Real Estate Investor bLAWg

More End of the Year Tax Planning Strategies for Real Estate Investors: Radio and Webinar

2011-12-14T11:06:00.000-08:00

This is important and time-sensitive. There are certain estate and tax planning strategies that can save you money, but you have to act now. Some of them have a December 31 deadline.

My partner, Michelle, who is certified as a Specialist in Estate Planning, Trust & Probate Law by the California Board of Legal Specialization of the State Bar of California, was on the "Best of Investing" radio show recently discussing these strategies. Click here to listen to that show now.

To hear many more "End of the Year Tax Planning Strategies for Real Estate Investors", from Michelle, Jeff and others, make sure to register for this December 19 complimentary webinar (just click here now).

Neighbor Problems Can Reduce Your Property Value--How To Solve Them

2011-11-28T10:06:00.000-08:00

Your home should be your oasis—the place where you can escape the stress and challenges of the rest of the world. But what happens when you’ve got a problem with your neighbor? Often those disputes can escalate to Hatfield v. McCoy proportions, costing you tens, or even hundreds, of thousands of dollars to resolve and getting so bad that you actually dread going home just because you have to confront your neighbor problem.

I have lectured on the multi-dimensional topic of neighbor disputes at the USC Gould School of Law and we have dealt with these turf wars extensively at our law firm. They cover a wide range of topics, with some of the more common controversies involving:
• Boundary lines
• Easements
• Encroachments
• Fences
• Trees
• Views
• Remodels and/or additions
• Water
• Shared driveway
• Noise
• Second-hand smoke
• Nuisance
• Waste (including poorly maintained home, delayed construction, unkempt yard)

There are a number of reasons why property owners should consider consulting a lawyer as soon as possible when a difficulty arises with a neighbor. First, the law requires any unresolved neighbor problem to be disclosed to a prospective buyer. If the problem is significant, it could have an impact on how much a buyer is willing to pay for your property or, in serious cases, make your property unmarketable (buyers usually don’t like to step into the middle of a hotly-contested unresolved neighbor battle or buy a property with a neighbor nuisance that has not even been addressed).

Second, these neighbor quarrels tend to be driven more by emotion and principle than logic. There seems to be a “How dare they?” factor in almost every neighbor dispute. An experienced lawyer can help you defuse some of the emotion, deal with the situation more rationally and, if appropriate, prevent your “molehill” from turning into a “mountain”.

Third, the laws in these disputes can be deceptively complicated. Depending on the issue, you may have applicable laws and ordinances at the state, county and/or city level. Then, there are court decisions that interpret and apply those laws and ordinances. All of those authorities need to be identified, understood, evaluated and applied to your unique facts just to determine who’s right, who’s wrong, and what the strengths and weaknesses are in your respective positions. You need a lawyer to make sure you’re analyzing the situation clearly and correctly.

Finally, you need to understand your legal rights and remedies in each situation. Those rights and remedies could translate into bargaining power you didn’t even realize you had and make all the difference in how your problem gets resolved.

We had one client, a very nice lady named Elvera Ralph (who kindly gave her permission to allow us to use her story and name), who had a boundary dispute with her neighbor. That neighbor had built improvements decades earlier that had gone over the boundary line or “encroached” on Ms. Ralph’s property by almost two feet (two feet may not sound like much, but when you multiply it by the length of the encroachment, it was a big chunk of land that was appraised at a significant value). As a result of our involvement, we resolved the dispute through mediation and Ms. Ralph was quite pleased, as she wrote in her kind letter below*:

"My case, by most accounts, was just about a lost cause from the very outset. You took me seriously, did not give up on me, did your best to inform me of all the obstacles without discouraging me. All your hours of research and planning did lead to exactly what I hoped for, the acquisition of a 22.5 inch strip of land.

Many, many thanks and my most sincere and best wishes for more successes in the years to come."

Elvera Ralph
Inverness, CA

If you would like to read testimonials from other satisfied clients, click here.

We can help you with your neighbor problem, too. If you would like to discuss this topic further, please e-mail me at jeff@lermanlaw.com.

*Testimonials or endorsements do not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.

Asset Protection Lesson From Joe Paterno's $1 House Transfer

2011-11-17T07:44:00.000-08:00

We're getting lots of great real-world asset protection lessons lately ripped straight from the headlines. Yet another one came out yesterday. It drives home many crucial lessons that frequent readers of this bLAWg will recognize from my past posts, yet they absolutely bear repeating.

As most of you know, Joe Paterno, the just-fired coach of Penn State, is in the crosshairs of potential plaintiffs for his alleged misconduct relating to Jerry Sandusky (if any of you are not up to date on this story, just Google those two names). The New York Times just published a story that Paterno, on July 21, transferred his interest in his home to his wife, as trustee for a trust, for $1 plus "love and affection".

Yesterday, Forbes published an article entitled "Paterno House Transfer Won't Shelter Him" that does a very good job presenting the asset protection issues triggered by the Paterno transfer. Pay attention closely as you read some of the highlights:

[R]eaders need to know: if, as a result of the scandal, Paterno is sued and found to be personally liable, the July transfer would probably not stop the house from being used to satisfy a judgment against him....

