Show Summary

As a real estate investor, are you facing unnecessary legal risk for not having your ‘business in order’. Most likely, you are. Attorney Marc Schwartz tells us some of the most common pitfalls that real estate investors face, and how to fix those gaps. Most are very simple, but can wipe you out if you don’t protect yourself. We also discuss how critical it is to have a great real estate attorney on your team, and how to go about finding the right one for you. Don’t miss it, in today’s FlipNerd.com Flip Show!

Highlights of this show

  • Meet Marc Schwartz, real estate attorney.
  • Join the discussion on how many real estate investors leave themselves completely exposed to significant legal risk, and how it can be avoided.
  • Learn some simple tips on how to properly raise private money, how to avoid legal issues with tenants and much more!

Resources and Links from this show:

  • Marc Schwartz Law Firm: 818-804-4691

Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

Mike: Welcome to the flipnerd.com podcast. This is your host, Mike Hambright, and on this show I introduce you to expert real estate investors, awesome entrepreneurs and super cool vendors that serve our industry. We publish new shows each week and have hundreds of previous shows and tip videos available to you, all of which you can access by visiting us at flipnerd.com or visiting us in the iTunes store.
By the way, flipnerd.com is the most robust social platforms in existence for real estate investors, where you can find off-market wholesale deals in your market, find great local vendors to help you and your business in your market and socialize, learn and grow with others in our industry. There’s truly nothing like it.
If you’re not already a member, please visit us at flipnerd.com today, where you can set up a free account in about 30 seconds. Everybody’s doing it, the cool kids and even the nerdy ones, so get on over to flipnerd.com. And now let’s get started with today’s show.
Hey, it’s Mike Hambright of flipnerd.com. Welcome back for another exciting VIP interview, where I interview successful real estate investing experts and entrepreneurs in our industry to help you learn and grow. Today I’m joined by Marc Schwartz, he’s a real estate focused attorney that has shaped his practice around assisting real estate investors.
There are a ton of ways, as you all know, that real estate investors can get themselves into trouble and today Marc is going to share how to avoid many of the pitfalls that investors often face from raising capital to tenant issues, to different contract issues and, of course, just general liability issues that you may face as a business.
As you grow your business, it’s critical that you have the legal protection and the things in place that you need to help you sleep at night, if you want to run this as a business for the long term and not just a hobby. Before we get started with Marc though, let’s take a moment to recognize our featured sponsors.

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We’d also like to thank National Real Estate Insurance Group, the nation’s leading provider of insurance to the residential real estate investor market. From individual properties to large scale investors, National Real Estate Insurance Group is ready to serve you.

Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions as real estate investing can be risky.

Hey, Marc. Welcome to the show.

Marc: Hey, hey, Mike. Thank you very much for having me.

Mike: Yeah, yeah. So glad you’re here. This type of stuff is something that is not necessarily the sexy side of the business, but it’s something that really can’t be talked about too much, right?

Marc: Right, absolutely.

Mike: Yeah, yeah. Well, before we get started though, why don’t you take a moment and kind of tell us your background and how you got into practicing real estate law.

Marc: Absolutely. Actually, I think our story is kind of interesting so hopefully it won’t be too boring for some of your listeners.

Mike: No, no, it’s good.

Marc: So I have real estate in my blood. My family actually owns some real estate and my dad was an entrepreneur. And when I went to law school, one of the things I wanted to focus on was real estate. I think real estate is one of the greatest wealth creators in the country. So I did litigation for a little while because people said it would be fun, but I find real estate to be much more fun.
So I went to go work for a real estate investment company, a large family-owned real estate investment company that owned property all over the country. And then I went to go work for a real estate developer. And I found that it was missing something. Even though I was doing a lot of real estate, I was doing much bigger transactions. And I wanted to do the smaller transactions. I wanted to connect with the individual investors.
I thought it was much more fun. I thought it would be much more of a rush. So I decided to start my own firm, and I built my firm around both of those expertise, both helping the large investor, the banks, the financial institution, and the small investors, the mom and pops. And I think that my experience in both of those areas really allows me to give some good advice both to investors and to the developer, and also to the lender.

