's even. Have them connected to your teammates, your team members on your power team and allow the lawyer as the closer of your transaction to make sure they're pulling everything they need from all the power team members as early as possible in the process. So that would be point number one and I guess one B.

2. Do your due diligence in working with anybody on your power team with your partners, like your investor partners that you might JV with or go into business with the lawyer, do your due diligence really feel comfortable.

With the people that you're going to be working with and you're trusting your business with. I actually was talking to somebody today and I, I didn't, I've never heard this before. I don't think I really enjoyed it. I'm gonna, I'm gonna steal his statement, which he said he got from one of his mentors there and there's the chug test.

You need to be able to feel as though the people you're working with. You could go down the street and chug a beer with, you could sit down with them and you could have a talk with them and you could just openly shoot the breeze back and forth. And those are the type of people that you want to work with.

You need to do your due diligence that you're working with the right people, trust your gut. If your guts are telling you that this doesn't feel right, like these guys are great. I know they're really successful. And what an opportunity for me to work with these amazing investors. But I'm just not feeling it. It doesn't seem like it's the right fit for me. That's not a bad thing. Trust your guide. And I love that quote, that chug test. So I'm going to go with it and say, make sure, you could chug a beer with the people that you're getting involved with, your power team members, your investors, all those people make sure they satisfy that chug test.

The other thing that we would throw under this due diligence piece and working with your lawyer is, and this is going to help you immensely, as you're getting closer to the finish line to close, that deal is you want to make sure with the value of properties, skyrocketing, like crazy. You want to make sure that you've done your due diligence, especially on an assignment.

You want to make sure that what you're going to agree to buy the property for the appraisal is gonna come back at least that amount, because another real life example that we've seen in the last month is unfortunately, a couple properties have not come in. The appraised, like the appraisal value has come in low.

Then what the purchase price is, or the assignee purchase prices, which then really created a big problem for our client's financing. Fortunately, the deals were able to close because we were able to get creative, find some other solutions with their brokers and so forth deals were saved, but it changed the scope of the deal for them.

Make sure with your, when you're looking at due diligence, it's not just okay. That your people check them out, make sure you've got the chug test going. You can be open and honest with them and really see yourself working longterm with somebody. But also make sure you do your due diligence with values, really make sure that what you're offering to buy, whether it's, straight from the seller or on a wholesale deal through my example that I gave you want to make sure the appraised value or what you're paying is going to come back in, in the appraisal. You want to make sure that you're not going to get stuck in a situation where you offer to pay 500,000 and the best it's possibly going to come back at is 400. Cause how are you going to, how are you going to finance that a hundred thousand dollars premium all of a sudden.

3. Making sure that when you're working with your real estate investor lawyer, make sure that you really go through a thorough job of making sure that you've got all your stuff in writing. Get all, get everything that you need or want about a deal. Get it in writing that means for the actual real estate transaction itself, you have, you want shadows and fixtures included or excluded. Don't go on the handshake. Get it in writing, just put it in the deal, put it in the agreement. If somebody is supposed to give credits, put it in the deal, make sure stuff's in writing.

Same thing goes with your doing your partnerships, with your business partners. It'd be great. If you could do all your business on a handshake, I'd love that. It would really give me a sense of confidence in humanity again, but the problem is I don't think that's what most people can do. You need to have an agreement so that when there are disagreements, It's in black and white for both of you, for all parties involved on what you agreed to and what you didn't agree to and what the course of action is to solve problems.

You’ve got to have joint venture agreements in place. If that's what it is. If you're doing a GP LP structure, you have to make sure you do all the paperwork on a GP LP. If you're doing corporate structure and you're going to be all shareholders in a corporation, have a shareholders agreement in place. Don't cheap out on that. Don't take the easy road on it. Whatever, or like whatever the reason is, you're not putting stuff in writing. Don't do that. You want to make sure you put everything in writing so that you can work with the right people. You guys can accomplish great things and the documents all be in place to protect you all.

Ryan: That's what I would say are the main points that we wanted to talk about from a point of view of working with a lawyer. And what do you need to know as real estate investors? I think we've given you some, real life examples of what we're seeing, what we're, what we're going through right now in the marketplace. Certainly it's an exciting time for real estate investors and we're seeing a lot of new and we're seeing a lot of season one.

I'm doing quite well out there right now. Hopefully what I've just mentioned to you will be helpful. Hopefully some of the points I've said we'll give you some help with vetting partners doing your due diligence and just introducing your power team with your real estate lawyer. So we can close everything up for you.

Sarah: Ryan, that was awesome. We are actually a little bit ahead of time, so I'm gonna ask a couple of questions from the audience if that's okay. But before we do that can you just briefly talk about, and I know you mentioned a few things, but what you have helped people with is select joint venture agreements, shareholder agreements. So if any of that stuff, like a paralegal, maybe just walk through like a list of all the things that we might need at some point that you're capable of, to do for us.

Ryan: We really have probably four divisions that would be crucial for the real estate investor client. I think a lot of real estate investors. Get focused, obviously naturally on the real estate deal itself. And so obviously, can we do the transaction, the purchase, the sale or refi, we can do all that. Can we lend the money? We can do that. But they, a lot of people would then maybe focus on potential corporate structuring.

Incorporating companies, sometimes, depending on what their accounts are recommending, we're doing family trusts. We're setting up, then supporting documents around partnerships as well joint venture agreements, shareholder agreements, partnership agreements, all of those things. Again, we can do one area that I think a lot of real estate investors do. Forget about, but it's really a crucial piece. If you want to talk about preserving and protecting your portfolio, your building is your wills and estates. Have you done an estate plan? If you had liked your, if you came to me and you had your one property, your primary residence, and then all of a sudden.

You've bought an investment property, then you bought two investment properties, then all of a sudden, by the end of the year, you're at 12 investment properties. They're probably all at least worth a couple hundred thousand bucks. You're you've got quite a bit of a portfolio there that if you suddenly die, what's supposed to happen to all of it.

There's lots of people that don't take us up as much on the wills and estate planning work. And hopefully this is a little plug to tell people like don't forget that, don't forget. Yes. Do the real estate deal. Of course. And yes talk to your accountants to make sure you've got the right structure in place and we can help with that structure, the corporate stuff. That family trusts possibly like partnerships and so forth.

We can do all of that. But don't forget about having a really important piece in play too, which is your, your wills and your powers of attorney and any additional estate planning that might be recommended by the lawyer and the accountant. That can be very crucial, right? Because most people probably are. Suspecting, they want to do what you guys have done, you've retired and now you've moved on to your new life as real estate investors and moguls and, they want that, they want to have that career path. And if that's what you're doing, then you need to protect that.

One way to do it is making sure you have Goodwill's good powers of attorney, good estate planning. That's the third piece. And then the last one, which as you mentioned, is our newest sort of division of Carson law is paralegal services. We're trying to focus mainly and only for the landlord. Tenants have enough rights already.

We're trying to really be for the landlord. So we're really trying to be just for you guys, just the landlords, the investors we aren't taking on any tenant cases. We're here for you guys. We're here to help you, with whatever happens to be an 11 and 12 drafting, lease agreements whatever the case is. We've got a full time paralegal that works with us on staff and both her and I, and my associates, Sean we're all happy to help landlord investors if that's, if that's your thing.