The reason stems from state and federal laws that prohibit what are called fraudulent conveyances: transfers of assets made with the intent to hinder, delay or defraud creditors (those are legal buzz words in italics). Creditors include everyone from disgruntled spouses and ex-spouses to people who win lawsuits against you. If a court finds there has been a fraudulent conveyance, it can declare the transfer void and order the assets be made available to creditors...

...[A]s a rule of thumb, you must transfer the property before there is even a hint of trouble on the horizon....[Note from JHL: Read that last sentence three times. It is the most important sentence in any asset protection article you will ever read]

There’s a lesson there, but it has nothing to do with the latest sex scandal. The take-away is that preserving resources for yourself or future generations goes beyond sound investment and money management. You also need to guard against losing assets to creditors...

Keep in mind that in tough economic times, people find reasons to sue. It’s prudent to ensure you are not an easy target.
...
An ideal time to address the issue of asset protection is in the course of creating or revising an estate plan. It is possible that some of your assets are already beyond the reach of creditors, and others could be, with minor adjustments....(emphasis added).

Whether, or how, a court ultimately decides whether a creditor can get to Paterno's home is irrelevant. What is relevant to each and every one of you is this crucial notion that, because of the fraudulent transfer laws, you must implement your asset protection plan "before there is even a hint of trouble on the horizon." And, you can kill two birds with one stone by combining that wealth protection project with your estate plan. To get more information as to how asset protection and estate planning overlap click here to read Certified Estate Planning Attorney Michelle Lerman's article "Ten Things You Must Know To Protect Your Family".

If you would like to discuss how best to protect your assets or any estate planning question, please e-mail me at jeff@lermanlaw.com. If you would like more information about fraudulent transfers, please click here to see information about an excellent home study course on that topic offered by Investor Education Institute Series.

Debt-Free in 15 Months and No More Underwater Mortgage

2011-11-16T13:25:00.000-08:00

With the lingering depressed housing market, one of the most common requests we get from investors is to help them deal with the enormous, often life-changing, burden of a property that is worth far less than the debt against it. To give those of you in this predicament hope and an action plan, I just wanted to reprint one man's unsolicited thank you letter* (which he graciously permitted us to share with you, along with his name) for how we were able to help him effectively deal with his seriously underwater mortgage and move on with his life:

Dear Jeff,

Thank you so much for your excellent educational materials...Your materials...have given me the courage and confidence to move ahead with a strategic default.

This will free me of a 177% underwater mortgage and paired with some other knowledge will allow me to become debt free in 15 months or less.

Thanks so much for helping me get a fresh start financially. I look forward to using your services in the future as my real estate deals begin to flow in. I will also happily refer other investors your way. (emphasis added)

Have an amazing day!
Charles M. Polanski

Actually, all that Mr. Polanski did was purchase a home study course I created and offered through my real estate investor education company, called "Before You Walk Away: What Every California Homeowner Must Know About Strategic Defaults", and then he took advantage of the free lawyer consult provided as part of that course package. That was enough to give him the direction and plan he needed.

Although strategic defaults have gotten alot of media attention, it is actually a deceptively complicated topic. That is why any of you who are suffering with this stressful situation owe it to yourself to take a look at this home study course. As is true with all of the products sold by my education company, it comes with a 100% satisfaction guarantee. For more details about that product and the guarantee, please click here, see the box in the lower left corner of our law firm website, then follow the "Click here to purchase online" link. And, if you know anybody who may be struggling with an underwater mortgage, please forward this post to them. They need this information and will thank you.
*Testimonials or endorsements do not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.

What You Must Learn About Asset Protection From Michael Jackson’s Landlord’s Mistake

2011-11-15T09:57:00.000-08:00

Yesterday’s “Today Show” featured a video taking you inside the house where Michael Jackson lived at the time of his tragic death. The grim tour was led by the company that will be auctioning off the 600 items of furnishings and personal property that Jackson left behind there. Since Jackson rented that house furnished, most of those items belonged to Jackson’s landlord.

Near the end of the video, the reporter said “The homeowner….wants to remain anonymous.” Perhaps the desire for anonymity is because the proceeds from the auction will be split between the homeowner and the auction house. It doesn’t really matter.

What does matter is this. If the homeowner wanted to remain anonymous, she blew it. How? Because it took me only about two minutes to do a basic, free, public records search to find out who the owner is (to respect what little "privacy" she thinks she has, I won’t divulge her name here). I did that search because when I saw the video, I was curious (as an asset protection lawyer) to see which asset protection strategy she used to attempt to protect her privacy.

It turns out the owner, who is trying to sell the house for over $20 million, didn’t invest the relative pocket change required to protect her privacy (not to mention to guard her personal assets from potential claims of her famous tenant and his countless visitors) by setting up an entity, such as a limited liability company or a limited partnership, to own this multi-million dollar income property.