Mike: Yeah, yeah. I came from big, corporate America and sometimes you’re doing things, but you don’t really see a face behind it. It’s like, “Who’s this for? Who am I helping here or who am I hurting here? What is going on?” So I could appreciate working for the smaller guy or working with the general entrepreneur that could be your neighbor, or your doctor, your person next door, right?

Marc: That’s right. The nice thing about real estate is that sometimes you have the big boys and mom and pops going after the same type of investment. I mean, real estate in the United States is very accessible and it’s also unique, as we all know, every piece of property is unique. So the opportunity to work in that, I just find to be fulfilling and fun.

Mike: Yeah, yeah. Well, and today we’re going to talk about a lot of the pitfalls that investors face. And I hope I don’t steal your thunder here, but one of the more basic ones that kind of comes to mind is that a lot of folks start out as kind of a hobby, they want to see if this works, and then later set up a legal entity. They’re running effectively a business without even having a legal entity at that point. I mean, it’s that something that you see that is fairly common?

Marc: Yeah. And you’re not stealing my thunder. It was going to be one of things I talked, but yeah for some reason . . . Actually it’s not for some reason, people are afraid that it’s going to cost them too much to do things the right way. So they figure they might as well put their toe in, try it out, and then see how it goes.
The truth is you’re playing with fire. It’s a Russian roulette game. To do things right, even if it’s a hobby, you’re going to need to build yourself a team. And to me, one of the essential members of that team is your lawyer. The other essential members are you need a CPA, you need a broker and you probably need a financial institution as well.

Mike: Yeah. I’ve talked about this a few times before with other guests. It think that there’s a lot of people that get started in real estate and, of course, there’s a large percentage of people that fail, largely because they never treated it like a business, they just, “I’m going to try this and see if it works.” And then almost by design it doesn’t work because they didn’t treat it as a business.
But I feel like people that come into it from the perspective of, “I’m going to build my team, I’m going to spend money on marketing, I’m going to do all the things that a business has to do,” have a much better likelihood of being successful. But you’re right. It’s a critical role to have the very things you just mentioned. Of course, the lender and other things, but an attorney really is critical part of that.

Marc: If I may, what’s interesting is I’m in California and real estate is a little bit different here, I think, than it may be in other parts of the country. Real estate is extremely hot in California. People see real estate millionaires and billionaires and they think they want to be a part of that.
But to your point, you’re not playing with small amounts of money. You’re spending hundreds of thousands of dollars, and the fact that people don’t think to themselves, “You know what? If I’m going to be risking or playing with this much money, I need to do it right,” always amazes me.

Mike: Yeah, yeah. So what are some of the advice that you give people on . . . from a legal, without getting into a lot of details, just in terms of . . . because I know we want to cover a number of things, but in terms of what they should consider in terms of setting up a legal structure at the beginning?

Marc: Okay. It really depends on your role. If you are an investor it’s going to be different than if you’re a developer, it’s going to be different if you’re a lender. But let’s start with the investor. If you’re an investor and you are, let’s say, buying a piece of residential real estate, there really is no excuse not to form some sort of limited liability company.
Corporations are not usually recommended for real estate in the United States. I really do recommend that to be LLCs. There’s also land trust, but LLCs have been a really reliable form, at least in California, of owning real estate. And it’s not that expensive to set up, especially compared to how much you’re spending in real estate.
And it’s not that much money to maintain. Now, setting up that LLC has to be done in such a way that you really do protect your other assets. And that’s something you would talk with your lawyer about because you have to create that firewall. If you don’t create that firewall correctly, then the LLC is almost meaningless and people can get at your assets. So making sure that you have that proper foundation laid is absolutely essential.

Mike: Yeah, yeah. Okay.

Marc: And in insurance too. Sometimes people say, “Well, if I have enough insurance, I don’t need to do any legal structure.” That’s not the case and we can go through plenty of examples, but I’m sure people can imagine as well.

Mike: Yeah, yeah. And of course, there are lots of tax benefits to getting your legal structure set up properly as well.

Marc: Absolutely.

Mike: Or the other way around, lots of tax burdens if you don’t get it set up properly.

Marc: Right.

