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SHOW NOTES FOR EPISODE 437: WHAT TO LOOK FOR IN FINDING A GOOD REAL ESTATE ATTORNEY
As a real estate investor, putting together a winning team is crucial for your long-term success. Accountants, bankers, real estate brokers and agents, and attorneys are some of the key members of your team. In today’s podcast, real estate investor and attorney Jeff Love shares important tips on how to find and evaluate a good real estate attorney.
What You Will Learn
- The 6 most important things your attorney should have
- Where to find good attorneys
- What a good real estate attorney can do for you
- Typical transactions a real estate attorney does
- The importance of proper risk assessment with any real estate investment
- How to avoid making bad investments
- Why real estate is the best investment for retirement
About Our Guest
Jeff Love
Jeff is a partner at Gibbs Giden Attorneys at Law, which focuses on real estate transactions. His practice encompasses all facets of real estate transactions, including drafting and negotiating purchase, sale, syndication, and financing transactions in connection with commercial, industrial, and residential assets. He also regularly drafts and negotiates office, retail, and industrial leases for regional landlords and tenants throughout the West Coast. Mr. Love has extensive experience drafting, negotiating, and reviewing real estate loan documents, including originations, modifications, note purchase agreements and other finance-related transactions from structuring through loan closing. He is also a licensed real estate broker in the State of California.
More About Jeff
- Grew up in Ventura County/Westlake Village area of Southern California
- Went to UCLA majoring in History and Political Science
- Had a strong interest in real estate and law
- Went to UC San Diego Law School
- Wasn’t interested in doing litigation
- Wanted to be a transactional attorney focusing on corporate law
- He inotially went to law school with the goal to learn the valuable information, be an attorney for a couple of years and then become a real estate developer
- They had family friends in real estate development
- Graduated law school in 2009
- Because of the recession, no one was hiring transactional real estate attorneys
- So he ended up getting two jobs:
- Worked as corporate attorney for a scrap metal manufacturer
- And as in house attorney for a Beverly Hills-based real estate developer
- After working on the corporate side, decided he wanted to work for a broad variety of companies of various sizes
- Joined up with Gibbs Giden Attorneys at Law
- Loves what he does
- Has a lot of variety:
- New real estate investors
- Fortune 100 construction companies
- And everything in between
- He tells people he’s a “dirt lawyer” – anything that has to do with the dirt
Traits of a Good Attorney
- Attorneys need attorneys too
- Jeff is a real estate attorney but he needed to hire an estate planning attorney to put together a will for his family
- So, he knows what it’s like to hire an attorney
- The 6 most important things to look for in an attorney:
- Someone who:
- You get along with
- Is responsive to your calls/questions
- Has a personality that meshes with yours
- You’re comfortable asking questions
- You can disclose anything with
- You can trust
- Someone who:
- In addition, you also don’t want an attorney who
- Will not bill you for every single conversation you have
- Really knows what they are doing and is fair to you
- Will get back with you quickly
- If the attorney is too busy to get back with you, you could lose a deal
- If they have other “bigger” clients who draw all their time, that could be a detriment
- The attorney needs to see you as important as the “bigger” clients and may one day be the “bigger” client
Where to Find a Good Attorney
- Referrals are you best sources of good attorneys
- Ask someone you know and trust
- There are also websites that rank attorneys
- Avvo.com
- Martindale.com
- But not everyone is listed
- Check industry trade publications
- Listen to real estate podcasts where attorneys are featured
- Real estate investing articles
- Trade events, meet-ups, REI meetings
- Get referrals from other consultants and professional people you already know:
- CPAs
- Insurance brokers
- Real estate brokers
- Real estate investors
Typical Real Estate Attorney Transactions
- Leases
- Purchase and Sales documents
- Indemnifications
- Representations and Warranties
- LLCs
- Partnership agreements
- Securities law issues
- Preferred returns
- Waterfalls or ladders – Cash flow and profit distribution on a deal with partners and/or investors
- Profit distributions
Biggest Mistake(s)
- There are lots of mistakes that can occur but not all require an attorney
- His firm had a client who had a small syndication
- The client was a developer who was tearing down small duplexes and creating brand new townhomes
- He raised money from his investors
- Had a PPM (private placement memorandum)
- He did everything like he was supposed to do but he didn’t disclose his fees
- The first question investors have is “how much is this operator making on this deal?”