We meet with investors all the time who are seeking to protect their hard-earned assets and their privacy from creditors’ prying eyes. You don’t need to be a multi-millionaire to appreciate the value of keeping what you own or to afford asset protection. But, as I always say when I teach this topic, the single most important thing you must, must, must remember is this: asset protection is a vaccine, not a cure. You must put your asset protection plan in place BEFORE you’ve got a claim against you. Once you know, or reasonably should know, that a creditor is going to come after you, it’s too late. Virtually anything you do to try to protect your assets at that point may be set aside at that point as a fraudulent transfer.

To drive this crucial point home, let me share with you a true story. I got a call one day from an elderly man and his wife. They were both clearly shaken up. He said he had just accidentally run somebody over in his car. He said he had not killed them, thank goodness. But he was certain the victim would sue him. He asked me what I could do to protect his assets, his life savings. It pained me to be the bearer of even more bad news: there was nothing I could legally do at that point to help him (other than to explain to him the relatively minor asset protection every California resident receives under the state exemption laws). It was too late, under the fraudulent transfer laws, to protect most of his assets from the lawsuit certain to follow.

Don’t wait. Learn from the mistakes of Jackson’s landlord and the unfortunate couple.

Take action before it’s too late.

If you would like to read “10 of the Biggest Mistakes Real Estate Investors Make When Selecting and Forming an Ownership Entity”, click here now. If you would like to discuss this topic further, please contact me at jeff@lermanlaw.com.

Important News for All Owners Of Single-Member LLCs

2011-11-10T11:49:00.000-08:00

If you own a single-member limited liability company (“SMLLC”) and live in a community property state, recent developments now make it prudent for you to seriously consider adding at least one more member to your LLC (with an appropriate change in your Operating Agreement, discussed below). Many investors have chosen to hold their assets in an SMLLC because they invest either by themselves or with their spouse (a husband and wife are currently viewed as a “single member” in community property states).

A primary benefit investors seek when choosing to own their assets through an SMLLC is asset protection. However, recent cases and legal commentary now strongly suggest the asset protection benefit of an SMLLC may not be so certain. While I hasten to add that I am not aware of any published California court ruling on this issue yet, there have now been enough court decisions published in other states to give fair warning that, if and when the asset protection features of an SMLLC are tested in a California courtroom, we should not be surprised if the court follows that trend and allows a creditor to pierce the corporate veil of the SMLLC.

I don’t agree with the court’s reasoning (and other legal commentators have also been critical of the courts’ reasoning). I think it’s unfair to the independent investor, the smaller investor, and the “mom and pop” investor. The practical effect of this trend, in general, is to give greater asset protection to the larger investors who have a deal large enough for two or more partners. This is just the latest “kick ‘em when they’re down” insult to the smaller investors, many of whom are already suffering through the worst financial crisis of their lives due to this real estate downturn.

However, this is the new reality with which SMLLC investors must now deal. So, what does this mean to you? What can you do to regain the asset protection benefits you seek?

You could and should add at least one more member to your LLC. When you do that, it is important to keep the following in mind:

1. The larger the interest the second member has, the better. While no court has yet stated the minimum percentage the second member must have to pass muster as a legitimate multi-member LLC, one court has already warned that adding a second member with a “peppercorn” or very small interest will not be enough. Several commentators have speculated that a 5-10% interest may be sufficient, but until a court rules on this specific issue, therein lies yet another risk.

2. Be sure the second member pays fair market value for the interest acquired. If, for example, 5% of your company is worth $10,000 and you sell 5% to your child for $1,000, you could be deemed to have made a fraudulent transfer.

3. When you add a second member, your LLC will need a new Operating Agreement that sets forth the terms and conditions governing the member relationship. There are a host of new issues that arise when you have more than one member—issues that did not exist in your SMLLC—and you must clearly and unambiguously document how those issues will be dealt with. Our law firm can prepare that new multi-member Operating Agreement for you and we can do it on a flat fee. And, from now through November 30, we will discount that flat fee by 10% (this may not be combined with any other offer, discount or promotion). When you call, just ask for the "Blog Discount".

If you follow these three guidelines, you can once again enjoy the peace of mind that the “corporate veil” is intended to provide to business owners.

Suze Orman is Wrong About California Short Sales

2011-09-19T08:35:00.000-07:00

About 15 minutes into her latest public television program, "The Money Class", Suze Orman advises that if you have a home equity line of credit (HELOC) and you do a short sale, you have a big problem. She explains the HELOC is recourse and that even if you do a short sale, the HELOC lender can still come after your personal assets. Suze is wrong...at least in California. And her mistake could make all the difference in whether or not you decide to do a short sale.

I'm going to give Suze the benefit of the doubt and assume she recorded this program before California law changed on this important issue back on July 15, 2011. But it is essential that anybody considering a short sale get an accurate understanding of this new law (if you want to find out how you can get legal help on your short sale at no charge, please contact me at jeff@lermanlaw.com). Click here to read my article published in today's North Bay Business Journal about this important new development affecting all California residential short sales and why every homeowner whose home is "under water" must understand the short sale option.

On the Radio: How To Save Your Commercial Property From Foreclosure

2011-06-23T10:22:00.000-07:00

Jeff appeared on the radio program "Best of Investing" last Saturday and discussed the important, timely topic of how to save your commercial property from foreclosure. If you own commercial real estate, you may be encountering serious challenges right now. Odds are you have hundreds of thousands or millions of dollars of your own money (and maybe your investors' money) already invested into your property.

