Categories: Podcast

108 – What You Need To Know About Real Estate Law with Jeff Love

Synopsis

Jeff is a partner at Gibbs Giden Attorneys at Law, who focuses on real estate transactions. In this episode, Jeff will clarify a lot of my questions about Real Estate Law and will let us know what to do to stay out of trouble with the SEC.

Key points

On Being A Real Estate Lawyer

Jeff starts the show off by introducing himself and briefly describing what a real estate lawyer is and does. As a real estate and corporate transactional attorney, his practice in real estate law touches different real estate asset classes whether single-family, multifamily, or industrial. His corporate transactional practice deals with a number of different joint venture financing, mergers, and acquisitions. On the side, Jeff is also a real investor where he invests in syndications as well as in multifamily properties in Los Angeles.

When Does Someone Need A Real Estate Lawyer?

As pointed out earlier, a real estate attorney can be useful in a lot of situations concerning different real estate classes. Jeff also emphasized its importance in settings like partnerships and JV agreements between parties where real estate law is much more applicable. It’s advisable to have a good team in place when you’re putting together a deal. That is if you don’t need to use them if you don’t need them. But it’s essential that a prior relationship with a lawyer or a team that you trust has been established; one who you know looks after your best interest. You may be up against a hard deadline and you may not have the time so having an attorney and a team in place makes you one step ahead of the competition.

Bad Syndication Deals And Legal Risks

What are the legal risks when you as a sponsor get burned by a bad deal? The answer is it depends, according to Jeff. As a sponsor, you should check your list and ask some questions like have you as a sponsor done everything legally that you are required to do such as complying with security laws? Did you document everything in terms of risks? Did you honor your fiduciary duties to your investors and put the best interest of the company and the project before your own? No self-dealing and fraud? The risk is if you as the sponsor didn’t do everything you’re supposed to according to real estate law. Then the investor can engage an attorney and file a lawsuit and you might be liable to refund their investment.

The Private Placement Memorandum Or PPM

Jeff discussed in detail what a PPM is, its use and necessity. Basically, a PPM or private placement memorandum is a document that discloses to a certain type of investors the risks of the investments that they are entering in. The document also summarizes what the investment is along with the terms. It outlines to an investor everything they need to know about the investment. It is an expensive document and is not always required but is mostly prepared by sponsors for accredited investors; investors that meet certain financial thresholds covered in 506B and 506C. Jeff also talked about other legal documents that real estate investors should know of such as the commercial and residential purchase and sales agreement, and the lease termination agreement among others.

The Ideal Property

Aside from being a real estate lawyer, Jeff is also a real estate investor himself. In the podcast, he describes what for him is an ideal property to invest in. Proximity is important, properties that are within 10 miles of where he is so he can manage the properties himself and save a little bit of cash flow. Familiarity with the city is also on top of his list. This helps him to have a grasp of what the properties are renting for just by looking at the pictures and what is reasonable or not. He also talked about other factors like appreciation, cash flow, and rent control.

Ending With His Best Tip

At the end of the interview, Jeff reiterated that his best piece of advice would be to always have your team in place. Know the ins and outs of the investment and the industry in general whether with the help of your team, or by going to a meetup, or learning from other investor and their mistakes. This ‘team’ is the support group that you can rely on if you have questions or you run into issues that you don’t know how to deal with.