In this segment Jim Clark answers the most popular questions that come up through his interactions with landlords and real estate investors through his presentations to local organizations, networking, one on one conversations as well as direct posting through his web site and social media.
This month the following questions are addressed:
Are mortgage brokers a good source of deals? How to make the most of it.
What is the best day of the month to use as the start date for a new residential tenant?
Are kitchen table contracts the best way to make offers for residential foreclosures?
What’s the best medium for negotiation? In person, phone or something else?
I have a deal but the terms are onerous and seem risky. What do you suggest?
If you’d like additional information or would like to submit a question for a future segment, contact us.
In this segment Jim Clark answers the most popular questions that come up through his interactions with landlords and real estate investors through his presentations to local organizations, networking, one on one conversations as well as direct posting through his web site and social media.
This month the following questions are addressed:
Getting started as a real estate investor after leaving a career in sales.
Getting started as a real estate investor with a background in commercial construction.
Finding a “friendly” attorney for my sellers.
Does it pay to get zoning approval before selling commercial land, or sell “as-is?”
Getting a 8-family house vacant – how hard will it be?
If you’d like additional information or would like to submit a question for a future segment, contact us.
If you have nothing, then you have nothing to lose. Landlords on the other hand, have a lot to lose. Run of the mill asset protection planning doesn’t cut it for landlords. In my experience, generic asset planning falls short either in the way it constricts a successful real estate operation, or in the way it doesn’t fully protect. The risks landlords face are different than other individuals and the business of being a landlord is different than other businesses. So what kind of risks are we talking about? And how do we protect against those risks?
The Slip & Fall Risks
These types of risks are those landlords face by virtue of owning property. When someone walks on the property and gets injured, they look for the deep pockets to sue. Normally, that includes the property owner. How do you protect against this risk? First, you’ll want to make sure you have the right insurance policies in place with adequate coverage. Secondly, you might want to look at why you are the deep pocket – most likely it’s your equity in the property, so you might want to look at “equity stripping” by borrowing against your equity.
Tenant Risks
What happens if your tenants don’t pay, they destroy your property, or both? The cost of eviction in legal fees, lost time and repairing the rental unit could run in the tens of thousands. Having a sound risk mitigation process in place is critical to prevent these types of costs. We assist our landlord clients in our programs by getting them set up with a strong lease agreement, comprehensive background checks and ongoing monitoring of tenant performance so we can swiftly respond at the first hint of trouble. We’ve found that processes like this can all but eliminate these risks.
Contract Risks
What if you’re sued by someone, not because of an accident, but because of a breach of some agreement? Insurance doesn’t cover this, so here’s where correct entity structuring can make a big difference. Holding title in your individual name leaves you with nowhere to hide from these risks. On the other hand, with some smart entity structuring limited liability protection can shield you from most.
Risks From Outside Interests
Many landlords are also business owners and have families. Risks that a family member might incur, and liability from your business could affect your rental properties. Here, cordoning off your “at risk” assets (your business and family risks) from your “low risk” assets (your rental properties) is crucial.
Regulatory Risks
A big part of the game when you own real estate is keeping it. Planning to make the most of the tax code (ie avoiding excessive taxation) is important. Other regulatory risks include those that come from the ever-expanding powers of cities and towns. Real property owners are never too far from the minds of regulators, and while most landlords I know would rather be left alone, towns and cities have other ideas. The negative implications of city and town overreach can be minimized by structuring your operations correctly.
As I mentioned, protecting against the risks landlords face is different. This is not estate planning (though having a compatible estate plan is a big part of asset protection planning), this is asset protection planning. This is the crossroads of life planning, business planning and estate planning. Landlords face risks from multiple sources, and they not only need to protect themselves, but they also need to structure themselves so that they can continue to grow and thrive. This is a multi-dimensional approach, on which we call upon many different practice areas as well as our years of experience in the business of real estate and the business of helping our landlords through when things go bad. Our strategies are borne from the trenches of fighting off threats for our clients.
Want to get a handle on your risks? Give us a call, and we’d be happy to evaluate your asset protection plan.
In this segment Jim Clark answers the most popular questions that come up through his interactions with landlords and real estate investors through his presentations to local organizations, networking, one on one conversations as well as direct posting through his web site and social media.
This month the following questions are addressed:
What to look out for when buying a nonperforming mortgage note in New York.
Negotiating with a seller who is looking to defer the tax liability on a sale.
Legal issues raised by a Landlord Waiver & Consent in a commercial lease.
Assigning a short sale to a buyer who is purchasing with a conventional mortgage.
Joint Venture with a minimum return and the minimum return is barely met.
If you’d like additional information or would like to submit a question for a future segment, contact us.
Jim Clark is a New York real estate attorney who represents landlords and active real estate investors.