If you can't afford to make your payments, or your loan is coming due and you can't afford to pay it off or can't find another loan to refinance it, or if you have other challenges, don't give up hope. Click here now to listen to this free recording of this important radio discussion.

Breaking News: The Commercial Loan Modification Rules Just Changed-Impact Expected Starting June 15

2011-06-13T11:20:00.000-07:00

New rules were just issued by the Financial Accounting Standards Board that will impact commercial loan modifications. Click here to read more about this important new development in this article written by Jeff Lerman and published today in the North Bay Business Journal.

Jeff Hosts 5/1 Radio Show On The Wall St. Business Network: Hot Topics For Real Estate Investors

2011-05-06T14:20:00.000-07:00

Jeff recently hosted the Going Beyond Real Estate Show on the Wall St. Business Network (KDOW 1220 AM). In addition to discussing hot topics he's encountering with his investor clients (if you would like to discuss any of those topics, please contact Jeff at jeff@lermanlaw.com), he interviewed several guests discussing a variety of timely topics affecting investors including: the founder of the largest accredited investor only angel network in the world (this should be of interest to any investor who is looking for deals in which to invest or a forum in which to find new investors for their syndications), global and domestic economic news and what effect it has on investments, and new turnkey real estate investment opportunities (Disclaimer: Jeff's interviewing of guests does not constitute an endorsement of any statements made or investment opportunities discussed).

To listen to that show whenever you like, click here to go to the Going Beyond Real Estate Show website, then scroll down to the 5/1/11 ("Perhaps our best show this season") podcast in the column on the right and click "Download" to listen.

Important Court Ruling Affects Every Investor: A Deal’s A Deal…Except When A Court Says It’s Not

2011-05-03T20:39:00.000-07:00

In yet another head-scratching court of appeal ruling, investors were given a shocking and sobering reminder that common sense has nothing to do with the law. The court ruled that despite a clear, unambiguous provision in a written purchase agreement between two “very sophisticated businessmen, especially in real estate”, stating that a $620,000 deposit is “nonrefundable”, that deposit is refundable. In other words, the court ruled a written agreement should have the exact opposite meaning from that which both parties intended when they signed on the dotted line.

Courts repeatedly remind litigants of two well-established public policies: (1) they want their rulings to promote predictability in contracts in commercial transactions, and (2) they are loathe to re-write contracts. Yet, this particular ruling seems to fly in the face of both of those policies.

I could give you a detailed statement of facts and explain to you the court’s reasoning in reversing the lower court’s ruling on this issue. However, those details would probably just further confuse non-lawyers (if you want to read the entire case, click the link at the end of this article).

Perhaps the most important lessons to take away from this ruling are:
1. No matter how “sophisticated” an investor you think you are, you ALWAYS, ALWAYS, ALWAYS must use a lawyer before you sign any document involving real estate.
2. In this particular situation, had the parties used a liquidated damages clause or an option to purchase instead of drafting their own “nonrefundability” clause, it appears the court would have ruled differently. So, if you’re a seller, next time you want to make sure a buyer’s deposit is nonrefundable (after an agreed date), it may be better to use a liquidated damages clause or an option to purchase.
3. It’s not enough to use just any lawyer. You must strive to find a lawyer who stays on top of new court decisions affecting their practice area. How can you tell? One way is if that lawyer sends out periodic educational updates, like this, on important new court rulings.

Our office routinely assists our clients in negotiating and documenting purchase and sale agreements. If you need assistance in this area, please do not hesitate to call Jeff Lerman at 415.454.0455, x234 or e-mail him at jeff@lermanlaw.com. If you are a broker, please forward this to your clients. They need this information and will appreciate it.

Click here to read the full opinion in Kuish v. Smith.

Jeff Hosts Radio Show On Wall St. Business Network

2011-04-24T09:13:00.000-07:00

Jeff recently hosted the Going Beyond Real Estate Show on the Wall St. Business Network (KDOW 1220 AM). In addition to discussing hot topics he's encountering with his investor clients (if you would like to discuss any of those topics, please contact Jeff at jeff@lermanlaw.com), he interviewed several guests discussing a variety of timely topics affecting investors including: the impact of the new estate tax law, global and domestic economic news and what effect it has on investments, and new turnkey real estate investment opportunities (Disclaimer: Jeff's interviewing of guests does not constitute an endorsement of any statements made or investment opportunities discussed).

To listen to that show whenever you like, click here to go to the Going Beyond Real Estate Show website, then scroll down to the 4/10/11 podcast in the column on the right and click either "Stream" or "Download" to listen.