- He put the fees in the proforma but not in the PPM, operating agreement, not in emails
- He was changing a “development fee” to oversee the process
- He was also changing a “construction management” fee
- He was charging an “asset fee” on the equity he raised
- None of the fees are necessarily bad but the investors need to know the fees to assess whether they feel the fees are fair to invest in
- When the project ended up not being profitable, he had a lot of troubles because the investors found out that he took these fees off the top and had he not done that, the investors may have had more profit
- He was upset because he spent 2 years of his life on this project and felt he earned these fees
- He ended up pulling funds from another project so the investors could at least get their whole investment back but they earned no profits
- Disclosures are very important so your investors fully understand the same risks that you do. You need to present ALL potential risks:
- Competition
- Environmental issues
- Etc.
Biggest Success(es)
- Doing things the way they’re supposed to be done – under promise and over deliver
- He’s had investors who created an LLC (limited liability company)
- Documented the Operating Agreement
- They an attorney to do it
- Everyone’s on board
- Then they ignore what’s in the Operating Agreement
- They didn’t give their investors K1s within the 90 days they said they would (that was in the operating agreement)
- You need to do what you said you would do
- One of the biggest areas of dispute is when operators over promise and under deliver
- It’s better to under promise and over deliver
- If you can’t deliver, make sure you communicate that fact and alleviate stress and concerns
- Communicating in person makes a big difference
Advice for Old Dawgs Looking at Real Estate Investing to Help Them in Their Retirement Years
- If you decide to invest in real estate, you’ve made a good decision
- It’s good to diversify your assets in real estate, whether it’s buying and holding, fixing and flipping or investing with an operator
- It’s a great way to be able to leave that nest egg for the next generation
- But make sure you’re doing it the right way
- If you’re investing with someone, make sure you fully understand the deal you’re investing in
- It’s not as simple as buying a stock
- You’re trusting your money to the individual that’s operating the project
- Make sure you understand:
- What types of returns you are getting
- What types of risks are associated with this type of investment
- A Fix ‘n Flip is different than buying a fourplex and trying to add value by fixing it up and leasing it
- Investing in a syndication is different than buying a strip retail center or small office building
- Understand the deal
- Understand the risks
- Understand the track record or history of the operators
- By understanding those things, that is the way you can mitigate your risk
- If you’re investing with someone, make sure you fully understand the deal you’re investing in
- As a retiree, you don’t want to risk losing the nest egg that took you so very long to build
- Instead of going for a 30% return, maybe go with a 10% return with less risk
- Jeff is investing in small multifamily properties for his kids’ future
- They are 2 and 4 years of age
- His kids own 20% of a fourplex by the beach
- They are already in the LLC
- In 30 years, when the fixed mortgage is paid off:
- That building will be a free and clear asset he can leave to the kids
- Jeff and his wife can also draw income from the building in their retirement
- They can draw equity out and invest in another property or investment
- It’s never too late to invest
- You can generate immediate cash flow to supplement your retirement
- You will be building up equity
- It doesn’t have to be time-intensive
- You can start off slow and invest with other people to learn the business and later, start buying your own
- Treat it as a side business
Rap-It-Up
- Favorite real estate book: (not really a real estate book) How to Win Friends and Influence People by Dale Carnegie
- Favorite business book: The 4 Hour Work Week by Tim Ferris
- Most valuable web site for success (other than your own): Zoom
- Favorite app: Loopnet
- Favorite quote: “The only thing necessary for the triumph of evil is for good people to do nothing.” – Charles Frederic Aked
- If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? I would use the $1,000 to start a consulting business. I could leverage my experience and knowledge in real estate to generate cash flow and then use the cash flow to invest in real estate.
How to Reach Jeff
- Email: jlove@gibbsgiden.com
- Website: GibbsGiden.com
- Phone: 310-552-3400
DISCLAIMER: Many of the above strategies take knowledge and have a higher degree of risk. You need to do your research and/or work with someone who is experienced to reduce your risk.
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2 comments. Leave new
It’s interesting to know that an estate planning lawyer can also help when it comes to profit distribution. A friend of mine is planning to start his own game development company soon and I can see how he can make it big with one good title to start with. If ever it becomes a massive hit, I can see how he will need to manage a big amount of profits.
My dad is planning to buy a building this year, which is why he’s thinking of hiring a real estate attorney that will be able to help him with the contracts. Thank you for sharing here that the chosen lawyer must be responsive to our calls. We’ll also keep in mind to avoid someone who handles bigger clients.