All Forum Posts by: Chris K.

@Jacob Lapp

I'm a lawyer but I get asked a lot to do "consulting" work for real estate projects. They may not need my legal help but they may need my help with underwriting, financing, construction planning, etc. For those types of projects, I typically charge them 1/2 to 1/3 of my lawyer fees. I don't mind the discount since it's fun. 

In terms of charging friends, I mostly deal with other professionals and business folks. So they generally have no qualms about paying me if I needed to get deeply involved. But I agree with others that you want to be sensitive to time. For example, I won't bill my full time talking on the phone when we spend half of it socializing. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Kyle McCorkel

In many situations, you are "lucky" if you have the tax sale overturned. Many worst case scenarios I've seen involve situations where the buyer ends up with a property with tons of liens. That's an obvious risk in upset sales but also a major risk in judicial sales as well. Nothing sucks more than ending up with a property with ridiculous amount of liens from various creditors. 

You see a lot of caselaw on this topic where the buyers in the above situations make a desperate attempt to get the sale overturned. But they generally will fail. As the buyer at a tax sale, you are at the very bottom of the totem pole when it comes to protection.

Very few people have a track record of success that @David Krulac has. It can also get very competitive in many counties if there are larger players who are willing to gamble. They will buy a ton of properties at a sale with the understanding that many of them will be "duds." Hard to compete with those guys when it comes to due diligence. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@David Haynes

I agree with most of what you wrote. But when it comes to attorney pricing, it's typically more related to firm size and location than anything else. The hourly rate for an experienced attorney in say Wilkes-Barre/Scranton is likely going to be lower than a first year associate in Philadelphia at a national law firm. National firms tend to serve large, institutional clients that need a firm that can handle multi-jurisdiction projects. 

An example client might be an institutional developer from NY working on a new construction project in PA with lenders from multiple jurisdictions with a general contractor located in New Jersey. In those scenarios, they typically prefer to go with a large law firm that has experts in all those jurisdictions. In exchange for that "convenience," the client expects to pay a much higher rate --- even for recent law school graduates. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Mason Kimball

As you mentioned, I think it's a good ideal to find an attorney that also invests in real estate. I would ask if the attorney has experience investing in the type of real estate you are interested in investing. 

Below are some questions that I ask as an attorney when I need to hire an out-of-state attorney for my real estate transactions. I don't really ask them as a question --- I just naturally try to bring it up during a conversation to see what he or she has to say.  

     1. Capital Gains/1031 Exchange/Cost Seg: If I get the chance, I like to talk a bit about capital gains taxes resulting from real estate. If the attorney works with a lot of investor, the attorney is bound to deal with issues involving capital gains tax. If the attorney is knowledgeable about the topic it says a lot about the attorney. 

     2. Entity: I always like to give some scenarios and ask what entity the attorney would recommend if I was to invest with multiple folks on the deal. Their answer tends to reveal a lot about what kind of work they handled in the past. 

     3. Market Knowledge: I like to ask the attorneys about their thoughts on the market including what the market cap rates are. You don't really need to know this to be a good attorney. But again, it reveals a lot about the kind of work they do. 

With all that said, the best general bet is to go with a referral from a trusted source. This is especially true if you are just starting out. As you may know, most real estate attorneys specialize within the realm of real estate. So you may have an attorney that specializes in zoning/land use matters. You may have another attorney that specializes in residential properties. You may have yet another attorney that specializes in larger deals. My point is that when you are buying smaller investments, you may not need any specific level of expertise. So you might just be better off going with someone you can trust and will be patient with you (versus going with someone who has a very high level of expertise in a particular topic in real estate). 

Just a few thoughts!

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@David M.

I would say explore both markets. Scranton and its surrounding markets are fine rental markets. Just note that Scranton itself has more regulations to deal with and the taxes are higher (both property tax and also realty transfer tax). In exchange, Scranton generally has the highest rent in the Northeastern Pennsylvania Area. 

The fact that you are in the military means you are probably eligible for VA loans. That's a significant advantage that you have if you want to go the house hacking route. But I don't know whether it would make sense for you to do so while in active duty.

Thank you for your service by the way!

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Chris Horton

You are probably best off using the $250k as a down payment to buy a large enough property where you can have access to a good team including a good property manager. Could be commercial or residential. You can also reduce the risk by under leveraging the deal. 75% isn't too high but perhaps it's safer to be around 65% to 70%. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Felix Stone

It's a complicated question. You can try to do a search for the "Howey Test" and see what you think. This is a pretty good article on the topic: 

https://www.foley.com/en/insights/publications/2020/02/when-real-estate-transactions-securities-risks

One common confusion I see is the difference between what each member is allowed to do versus what member actually does. For example, take a five-member LLC with one member acting as the manager. Depending on what the operating agreement says, the manager may have most of the day-to-day powers. And as a practical the matter, it might be the case that the four other members just want the manager/member to do everything.

But the fact that the other members are generally not involved in the day-to-day operation doesn't mean that it's automatically a security. This is especially if the members have powers that can counterbalance the powers of the manager. For example, the operating agreement could state that certain important decision requires majority or even super majority votes from the members.  

It's a complicated topic. My advice is to hire a lawyer to review your situation and draft an operating agreement that could most likely stand up to SEC scrutiny. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Chris Fuhry

Short answer is both. You will definitely need a FL attorney can handle the real estate side. You may need a PA attorney depending on what you are doing. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Shafi Noss

I don't see the need to form a syndication for this kind of project. You can either borrow the money from the investor and lend the money again at a higher rate. Or just form an LLC naming you as the manager and add the investor as members.

It will still cost you in terms of legal fees. But probably not much as a syndication. Note that the challenges with syndication is not just the legal fees --- it's also the time commitment to get it set up and operating properly. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Ganessan P.

What size of loans are you looking for?

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.