Surprising Court Ruling Impacts Every Business Contract and Written “Proposal”

2011-03-22T11:59:00.001-07:00

Every real estate investor, real estate broker and businessperson needs to know about a surprising decision handed down recently by the Ninth Circuit Court of Appeals of California. In First National Mortgage Company v. Federal Realty Investment Trust (9th Cir. 2011) 631 F.3d 1058, the Court affirmed the lower court’s decision, including a $15.9 million damages award, that a signed document—a ground lease agreement with a put and call option to purchase—was binding and enforceable despite four facts that certainly seem to indicate to the contrary: (1) it was entitled “Final Proposal” (emphasis added); (2) it expressly stated that one of the parties was “to prepare a legal agreement for [the other party’s] review to finalize the agreement” (emphasis added); (3) it expressly stated that “The above terms are hereby accepted by the parties subject only to approval of the terms and conditions of a formal agreement” (emphasis added), and; (4) it was missing an “essential” term: the duration of the lease.

Significantly, that “Final Proposal” consisted of only nine sentences, each representing a separate term of the agreement, on one page. Of further significance, it appears that the document was drafted by the parties themselves instead of by their respective lawyers.

A major factor in the Court’s analysis appears to be the fact that the parties omitted a clause that had appeared in prior drafts: that the document was not binding. Note, the parties just omitted language that the document was not binding. They did not, however, go the next step of adding language that expressly stated the document was intended to be binding. In other words, it was just the omission of the prior non-binding language alone that was enough to get the Court comfortable to imply that this “Final Proposal”, that was expressly subject to the preparation, review and approval of the terms and conditions of a formal agreement, which approval never happened, had the same force and effect as a final, binding contract.

This decision provides important lessons not only for every investor but for everybody signing any business contract:

1. It is absolutely essential that if you intend a written document to be non-binding, you must expressly include unambiguous language in the document that says just that. If the defendant in this case had done that, the decision would have gone the other way. Equally important, if you intend the document to be binding, you should include appropriate language to say that, as well. This is a strategic decision that needs to be thought through carefully for each document. Sometimes you want the document to be binding; sometimes you don’t. In our office, we have two separate “standard” forms we use as the starting point for drafting a letter of intent and memorandum of understanding. One contains language that makes it binding; one expressly states it is non-binding.

2. It is a common mistake that parties to a transaction make that they tend to handle the early negotiations on their own, without lawyers. They usually do so because they believe they don’t need the lawyer until the business terms have been finalized or they want to save legal fees or they’re in a hurry or they don’t want to scare off the other side with a lawyer. All too often, however, I see that by the time my client brings me into the transaction, they have already signed off on a document that creates a problem that is too late for me to fix. The above case is a perfect illustration of that and it ended up costing the defendants $15.9 million. Get your lawyer involved as early as possible in the negotiation and certainly before you sign anything.

Our office routinely assists our clients in negotiating letters of intent and memoranda of understanding as a quick, inexpensive step leading up to the final contract. If you need assistance in this area, please do not hesitate to call Jeff Lerman at 415.454.0455, x234 or e-mail him at jeff@lermanlaw.com. If you are a broker, please forward this to your clients. They need this information and will appreciate it.

On the Radio: How To Negotiate Better Joint Ventures and Construction Contracts and Handle Your Construction Defect Problem

2011-03-07T13:56:00.000-08:00

Jeff was on the "Best Of Investing" radio show this past Saturday at 1:00 p.m. on Fox News Radio 910 AM discussing the topics of how to negotiate better joint ventures and better construction contracts, as well as what to do if you're having a construction defect problem on your property (water intrusion, foundation cracking, etc.). Click here now to listen to that radio show.

Success Story: When negotiating loan modifications, you need “an iron fist in a velvet glove”

2011-01-31T14:36:00.000-08:00

There is an increasing amount of confusion surrounding loan modifications. The longer this challenging economy persists, the more new laws, rules, and regulations complicate this area. On top of that, individual lenders often make matters worse by adding their own interpretation to those guidelines. An excellent example illustrating how borrowers can be victimized by the “system” and how you can avoid becoming one of those victims is the true story of Susan and Robert Gerke.

Susan and Robert called our office looking for help with their loan modification. They were getting the runaround by CitiMortgage and were in serious danger of losing their home to foreclosure. Since I get a lot of calls seeking help in this complex area, I have established a referral relationship with a lawyer who specializes in loan mods. I referred Susan and Robert to that lawyer.

It took a lot of creativity, persistence and tenacity (including calling the San Francisco Chronicle to get them to write an article about the Gerkes’ plight to bring pressure to bear on CitiMortgage), but that loan mod lawyer finally got the Gerkes their permanent loan modification and saved their home from foreclosure.

Here is what the grateful Gerkes had to say:
“Our loan mod situation was extremely challenging and very complex. [The lawyer you referred us to] proved to be an excellent attorney, a trusted ally, and a tireless champion of our cause. Truly an iron fist in a velvet glove.”
-Robert & Susan Gerke
[Note: This testimonial or endorsement does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.]

You can read more about their story in the Chronicle by clicking here now.
If you are facing challenges with your home loans, you are not alone and you don’t need to navigate the treacherous waters of loan modification negotiations by yourself. Just send an e-mail to jeff@lermanlaw.com with “Loan Mod Referral” in the subject header and I will be happy to reply with an e-mail that will help you start solving your problem immediately.