In this segment Jim Clark answers the most popular questions that come up through his interactions with landlords and real estate investors through his presentations to local organizations, networking, one on one conversations as well as direct posting through his web site and social media.
This month the following questions are addressed:
Percentage rent structures in commercial real estate and how it works.
What you need to know if you are thinking of becoming a private lender.
Statute of Limitations on money judgments obtained from a tenant in New York.
Issues with buying an occupied bank-owned REO property.
Why you might need a “single and separate” title search.
Best way to send interest payments to your private lender.
If you’d like additional information or would like to submit a question for a future segment, contact us.
Much of your success in real estate depends on timing. As a real estate investor, you should strive to find order in the cycles and patterns of the market. Should you pull the trigger on that seemingly lucrative commercial real estate deal? If you evict your messy, property-damaging tenants now, will you be able to find a suitable replacement? Striking at the right moment can often mean the difference between success and failure. But, knowing when to hunker down and be patient is equally important.
Making Sense of the Fickle Real Estate Industry
Now I’m not attempting to forecast what the real estate market will do next year or the next five years. Or even next week. I don’t know. Anyone that tells you they know is fooling themselves, and if you believe them, then they’re fooling you as well.
I will tell you what I’ve observed about real estate investors who always seem to have the best timing. You can take from it what you will, and try to improve your operation. I’m talking about the investors who, for example, actually buy in the bad neighborhoods. They then ride the market cycle to its heights, and cash out. But before that, let me start with a question.
Take Note of the Ebbs and Flows of Real Estate
What if you could time the cycles and know the patterns? How much more successful do you think you’d be? We’re not just speaking of a market cycle, but also the rhythm of a deal. That means the stages of a rehab, the motivation of a contractor, and the thought pattern of a motivated seller. Everything is cyclical. To make the most of your efforts, it pays to know when to react, when to hunker down and when to run. So how do you do it?
The Real Estate Industry Changes — Constantly
First, you must trust that nothing happens by chance, nothing is random. Everything happens for a reason. From the revolution of our solar system within the galaxy to the appearance of mayflies in early spring to payday to the ups and downs of the real estate market – there’s an order to everything. Nothing stays the same, it’s always a little different each time around, but it always comes back around. We can say the same for maintaining a consistent cash flow— as long as you’re being proactive in your business.
Pay Close Attention to Tenants, Deals and Everything Else
Once you trust that it’s all cyclical and follows some kind of order, you pay attention and observe. Observe the patterns. Not just the patterns that will make you a ton of money in real estate, but everything else as well. Staying aware of potential issues down the line will save you time, money and frustration. Make it a game to just calmly, objectively observe. Don’t conclude, just watch.
Some of the most successful real estate investors I know spend hours just observing – the stars, the waves lapping a shoreline, the traffic on a busy street. Most are just naturally curious people and they like to learn, so they just watch, without judgment, and without concluding, just watching. When you become experienced in watching everything around you, you’ll find more ways to land unique, lucrative deals.
Over time, what happens is the patterns start to reveal themselves and over more time you start to realize that everything has a similar rhythm. As you get in tune with that rhythm you start to build your instincts for how and when things change. Once that happens you’ll realize a greater sense of ease and patience in your business dealings. With that you will get better at what you do, and greater success will come naturally.
Hire a Real Estate Attorney
Success in the real estate industry is not a short-term goal. Whether you’re planning to renovate and resell, or rent the property to tenants, you need the foresight to predict future issues. With extensive experience in all aspects of real estate law, James Clark can help you to identify potential issues down the line, and actively work against them. If you want advice and guidance from somebody who can help you make these decisions, contact Clark’s Laws.
In this segment Jim Clark answers the most popular questions that come up through his interactions with landlords and real estate investors through his presentations to local organizations, networking, one on one conversations as well as direct posting through his web site and social media.
Tough words to hear, but true. I work with landlords all day, and I see all kinds of ways they get into trouble. Some troubles come by natural disaster and others come from malicious tenants, but all of it causes much distress to landlords.
So what can you do about it?
If you’ve voluntarily become a landlord, then you need to own these problems. If you haven’t dealt with them yet, then they are coming. By owning these problems, you’re taking responsibility for your own future, and you’ll find that you have far more control of your real estate investing business than you think. Here’s how I recommend you get started.
1. Accept That There Will Be Problems
Half of the battle is getting into the right frame of mind. This business is largely mental. Experienced investors do well with problems because they’ve been through it before, they dealt with it, and they’ve lived to fight another day. They also understand that despite the problems, this is still the best business out there for them.
2. Be Careful About Who You Do Business With
As a landlord it is assumed that you’re wealthy. Whether that’s true or not, that perception makes you a target – for deadbeat tenants, contractors who may overcharge you, unscrupulous property managers. The list goes on. Knowing this, you need to be careful about who you deal with. What are they really after? Will the relationship with them be beneficial to you? And what checks can you put in place to make sure everyone does what they’re supposed to do?
