Real Estate Lawyer Questions

12 Replies

What do you think would be some good qualifying questions to ask of a prospective real estate lawyer? For context, my business partner and I are just starting out in real estate investing in the Boston area, and we are building our contact list. First on that list will be a real estate lawyer so we are developing somewhat of a shortlist of vetting questions and focus points.

Originally posted by @Gabe Smith :

What do you think would be some good qualifying questions to ask of a prospective real estate lawyer? For context, my business partner and I are just starting out in real estate investing in the Boston area, and we are building our contact list. First on that list will be a real estate lawyer so we are developing somewhat of a shortlist of vetting questions and focus points. If you are a real estate lawyer in my area, I welcome a direct message too!

 Real estate attorneys fill a variety of roles. It depends on why you need a real estate attorney.

@Account Closed We are initially looking for entity formation assistance. From there, we are securing our first starter property to buy-and-hold, so a lawyer who can help sure that up and fill any gaps in our knowledge would be most beneficial.

Originally posted by @Gabe Smith :

@Mike M. We are initially looking for entity formation assistance. From there, we are securing our first starter property to buy-and-hold, so a lawyer who can help sure that up and fill any gaps in our knowledge would be most beneficial.

You likely want an LLC then. Keep in mind that an LLC only protects you if you follow ALL of the rules of the LLC. You are better off getting umbrella insurance for your first couple of properties.

An attorney is used for drawing up agreements, closings, evictions, lawsuits, estate planning, asset protection, that kind of thing. For what you want you should first watch videos and read about "buy and hold" until your eyes glaze over. It's free and you can re-read the material. 

Attorneys go fast, cover things you have no idea about, use words that are unfamiliar and rarely take the time to educate you to the point where the conversation is meaningful for you. They "do", rather than "educate". They ask what you want them to do for you. If you don't have the basics down you are wasting your time for $300 per hour.

Your first focus should be finding a property. Then you have a specific event to discuss with an attorney. 

Hi @Gabe Smith ,

To be honest, a lawyer shouldn't be on your list of contacts at this point. You might actually need the following lawyers:

- Landlord / Tenant (if there is an issue in the future or to review your leases)

- Small business (for LLC creation)

- Real estate (to handle closing)

Some lawyers can do all three tasks, others only one. Any competent real estate lawyer can handle your closing. You actually need to pay the bank's lawyer, and in some cases your lawyer can represent the bank, and in other cases it will make financial sense for you to use the lawyer that the bank chooses.

You can form an LLC in MA very, very easily. Of course for the actual LLC agreement between the general partners you will want to go to an attorney. To avoid potential conflicts of interest, each LLC partner may want to have their own attorney (of course costs will go up).

Finally, although lawyers often give a "free consultation," no lawyer is going to want to sit there and feel like they are being screened by gotchya questions. Attorney generally charge between $200 and $800+ an hour, so keep that in mind when creating a set of screener questions. You should generally feel a good level of comfort with the attorney you choose and obviously they should be competent. 

-Dan

Updated almost 2 years ago

I'm an attorney. Unfortunately that fact was edited by the moderator because I said you could feel free to message me via BP.

@Gabe Smith I don't mean to be a smart *** but ask them questions you don't know the answer to. Most new investors have a thousand questions. It shouldn't be hard to come up with some. 

I would ask, "Being new what are some of the areas I should learn about first? "  Most new investors are incredibly ignorant of the law. That is gong to cost them, possibly big time some day.  

If you want to know what questions to ask in selecting an attorney, I would be asking other experienced investors who they use. As  @Dan K. said even within real estate there are many specialties. I work s with many different attorneys depending on my specific need.

This is a good article to help you screen attorneys that you may work with. When meeting with clients the first order is to discuss (A) their personal assets, (B) break down their current investments portfolio and other business ventures before discussing any (C) future goals. Each of these variables will dramatically change the advice for the individual asking this question. I often break it down into the "five pillars" of protecting your assets.