Mike: Well, Marc, what are some of the other pitfalls that you see real estate investors face that, if done properly from a legal perspective, they could avoid?

Marc: Well, like I said, it depends on your role. I had a recent client who came in, and unfortunately he did not seek an attorney before investing, I think it was, a million and a half. I mean, he was a wealthy investor, but it’s still a lot of money to everybody. And he had loaned some money to a developer as part of a joint venture. But the documentation wasn’t set up correctly and the developer had no obligation to use that money on the project that the investor thought that he was in. So some of that money was siphoned off. It also turned out that there was a first loan on the property, so my client was in the second position.
And they required my client to sign what’s called an inner creditor agreement, which is an agreement with the senior lender that you’re going to follow their rules. Well, my client really didn’t know what he was doing, didn’t have an attorney, and things went south. And when things go south like that, you call an attorney. And then the attorney has to unravel.

Some of the things he didn’t know was in that inner creditor agreement it said that he couldn’t foreclose. He has to wait until the senior lender goes ahead and forecloses, so he was kind of stuck in this horrible position of just waiting to see what happens. Also, with the money being siphoned off, he had no way to control it. I’m looking at the documentation. The documentation didn’t say that the developer had to use it for this house. The developer was using it for some other houses. So getting your documentation in order is so essential.

Mike: Yeah.

Marc: So I don’t know if you want to . . .

Mike: Yeah, maybe you could take a second, Marc, and just talk about . . . it kind of made me think of not necessarily formal joint ventures. I mean, joint-ventures is kind of like a broad term that is used for a lot of things, but I would say that there are a lot of partnerships, whether it’s just two people that met at an REI club and want to get started together or find some way to work together.
So small kind of partnerships are very common in real estate. Maybe you can share some kind of general advice on how people should think of that. Because I think often they think, “Well, we trust each other, and we’ll worry about that.” But maybe just talk a little bit about how people should think about those relationships, forming those.

Marc: Yeah, it’s funny you say that, Mike, because that’s probably one of the most common issues that I face. And the fact that you said that joint venture is a broad term shows that you actually have a fair amount of experience in that. Because when other people here joint venture, they think it’s just a partnership.

Mike: Yeah.

Marc: And not necessarily is that the case every time. A joint venture, as you said, is getting a meeting of the minds of two or more people for a specific project. When that happens you have to document it in writing. Now, a joint venture can take the form of a general partnership, it can take the form of corporation, it can take the form of an LLC, or it could just be two people who own property together.
So my recommendation is that we always formalize it. I just did a joint-venture agreement, actually, this week. We didn’t do an LLC, but each of the joint ventures had their own LLCs and then I did the joint venture agreement between the two. And that was a very good way of doing it because that means each side has their own protections, and then we have an agreement that dictates how they’re going to act. And being able to understand whose responsibilities are whose is so easy if you put them in writing. If you don’t put them in writing, it’s just a recipe for disaster.

Mike: Yeah, and I would say even outside from the legal part of it, I think I deal with a lot people, I’ve mentored a lot of people and have a lot people in my network that I see that are in partnerships, and are working together and they can end badly if you haven’t documented not so much the legal side of it, but just the expectation of who does what, who’s responsible for what and how each person will participate.
Because even aside from the legal issues that may come out of it, I think if people aren’t really clear about who does what, then somebody ends up feeling like they’re doing more than their share of their work for what they’re getting paid for. And that’s the beginning of the end many times.

Marc: And to that point, Mike, if I may, as I mentioned, I consider myself the entrepreneur’s lawyer, so I have a really good business sense and we have a number of resources that we actually can provide to people. So the situations that you’re describing and that I’m describing, it’s often friends and family, to be quite honest.
But there are other ways of doing it that I think are even cleaner. We represent a fund that actually does hard money loans to these flippers. I know that not all of your viewers are flippers, but having that degree of separation, having that formality of a lender and you’re the owner, really kind of cleans things up a lot and you don’t have the situation where you have one side thinking they’re doing more than the other.