3. Keep Your Cool
As the landlord you are the CEO of your rental business. Act like it. Tenants sometimes do foolish things. Often they have reasons and sometimes they don’t. Either way, you’re always going to handle the situation best if you keep your wits about you. No matter what problems occur, you’ll feel it last in your bottom line. Remember that, and treat each situation like a business problem, and deal with it accordingly. No drama, no getting upset, just dealing with it, getting it under control and moving on. If you need to evict a tenant, then handle the eviction strategically, without violating the lease terms. If you can’t do that, then maybe you don’t have the right temperament to be a landlord. Or maybe you might want to look at a lower stress type of rental such as a NNN credit tenant investment.
4. Don’t Trip Over Dollars to Pick Up Dimes
Landlords, bless their hearts, are cheapskates. Landlords often start out buying property with their last investable dollars, and so they do a lot of the work of maintaining properties themselves, handling the maintenance calls, taking out the trash, doing the books. That’s fine, to start, but old habits die hard. Like any business, you want to put your highest value people on the highest value work. Sure you will save a few bucks by doing the little maintenance items on your properties yourself, but at some point your time becomes far too valuable.
Instead you should hire someone to do that work, and you should stay focused on strategic considerations, finding more properties, or your day job. When you’re purchasing a new property, understanding the transfer policies permitted by the specific type of New York State deed is paramount. Rather than risking less than optimal closing terms, trust an attorney with the closing negotiation duties. Maintaining a steady cash flow from all of your revenue streams should be your absolute priority. If you really want to get crazy, you could use that time for some rest and relaxation! After all isn’t that the reason you got into real estate investing to begin with?
These are just a few of the issues I see that come up constantly. It’s very easy to blame everyone else for the problems you encounter as a landlord, but casting blame is not going to fix a single problem. I know some of this might sound harsh, but I’d rather be tough on my landlords in private, than let them be exposed in a courtroom or worse. Real estate is an unforgiving business, and the best thing I can do as an advocate for landlords is prepare you for it.
The Flip Side
Now that I’ve bashed you for being the source of your woes, let me tell you about the flip side. That is, you have within you a huge part of what you’ll need to make things right. If you’re the source of your problems, then that means you also can be the source of your own solutions. This is a great thing because in real estate, the vast majority of things that factor into your success or failure are largely outside of your control. Here we have something that’s completely within your control. This means that rather than waiting for these things to rectify, you can fix them yourself right now.
So I would encourage you to take charge of your business, accept responsibility and rather than casting blame, make yourself a better landlord. Then the next time trouble rears its ugly head, you’ll be better prepared to deal with it head on.
Landlord Solutions
And if you need some help getting started, give me a call, and I’d be happy to beat up on you some more! Whipping my landlord clients into shape is what I do best. Through our Landlord Edge Review, we take a critical look at your plans, processes and structures to identify areas of weaknesses, bulletproof your rental business and help you achieve peak performance.
Filed under: Landlord & Tenant
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In the real estate world, there are two basic ways to get more deals. The first is obvious: to go out and find properties through marketing, networking, and hitting the pavement. The second is unconventional, but lucrative with the right approach: make better deals out of the properties you’re already looking at. There’s no such thing as a bad property, only a bad deal.
Take an Unconventional Approach to Property Buying
Most of our investor clients built their business the traditional way: finding a motivated seller, buying properties below market value, adding value, and then renting or selling at market value. This works well in the beginning. But, our best investors are also very creative, and are always hunting for new ways to make money from otherwise unworkable deals.
This approach is not about spending a ton of time trying to make a deal where none will ever exist. This is about having a process for analyzing otherwise dead deals, and putting them through the creative lens before tossing them into the scrapheap.
Our two-step process focuses on creatively viewing the deal structure, and finding hidden value in each property.
Creative Deal Structuring
Each real estate transaction is unique. For creative deal structuring, we take a critical look at what the other side really wants and needs. Then, we examine what is possible legally and financially. Some questions we look at in creatively structuring a deal could include the following:
Does the seller need cash now, or can they wait to be paid over time? Does their mortgage need to be paid off, or can it be left in place for now?
What about your lenders? Is the loan-to-value ratio too high to get the money you need? Maybe your lender would consider a joint venture partnership?
You’ve heard of an owner’s title policy, but have you ever heard about a contract vendee title policy? This is a policy that insures the deal at the contract stage rather than at the closing. If a seller needs the contract deposit before closing, something like this could make it work.
Finding Hidden Value in the Property
You should never squander the potential value of a real estate property by ignoring the option to be creative and find the property’s optimal use. But, we take this principle a step further.