UPDATE: New LinkedIn Group Offers Free Matching of Joint Venture Partners

2010-11-06T11:24:00.000-07:00

Less than one year ago, I announced my new free Joint Venture Matching Group in LinkedIn with the below e-mail. As of today, that group is 526 members strong. That's 526 free sources of potential JV opportunities. I invite you to read the below, check out the group and join (again, free). The more members, the more opportunities.

Whether you're an investor trying to hold on to your existing investments or find an "off-market" new investment that finally makes some sense, consider joining Jeff's LinkedIn Group: "Real Estate Joint Venture Matching Group-Find a JV Partner Here."

At this unique time in our economy, when loans are hard to get and it's hard to find sellers willing to sell at a "realistic" price, it may be easier to meet your investment objectives through a joint venture. This group offers a place for you to post your "need" (if you already own property) or "offer" (if you have money or services you can contribute to a joint venture) at no cost.

Click here to visit the Group now.

Who do you know who is an investor? Do them a favor and forward this e-mail and encourage them to joint the group, too.

Need legal help with your joint venture (negotiating the deal, forming it, resolving disputes)? I am The Real Estate Investor's Lawyer. I handle transactions and litigation for investors like you. Please visit our website (www.RealEstateInvestorLaw.com) or call me.

Critical Lessons You Must Learn From "The Social Network"

2010-10-31T18:46:00.000-07:00

I recently saw “The Social Network”, the super-hot movie about how “Facebook” was created. Significantly, the primary focus of the movie was not just showing how the mega-company came to be but the mega-multiple-lawsuits that almost immediately erupted among the partners involved. Those lawsuits certainly cost the litigants significant sums of money in legal fees, not to mention the loss of important friendships (one of the lawsuits involved Zuckerberg’s “best friend” suing him for $600,000,000).

This movie should be required viewing for every real estate investor-—in fact, for every entrepreneur. Put aside the fact that this is obviously a dramatization; the movie provides a great case study to see how partnerships (I use the term “partnerships” not in its narrowest sense to refer to just a limited or general partnership but, rather, to mean a joint venture between two or more people for a common business purpose, whether the legal structure is a limited liability company, a corporation or a partnership) can go wrong. Here are just a few of the lessons you can learn from it:

The Importance of Confidentiality And Non-Disclosure Agreements: One of the key lawsuits involved the claim by three individuals (“Plaintiffs”) that Facebook co-founder Mark Zuckerberg stole their idea they had shared with him when they “invited” him to “join them” and write the computer code for their new computer social network. From the movie, those Plaintiffs apparently did not have Zuckerberg sign a Confidentiality And Non-Disclosure Agreement before they shared their idea with him. Whether you’re an entrepreneur protecting your next great invention or a real estate investor seeking a partner to help you buy your next great investment property, it is a basic, fundamental “given” that you must have your future partner sign a Confidentiality And Non-Disclosure Agreement before you reveal your hard-earned proprietary information.

The Importance of a Written Partnership Agreement: One of the problems that confronted the Plaintiffs was that they apparently had no written agreement with Zuckerberg that clearly outlined what conduct by him would be a breach. This is Partner Real Estate Investing 101: you simply must have a written agreement that addresses all important issues in the partnership relationship.

The Importance of Having The Right To Approve New Partners: Another pivotal problem that got Zuckerberg into the lawsuit with his “best friend” was Zuckerberg’s unilateral decision to allow a new partner into the business without his partner/friend’s approval. That new partner drove a wedge between Zuckerberg and his partner/friend and tried to strip the partner/friend of virtually 100% of his interest in the multi-billion dollar company. A properly drafted partnership agreement would have addressed and prevented such unfair misconduct.

The Importance Of Having Your Own Lawyer Review All Documents: Another major mistake made by the ex-Zuckerberg partner/friend that apparently cost him billions of dollars was his failure to have his own lawyer review agreements that Zuckerberg’s “angel investor” asked him to sign. By the time he realized the impact of that mistake, it was too late. The documents he had signed gave Zuckerberg the right to dilute his interest from more than 30% to less than 1%. You should always, always, always have a lawyer review a partnership agreement before you sign it.

These are just a few of the traps for the unwary that are illustrated by this real-world, high-profile case study. There are many more.

Joint ventures can be an immensely powerful strategy to accomplish your business objectives faster, safer and less expensively than you might otherwise be able to do on your own. But whenever money is involved, even best friends can end up as legal enemies. You must be ever-vigilant and on your guard when you embark on these business relationships.

We can help you properly form your business relationship from the beginning and we can represent your interests if you are already involved in a partnership dispute. We are The Real Estate Investor's Lawyers and we handle transactions and litigation. Call us.

Also, for an outstanding home study course to help launch your next partnership, please click here.

Jeff On The Radio: "Insider Secrets for Lower Legal Bills"

2010-09-20T13:50:00.000-07:00

Jeff was on the radio recently discussing "Alternative Strategies in Today's Economy - Insider Secrets for Lower Legal Bills". This is a good, in-depth dialogue on an important topic that can help you collect money owed to you, even if you think you can't afford to hire a lawyer. Click here, and then click the play button under "Alternative Strategies in Today's Economy-Insider Secrets for Lower Legal Bills" (9/5/10 post), to listen to the 1-hour recorded version now.