Mike: Right, right. How about just generally? I know one of the areas you wanted to cover is lending and there are so many people, I see them all across social media saying, “Hey, I’ll pay 12%. It’s the safest investment you can ever make and I’ll pay you 18% on your money in two months,” and lots of guaranteed things, which you and I both know doing that is generally illegal.
But there are a lot of myths that people think, “Well, I won’t get caught,” or, “I’m just trying to do a deal or two, nobody’s going to come after me.” Or maybe they don’t even realize that actually could be illegal or probably is illegal, so why don’t you share some just general advice on people who are trying to raise money, how they should look at this differently.

Marc: Okay. Well, we’re going to get a little bit wonky so my apologies.

Mike: Let’s get wonky.

Marc: We’re going to get a little bit wonky. So in the United States, if you offer interest in any sort of investment that is a security, pure and simple. It doesn’t matter if you’re offering shares in real estate or stock, people usually thing that securities are a stock, but if you’re selling interest in the real estate product, that’s a security.
Every security either has to be registered with the SEC, the Securities and Exchange Commission, or there has to be an exemption. If you are what’s called an accredited investor, meaning that you have a million dollars of net worth or you’re earning about a quarter million dollars a year, the government considers you to be sophisticated, and you have an exemption.
Anything less than that, you’ll probably have to file with the SEC as to how you are advertising you security interest. So it’s really important for people to understand what it is that they are investing in. In our office, we help people understand what they’re doing and what is legal and not legal.
Friends and family, people don’t usually think about it, and for those people who are raising money outside of friends and family, you really, really need to be concerned about securities regulations. That’s why I said I think it’s much cleaner if you want to do a hard money loan, for example, to find somebody who’s sophisticated, who has a reputation. It’s all about the due diligence. Some of it it’s common sense, but a lot of it you need the expertise of advisors who have done it 100 times before. In our office, we believe that the advice that we give and the fees that we charge pay for itself.

Mike: Why don’t you talk about, for people who do this right, to be able to raise money publicly, what is the general cause? Without getting into details of how to do it, which we could have an entire show on that, obviously. You said this before when we talked about legal entities. There are a lot of folks that associate . . . it’s like pain versus pleasure, right?
They’re like, “What’s the pain of me doing this?” It usually is associated with cost, so if somebody wanted to kind of get this structured properly, work with an attorney to get this set up, what is the general cost and time to kind of do it the right way?

Marc: Okay. So if you are going to raise money from the public, you absolutely, positively need an attorney. Anybody who tries to raise money to the public without going through an attorney will get burnt. It’s not a question of if, it’s a question of when. So maybe you’ll get away with it on one project, but you’re not going to get away with it on all your projects.
In terms of the time and complexity, it really depends on the offering that you’re really doing. I mean, if you’re looking for several million dollars, you’re going to have to have, what’s called a private placement memorandum, and having that PPM reviewed by an attorney and making sure that it complies with the SEC regulations is critical.
And then you also have to check to see which person is being distributed that PPM because you can’t just give it to anybody. In terms of cost, it’s really hard to say. It depends on the size, but I mean you’re going to be spending some significant money if you’re going to be offering interest in a security to the public.

Mike: What if you’re on the smaller side? Is there a line somewhere that’s like if it’s over a million dollars, here’s the path, or if it’s under a million dollars, is there kind of a baby step?

Marc: You know, like I said, if you’re offering interest to the public, at that point you’re automatically subject to these SEC regulations. If you’re just doing a one off project, you just have a residential home, you can talk to us. And in our office, you don’t have to go through all those regulations. It’s going to be a lot cheaper; it’s going to be a lot easier.
But it’s still going to cost some money, but not nearly as much as it’s going to be cost if you’re trying to offer it to the public.

Mike: Okay, okay. So raising money is another pitfall that is, gosh, super common. I bet you the majority of people that are out there as real estate investors, a lot of the independent people are probably doing it generally wrong.

Marc: Yeah, I’m sure they are. And listen, one of the common refrains in real estate is OPM, other people’s money. And if it’s not a negative, I mean, most real estate people become rich because they did use other people’s money. But using other people’s money comes with a really big responsibility, and part of that responsibility is getting proper legal and tax advice.

Mike: Right, right. So what are some other issues that we face? I think you mentioned just kind of a general liability, making sure you have coverage for your business. Is that what you wanted to talk about in terms of liability perspective?