We take a critical look at the property to discover ways it can generate cash beyond the traditional sale or lease. Sometimes, there are things other than the real estate that can generate money in a sale for an investor. There is also potential for additional streams of income from a rental, such as laundry services or percentage rent structures. These are some of the factors that we look at in uncovering the hidden value of a property:
What types of uses does the zoning on the property allow? Are there any easy ways to change or expand upon that?
What type of user (commercial or residential) would find the location of this property most appealing? Are there any parts of the property that are currently un-used or under-utilized that can be put to work?
Is there any personal property in or a part of the property that could be sold separately to generate more income?
Creativity Doesn’t Necessarily Mean Building Improvements
I’ll never forget the time when a client of mine was able to raise the asking rents on an office property she purchased just by naming the building. The property was a historic structure, and she did a little research in the local library. Upon doing so, she discovered that the building was once owned by one of the town’s founding fathers. With that bit of history, she had gold leaf signage made for the building with the historical name. Now, she owned a local landmark.
This newfound prestige paid off in droves. She had higher-end tenants battling for office space, and generated far more cash flow than she would have without reviving this historical connection. This improvement cost her an afternoon in the library, and continues to pay her a premium to this day.
Taking the Creative Real Estate Initiative
The fun part about real estate (other than making money) is the ability to be creative. As you get more experience, you’ll see more and more ways these deals can get done. Then, at some point, you’ll find a deal where you can do it differently.
If you can’t wait and want to get creative right now, you either need to educate yourself, or get someone with experience on your team. There are plenty of resources out there on creative real estate, and we analyze these variables for clients daily. I’d encourage you to take a look at some of the resources on our website to get your creative juices flowing. Also, creative real estate investing is always a hot topic at my regular Q&A sessions (which are often recorded and posted to our YouTube channel), so I would encourage you to sit in on one or more of those if you’re interested.
Find New Opportunities With Real Estate
Before you pass on the next otherwise “dead” deal, put it through your own creative process to see if you can make more deals from what you’re already looking at. If you need some help getting started, or would like to test your ideas against our experience, then feel free to give us a call. We live for creative real estate, and would be happy to help you figure out if there’s a way to make lemonade out of your lemon deals!
Like any other field, there is plenty of potential for error in the real estate world. Whether you are drafting problematic lender contracts, delaying action on overdue payments, or underestimating budgeted repairs, chances are you have made a mistake at some point. This is completely natural, and believe it or not, may even pave the way for personal and professional growth. Read on to learn more about the positive aspects of these setbacks, and what they mean for property owners.
These Setbacks Are Part of the Game
There’s no getting around it. If you’re investing in real estate, there’s going to be setbacks, crises and problems on the way to success. I call it “brain damage” because they do a number on your head. Why? Because the stakes are so high. You’ve got your money, your future and your pride all on the line. Unfortunately, it’s the nature of the business. If you don’t encounter these setbacks, then you’re not doing it right.
Never Make the Same Mistake Twice
You should never make the same mistake twice. And thanks to the lessons that the obstacles in your career present, you won’t have to.
Experience is the thing you get right after you needed it. Well, these problems are the experience. In this business, we tend to learn as we go.
In the real estate world, we would obviously prefer if everything went according to plan. This is no different than any other industry. But, even when your deal does not go exactly as planned, there is still an opportunity to learn. As a landlord or investor, you should recognize the value in learning important lessons. You may as well make the most of these mistakes through learning, even if you can’t win in the current situation. Lessons can pay off in spades later, as long as you make a conscious effort to adjust your strategy.
Meaningful Experience
Rome wasn’t built in a day.
As you journey through your career in the real estate world, you will encounter many challenges. After successfully navigating these challenges, you will become a seasoned investor or landlord. With this new experience under your belt, your knowledge, skills and outlook will be stronger than ever.
We all strive for success, but success after overcoming a crisis or setback is indomitable, immovable, and just incredible. Not only will your confidence soar, but your value within the industry will skyrocket.
Think about it. The next time you’re describing your experience to a lender, you’re going to have something real to talk about. Rather than simply embellishing upon your previous experiences, you will have a legitimate and truthful story to tell. Lenders like putting money with successful investors. But, investors who persevere through even the harshest challenges earn more merit.
The bottom line here is that you shouldn’t be ashamed or embarrassed of your past setbacks. Instead, you should frame them in a way that demonstrates your attention to detail. Use these setbacks to tell your story.
Long Island Real Estate Law
Encountering a serious real estate issue is not a pleasant experience. As a Long Island real estate lawyer, I help individuals assess and respond to these issues each day. It’s important to make a concerted effort to avoid these issues. But, when they are unavoidable, learning from them and using this knowledge in the future is paramount. Make the most of these opportunities to learn, and you will gain meaningful experience.
At Clark’s Laws, we’ve witnessed great successes and spectacular failures, and put that experience to good use for our clients every day. Feel free to reach out if we can ever be of some assistance to you.
Filed under: Real Estate Law
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