Jeff on CNBC “Squawk Box”: How To Minimize Risks/Costs When You Sue

2010-08-23T09:18:00.000-07:00

Jeff Lerman appeared this morning on CNBC “Squawk Box” to discuss an important topic in today’s challenging economy: how to minimize your risk and cost when enforcing your rights in a business dispute. The segment explored the rise in lawsuits in this recession, the types of lawsuits, and the reasons for the increase. Jeff explained that, for good business cases, it may be possible to get your lawyer to accept your case on a contingency basis or alternative fee arrangement, as opposed to the traditional hourly fee structure. To watch that 2:08 segment now, click here. To learn how to determine if your claim may be appropriate for a contingency fee arrangement, click here. To schedule a free consultation with Jeff about your potential lawsuit, click here.

News Alert: New "Accredited Investor" Definition Effective Immedately

2010-07-22T17:25:00.000-07:00

Yesterday, a new law went into effect that immediately changes the definition of "accredited investor" under the federal securities laws, having a potentially dramatic effect on the real estate investment market and the economy. President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"). Section 413 of the Dodd-Frank Act changes the definition of "accredited investor" under the Securities Act of 1933.

Specifically, the definition of "accredited investor" contained in Rule 215 and Regulation D previously included, among other categories, "Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000". That calculation of net worth included the value of an investor’s primary residence...until yeseterday.

The Dodd-Frank Act revises the accredited investor definition as it relates to natural persons to exclude the value of a person’s primary residence from the $1 million net worth test.

The revision to the accredited investor definition as it applies to natural persons is effective immediately, with no transition period or grandfathering for private offerings that are already in progress but have not yet been completed.

This new law could have a significant negative impact on the commercial real estate investment market and, consequently, on the broader economy. The new law effectively requires all accredited investors to have a higher net worth requirement, which will mean there will be fewer accredited investors, and fewer large investments getting the funding they need to close.

With the already-challenging debt markets, this new development presents investors with an untimely double-whammy in getting the money they need to take advantage of this buyer's market.

This new development will have its most immediate impact on private syndicators and other issuers relying on the accredited investor definition in connection with ongoing private offerings that involve investors who are natural persons. Those syndicators should immediately revise their disclosure and subscription documents to reflect this modification of the net worth test. To the extent subscription materials have already been received from investors who are natural persons, private funds and other issuers should obtain new accredited investor representations are required to ensure the availability of an exemption from the registration requirements of the Securities Act.

Our law firm can help you with these new documents. Please contact me at jeff@lermanlaw.com.

Podcast: How To Save Thousands Of Dollars On Your Next Loan

2010-04-04T22:18:00.000-07:00

How much you pay in points and interest on your next loan will be directly affected by your credit score. I was a guest on a recent "Your Credit Today" podcast. During that 30-minute program, credit repair expert Angela Setters Bessard (www.conquercredit.com) and I discussed five of the most surprising ways investors ruin their credit.

What makes them so surprising are two things. First, they can happen to absolutely anybody, even high net worth individuals (these hidden credit traps have nothing to do with your ability to pay off your credit cards). Second, most of these credit catastrophes are counter-intuitive (all five happened to yours truly).

So, click here, then click on the "March 26" podcast entitled "Live phone call with a valued client and Essential Credit Tips", and listen now.

Who do you know who's a real estate investor? Forward this post to them. They will appreciate it.

Then, come back here and post a comment about the most surprising lesson you've ever learned about either how to improve your credit or avoid credit downgrades.

Jeff Lerman on Fox News: 7 Ways To Legally Delay or Avoid Foreclosure (www.foxnews.com/friends)

2010-03-31T17:40:00.000-07:00

This TV appearance is from February, 2009, but the basic principles have not changed and, given today's economy, bear repeating:

New Bank of America Loan Mod Policy: What It Means To You

2010-03-29T10:21:00.000-07:00

Bank of America (who acquired Countrywide in 2008) has instituted a new loan modification program targeted at helping borrowers who are severely underwater--with loan to value ratios of 120% or more. The bad news: it only applies to loans secured by your principal residence. So, again, real estate investors holding multiple investment homes will get nothing from this new program (at least on their non-owner-occupied loans).

The good news: without going into all the gory details, this new program will effectively bump principal forgiveness up from the bottom of the list to the top of the list for your B of A and Countrywide loans on your primary residence. That is, the bank will look to "earned' or phased-in principal forgiveness as the first step, instead of the last, toward keeping an underwater borrower out of foreclosure.

And that, my friends, is big news.

If you need assistance with your loan modification, please contact Lerman Law Partners, LLP.

5 Of The Biggest Mistakes Owners Make When Dealing With Water Intrusion (Leaks) In Their Property

2010-03-27T10:56:00.000-07:00

After a dry early winter, California is now being pummeled by storm after storm. Whether you own just your own home or hundreds of homes, condos or commercial properties, heavy, continuous rains can result in problems for your property. Those problems can range from roof leaks and window leaks to more subtle water stains, slumping decks and peeling stucco. Regardless, water intrusion, if not dealt with properly and promptly, can lead to major property losses and even threaten your health (from mold, mildew and related resulting conditions). With that in mind, here are five of the biggest mistakes owners make when dealing with these issues:

1. Repairing without analysis. There is a right way and a wrong way to protect and enforce your rights and remedies. For example, many owners are too quick to repair the leak. They tend to underestimate the problem or want to avoid a confrontation with the seller or the contractor who might be liable for the problem. However, an innocent, well-intentioned attempt by you to repair a problem could result in you destroying key evidence that could prevent you from recovering money to which you might otherwise be entitled.