Marc: I’m sorry. Can you say it one more time?

Mike: In terms of a pitfall of just being protected for just kind of general liability for your business, is that an area that you see that’s kind of a common pitfall for folks?

Marc: Yes, it is a common issue. I mean, we talked a little bit about LLCs, we talked a little bit about insurance, and we talked about SEC regulations and that sort of thing. Making sure that you have covered yourself in terms of due diligence is probably another pitfall that people don’t necessarily realize that they are doing wrong.
For people who are familiar with commercial property, everyone does a phase one. A phase one is through this institute called ASTM, and it basically gives you a background on the property, its past uses, its title issues. It’s primarily used to make sure there’s no environmental contamination. We’ll see that all the time in commercial property.
Residential properties, not as common, but I think it’s essential. I think that doing an ASTM phase one report, just to understand what your property was used for in the past, is knowledge. And anytime that you have knowledge, you’re going to have more protection against anything that might happen in the future.

Mike: And how do people start that process? Maybe share a little bit more for those that have no experience with commercial real estate. What would that look like for a residential deal.

Marc: It looks very similar to commercial deal. There are many, many vendors out there who basically do this service. And I mean, I’m sure we could get a number of recommendations of these people. They’re in the neighborhood of $1,000 to $5,000, they’re not huge costs, but they do give you the information that you need.
And in terms of new investors or new real estate people, if you’re really brand spanking new, you really need to assemble that team. You need to have that lawyer, you need to have that tax person, you need to have that broker, and you need to have an environmental consultant, in my opinion. I don’t know about Texas, but in California we have a lot of methane issues.
And there have been properties that have been totally done because they didn’t realize that there’re environmental issues underneath their house, but the EPA comes in and says, “You can’t build on this,” or somebody comes and freezes your project. So making sure that all of these ducks are in a row is critical.

Mike: Okay, okay. Good to know. We talked about before, just general contract issues, what are some of the most common contract issues you see people just doing totally wrong? I’m sure that in most states, for non-attorneys, the contract is a lot of goobledy-gosh, especially for cash buyers. They think, “Well, most of this doesn’t apply to me. I’m just paying for cash.” What are some common issues you see people face that are either on the buy side or the sale side with general state promulgated contracts?

Marc: Great question. And I wish more people would ask that question. Unfortunately, they don’t.

Mike: I didn’t ask that question until I bought hundreds of houses, by the way, but tell me, oh great one, what I need to do differently. No, seriously.

Marc: Okay. There are two types of contracts that we have to differentiate from the beginning. So in California we have the California Association of Realtor contract, which is a pre-printed form by the Association of California Realtors. What people don’t realize, in a lot of those contracts is that they are geared towards the buyer.
So if you’re a buyer, I think nine out of 10 times, that contract’s going to serve you very well. If you’re the seller, however, it may not serve you so well. So for example, the buyer’s deposit. So from the seller’s standpoint, that buyer’s deposit can be fully refundable to the buyer all the way through the closing. As the seller, you want them to waive their contingencies. You want them to be hard, as they say.

Mike: Have some skin in the game, yeah.

Marc: So drafting the contract from the seller’s point of view to make sure that your buyer is committed is really, really important. Reps and warranties, those are huge. You want to get as much as you can from that seller as to that state of the property. You want to know what problems they’ve had, you want to know what issues have happened in the past, any sort of knowledge that they have.
And in our office, we go through this step-by-step because we want to make sure that the buyers get all that information. Now, from the seller’s standpoint, you want to release yourself of all liability as much as possible. You never want a buyer to come back at that some later date and have someone tell you that, “Oh, shoot, you didn’t disclose this. I’m going to sue you.”
By the way, that’s where that whole liability thing comes back into play. If you had an LLC or you had some other liability protection, that protects you as a seller not just while you own the property, but after the property and until that statute of limitations runs out. From a buyer’s standpoint, this is something interesting. Most people don’t think about arbitration being bad.
They think arbitration’s great, it’s going to be cheaper, but from a buyer’s standpoint, you may not want arbitration. You may want to be able to go back to court, get a jury, and show the jury how you have been totally wronged. You may or may not want it, but I’m just saying it’s something that people sign blindly and it’s up for discussion.