1st pillar is avoiding unnecessary and risky activities (don't drink and drive, insurance generally won’t cover your poor decisions) and take good care of your investments - these simple steps will help you prevent lawsuits before they even occur.

2nd pillar is a good insurance policy as that cover the majority of your exposure. However, insurance is limited because it only protects you from one type of liability: accidents/negligence. Insurance doesn’t protect you from any part of the sale or acquisition of a property (e.x. Somebody wanting to sue for you backing out of a bad deal or accusing you of selling them a property with defects like unknown termite damage). Insurance also doesn’t protect you from misunderstandings, especially those made in writing and email. What happens in these misunderstandings is that something goes wrong either in the sale or after, and then they sue you for some statement you made that they “misunderstood”. That lawsuit is a claim for fraud, and that’s what fraud typically is...a misunderstanding and someone being “injured” and wanting to hold the other responsible for it. Insurance never protects you from these kinds of claims and they happen all the time.

3rd pillar applies after you have good insurance You need to protect yourself from what insurance doesn’t cover by compartmentalizing your assets. Compartmentalization means that if something happens to one property they can't touch you or the other properties. You should use either LLC's (the old and expensive way) or a Series LLC (the new and more cost/time effective way). No matter where you live or where you own assets, I personally recommend the Series LLC to be a great tool for the individual investor who is planning to expand their operation, as it allows for you to scale infinitely for FREE- check out this article to learn more.

4th pillar is somewhat similar - you want to separate your operations from your assets. One company owns everything and does nothing (this is your SLLC a/k/a "asset holding company") and a completely separate company handles all of your operations (this is a traditional LLC a/k/a "operating company") For the operating company which serves as your face to the world and through which you do all your business, you establish a Traditional LLC to carry out the operations of your investments. The operating company takes on all of the liability that would otherwise blow back on you including: paying property management, paying contractors, collecting rent, marketing, etc.

5th pillar is owning everything anonymously. If people don't know what you own, then they are less likely to sue. People don't sue people that qualify for food stamps. This anonymity can be accomplished for free by using Trusts to own your companies as well as the assets. Trusts create this anonymity by removing your name from public record. Even if they can see you used to own a property, when properly transferred it will look like it was sold to investors. If they somehow guess you are the owner still, it doesn't matter because you are not the owner. The trust and the LLC are the owner of the asset/real estate, so even in the scenario that they guess, they guess wrong.

While not everybody needs a full blown entity structure when they are just getting into real estate, it's always a good idea to try and build out beneficial relationships when getting into the industry. Finding any professional (banker, CPA, attorney, contractor, property manager, etc) who also has personal experience in your type of investment is like getting super powers. Always a good idea to try find professionals to add to your real estate investing team!

This isn't legal advice, just my opinion as a real estate investor.

You'll be surprised at the questions that will come to you once you start interviewing. For instance, we recently needed an attorney's advice when filing for a patent and trademark which we knew nothing about.

So we went to Upwork and Upcounsel (freelancer sites) and posted a job for patent attorney. We didn't really know what to ask. But by the time we got through all of the interviews, we felt like experts on the subject and had a good plan to move forward.

There are also attorney's right here on BiggerPockets who will be happy to answer some of your questions.

Just throw an attorney an easy task and see how well they do it. If they screw up something small, move on. If they are difficult to work with, move on. If they are good then keep them. There are lots of good attorneys. And lots of bad ones who know how to answer all your questions.

Originally posted by @Jason Chambliss :

@Scott Smith is it true some states are better than other when it comes to LLC's ?

All states will operate a bit differently as they are the ones who set the requirements for operation and the legal precedent for charging orders. Some states are easier/cheaper to operate out of while others have stronger charging order protection. These can be small or large differences. As an example: Texas has a $50 annual fee for an LLC, while California has a minimum of $800 annual franchise tax. So it is good to compare and find the one that fits you best.
https://www.llcuniversity.com/llc-annual-fees-by-state/