2. Failing to consider all potential defendants. All too often, an owner hastily comes out of pocket to attempt a fix on their own. Or, if an owner does start thinking about other potentially responsible parties, it is not unusual for them to overlook one more potential sources of recovery. They may think the broker who sold them the property failed to disclose a problem, but fail to consider the seller, or the contractor who built the property or performed a defective repair. The more defendants you can legitimately include in your claim, the more likely you will get the recovery you seek.

3. Failing to promptly address the situation. It is not uncommon for property owners to delay in dealing with water intrusion issues. They might let the seller or contractor make repair attempt after repair attempt or may even pay for those trial-and-error repairs on their own. However, there are important deadlines, statutes of limitation and perhaps contractual deadlines that may cut off your rights and remedies forever if you wait too long.

4. Failing to consider all possible insurance. Insurance is complicated. Many property owners fail to determine all potential insurance policies they have been paying premiums for over the years that might now provide a source of payment for their water intrusion problems. Or, they might not realize how critical it is to tender their claim in a certain way to maximize the chances coverage will apply, instead of being denied.

5. Failing to consult an attorney. Water intrusion issues can lead to literally millions of dollars of damage, when you consider costs to analyze the cause of the problem, determine the proper scope of repair, deal with mold issues, and perform the repair itself. Perhaps the biggest mistake a property owner can make when confronted with these serious problems is failing to consult an experienced lawyer to guide them through the minefield of traps for the unwary that water intrusion problems often present.

If you would like to discuss this topic further, please reply to this e-mail and just type "YES" in the subject header. Our office will contact you to set up a consultation.

To read an article featuring Jeff discussing the perils of dealing with insurance companies in real estate damage cases, click here...

Send Your Kid To College For Free By Buying Instead of Renting Student Housing

2010-03-22T10:38:00.000-07:00

I have four kids, two of which are now freshman in college. Click here to listen to a recent radio interview I did where I present a personal case study showing how you can use today's real estate buyer's market to send your student to college for free...

How's The State Of YOUR Union?

2010-02-21T08:58:00.000-08:00

As our President just gave his big State of the Union speech, it is a good reminder of the need to manage your own "unions" or joint ventures or partnerships. Our office helps investors put joint ventures together, but we also help two or more partners when disputes arise, either to resolve those disputes amicably or, if necessary, through mediation, arbitration or court. In these financially-troubled times, unfortunately, we're seeing an increase in such disputes.

Recently, I appeared on "The Real Estate Guys" radio show to discuss this very topic. The show summary is below and you can click here to listen to that show now.

"Like marriages, partnerships can be beautiful or disastrous. On this broadcast, The Real Estate Guys talk to a practicing attorney who says there are things you can do to prevent problems before it's too late!

The parallels between marriage and partnerships are many, including the statistic that most break-ups are caused by financial pressures. With so many properties down in value and funding for projects nearly impossible to come by, many partnerships are in trouble. But in the midst of the carnage, are there lessons to be learned? After seeing many promising partnerships hit the skids, Attorney Jeff Lerman shares his front line experiences with The Real Estate Guys.

Jeff reveals the #1 mistake most partners make and tells us exactly how to avoid it. Like many things in life, the right things are easy to do, but they're also easy not to do. Unfortunately, the price of neglect can be very high.

Jeff also shares his #1 tip for working through challenging times with your partner(s). Some issues can be avoided. Others simply have to be dealt with. Jeff describes what he calls "the most important factor" in diffusing partnership tensions. He also shares several of the red flags he looks for in order to avoid getting into a problem partnership in the first place."

Putting a partnership together? Click here for an excellent course from our sponsor to teach you the right way to do it.

Now it's your turn. What's the single most important lesson--positive or negative--you have learned from your personal experience about doing business with partners? Comment below.

What This Blog Is About--And What's In It For You

2010-02-20T17:22:00.000-08:00

     This blog is dedicated to real estate investors (just like our law firm at www.RealEstateInvestorLaw.com). You can check back to this resource periodically to keep up to date on current topics of interest to investors just like you. I will also, from time to time, post invitations to education opportunities.
     But this blog offers you something else: a community where you can learn from your fellow investors. If there's a hot topic, it's sometimes difficult to get information from sources that don't have an "agenda". Here, we encourage you to share your expertise and insights with your fellow investors and to use their postings to help you in your investing business.
     If there's a topic you want to see addressed in this blog, either by me or just posted for input from other investors, drop me a line: jeff@lermanlaw.com. There's a lot of misinformation, risks, and pitfalls in real estate investing. Hopefully, in some small way, this blog can help you avoid all that and be a safer, more successful investor.