Mike: Yeah.

Marc: So just to review, dealing with buyer’s deposit, dealing with reps and warranties, dealing with arbitration and mediation. I think those are three of the things that we really have to look at. Or how about this one, this is something that happened not too long ago. What happened if the property burns down while you’re under contract? Who’s responsible? You, as the buyer, do you have to buy it and just accept the seller’s proceeds, like their insurance proceeds? Or do you get to walk away?

Mike: Wow.

Marc: These are some of the things that people . . . it’s amazing how so many people sign the contract thinking, “Okay, I’m paying this much money, I have this much time to close, and I’m done. And I’ll get title and I’ll be done.” It’s not that easy.

Mike: No.

Marc: And in our office we try to hold people’s hand, depending on their level of sophistication, showing them what they don’t know. There’s a colleague in my office, he likes to say one clause can kill you, you know, like the clause.

Mike: Yeah.

Marc: And it’s true. A clause can totally tank your deal.

Mike: Yeah, yeah. I can even share some personal information on something, what we typically use for seller’s disclosure. I’ve actually been sued a few times, I don’t generally share this a lot openly, but I’ve been sued a few times now. Every one was for a seller’s disclosure issue.
We were being sued on things that they said we purposely omitted. They weren’t even part of the form, it’s just things that we should have known, that we didn’t disclose. And in every instance, to be frank, it was frivolous. It was stuff that we truly did not know and we were kind of put in the position of usually calling my personal character into question, which I hate.
My attorney is like, “It’s just business. It’s a business decision.” Everything I do is a business decision, but when somebody calls my personal integrity into question, knowing that we’ve always tried to do the right thing with everything, that’s always bothered me. But one of the big lesson’s I’ve had coming out of those instances was . . .
And this is not something I hear real estate investors talk about ever. We have a general liability insurance policy to cover us for certain things, but at least in Texas we were always sued under the guise of fraud. It was fraud. And part of the reason they do that is because if they could prove that, they get triple damages, but what I didn’t have, which is what I advise everybody to get now, is literally an errors and omissions policy.
And agents and brokers have them, but most general real estate investors, if they’re not an agent or a broker, don’t have them. So that would have at least helped provide some coverage for the expenses that we bore. Even though they were frivolous and things like that, there still are costs associated with attorneys and all that kind of goes along with that.

Marc: You know, Mike, good for you, because the biggest issue when it comes to real estate lawsuits, in my opinion, is money. And if somebody can outspend you, they’re going to try and that’s one of the ways they intimidate you. And the personal character stuff, I actually had a similar case to that not so long ago where the buyer was suing the seller because he didn’t disclose alleged soil slipping. The land was on a hill, so it naturally had some soil slipping. It was common sense, but they sued for it because there’s no penalty for suing.

Mike: As long as you can get an attorney to take it on, contingency for a while, which doesn’t necessarily last forever, but yeah. Okay. Well, enough about me, Marc. What are some other things we could share with people that they should look out for?

Marc: Yeah, in California, attorneys are supposed to only represent themselves as people making good faith arguments. But a lot of times, the arguments that are made are not even made in good faith. It’s frustrating. Real estate, it could be glorious or a deep inferno. So, you know, it’s feast or famine, boom or bust, lots of different expressions. I happen to think it’s great. And by the way, if you do it right, like you’re doing it, then it’s going to be fantastic.

Mike: Yeah. Well, Marc, we only have a few minutes left here. I know that one other thing that you wanted to talk about is related to rentals and tenant issues. And I know those differ quite a bit from state to state, but maybe you could share some kind of general ways that some pitfalls you see and how people could protect themselves in that regard.

Marc: Absolutely. I told you we have some family real estate, and one of the lessons that my dad taught me, especially when it comes to rentals, is you would rather have your unit or your apartment or your house vacant for longer than have a bad tenant. So making sure that you rent to the right tenant is worth a hell of a lot more than having that unit vacant for another month or two.
In California, we have something called Rent control. I don’t know about Texas, but in California, the tenant has all the rights. And being able to navigate that minefield, and it is a minefield, it’s something that you don’t want to deal with without an attorney. I get a number of people who come into my office who want to do eviction that tried it once or twice before, it got rejected, and they just gave up and said, “I need an attorney.”
For people who buy foreclosures, and foreclosures are still pretty prevalent, one of the things that you really need to be aware of is this thing called the Protecting Tenants at Foreclosure Act. And under this law, which has been renewed every year since 2010, and I’m not sure if it’s going to ever stop, tenants who are living in the home that gets foreclosed upon have an automatic 90-day right to live in that house without you being able to kick them out.
Now, there’s some twists and turns to it.

Mike: Specifically that’s California, you were saying.

Marc: No, no, no. This is federal. This is a federal law signed by Obama in 2009, I believe. It’s called the Protecting Tenants at Foreclosure Act, and if you’re buying a foreclosure this is important. And by the way, if they have a lease, let’s say it’s not month-to-month, you as the landlord or as the new landlord have to honor that lease until the end of the term.
So what you end up getting sometimes is fraud. Just out and out fraud. “I have a five year lease.” Well, we all know it’s fraud, but now you have to go through court and you have to prove that it’s fraud. So buying foreclosures can seem like a really good deal, but if there are tenants in there, you have to keep in mind that this could be a really dangerous thing for you. You maybe think you’re doing a really great deal in the beginning, and before you know it, it’s snowballed into the area where your need to call our office is immediate.

Mike: Wow, I didn’t actually realize that. Well, Marc, I definitely appreciate your time today. Kind of any final words of wisdom for real estate investors, just a general summary of how they can kind of . . . I think a lot of people that are real estate investors, if they are just getting started or if they’ve been doing this for a while, they really want to spend their time getting their business off the ground or growing it.
And sometimes, while these things are really important, it’s like changing your oil, you know it’s time to change it but I’ll get to it later. It’s easy to put it off. What is some kind of general advice that you can give to people to just start easing in to make sure they get some of the protections in place that they need?

Marc: Well, I want to go back to what you said in the beginning, which is don’t treat this like a hobby. Treat it like a business. And the things that you don’t want to deal with, put people in place and they’ll deal with it. So in our office we are your firm. Get your accountant involved, get your insurance broker involved. If you create a team that can do all this stuff that you either don’t want to do or that you want to put off, then you can concentrate on all this stuff that you do want to do. It may cost you more.
Listen, it’s a business. It may cost you a little bit more but there are two things you’re going to get out of it. One is you’re going to get qualified people and two you’re going to sleep better at night, because I’m telling you, what’s going to happen is you’re going to be at a party or you’re going to be at some function, you’re going to be at a real estate club, and someone’s going to mention something to you that hadn’t thought of and knowing that you put that team in place in the beginning will give you the peace of mind of knowing that you have that covered.

Mike: Yeah, absolutely, absolutely. Well, Marc, thanks again for your time. Thanks for sharing all that great information today.

Marc: Yeah, thank you, Mike. It was a lot of fun. And I wish all of the people that are watching this the best of luck. As I said, I think real estate is the greatest, neatest wealth creator in this country. I mean, I don’t know where else you can go and have someone loan you 80% of the deal and you can keep 100% of the profit, but it’s fun. And we’re all doing it because we enjoy it.

Mike: Yeah. Hey, Marc, also can you share if folks want to learn more about you and your practice, where should they go?

Marc: I really appreciate you asking me. You can go to our website, which is www.mjslawfirm.com or our phone number is (818) 804-4691. And if you want any information, we have a general email that will always get responded to, and that’s info@mgslawfirm.com. And we welcome anybody to call us. We’re developing some great programs here in our office. I think people will find them to be cost effective and incredibly great in terms of return.

Mike: Okay. We’ll add all the contact information down below the video here. Hey, Marc, maybe you could clarify too. Do you work with people that are just in California, or other parts of the country as well?

Marc: We work primarily with people in California, but we do work with people all around the country. Depending on the nature of the real estate transaction, we will work with people all around the country.

Mike: Okay, fantastic. Marc, thanks again for you time today, my friend.

Marc: Thank you, Mike. I really appreciate it.

Mike: Okay. Have a good day.
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