Virtual wholesaling is one of the few businesses out there that require almost no money to set up. So you can be literally broke and still build a successful Real Estate Investing business.
But one of the areas that new real estate investors should invest in is in protecting themselves by understanding the law. No, you don't have to go to law school to do it. Instead, I always suggest that new investors find a lawyer who is experienced in real estate investing and hire them for an hour. (Don't hire your friend's brother-in-law who is a divorce lawyer. Look for a real estate investing lawyer).
Then, during your appointment, pepper them with questions about real estate investing. This will be the best $200-$500 bucks you invest to answer the nagging questions you may have about doing deals.
The DM says: Find a real estate investing lawyer and ask them a million questions
A lawyers' wage can sometimes seem to be a high expense but that is a very nearsighted vision if you’re going to be doing this as a business. it will be an investment for you that will be extremely beneficial over the life of your real estate investing business. If you only have a little bit of money to invest to get started, spend it on that hour with a real estate investing lawyer.
How to avoid chirping crickets
So you've found a real estate investing lawyer and you've booked some time with them. The last thing you want to do is show up and sit quietly at their desk, listening to chirping crickets and hoping they just randomly impart wisdom on you. That won't be helpful. KEEP in mind they are Working for YOU!
Instead, gather together the following things...
- A list of questions
- All of your forms such as contracts, lease options, letter of intent, rental agreements and such.
- A brief outline of the kind of real estate investing you plan to do and where you plan to do it (i.e. wholesaling in Columbus Ohio)
... then send these things to the lawyer ahead of time.
On the day of your appointment, show up with a pen and notepad and expect to take a LOT of notes.
To get you started, I've prepared a list of questions I would ask. These aren't the ONLY questions you should ask (and the questions might differ for you if you depending on the type of real estate investing you plan to do) but these will get you started:
- Given the type of real estate investing I want to do, are these forms legally binding and complete? I recommend you address the things you’re not sure of. You will already know what most of your forms and contracts say so just identify the pieces of the contracts that are holding you back.
- What else will I need to make them legally binding? Oftentimes, lawyers will say things such as "well, I don’t like this" or "I don't like that". So you need to say "What do we need to say to make it correct?" That's important. Remember: You're working with lawyers here :) so they all think something different... which is OK but you need to feel confident about your forms when taking down deals. So when talking to lawyers, try to separate their opinion from fact.
- Not a big one but ask it and see what they say: In my marketing for sellers, what words and terminology should I avoid?
- In my marketing for investor-buyers, what words and terminology should I avoid?
- What liability risks might I face from sellers? This is one of the biggest pieces that we see investors struggle with I personally would invest some time here. REMEMBER I don’t recommend you to invest much money down on deals and I always recommend that you don’t overpromise.
- How can I protect myself from liability from sellers? This is a great follow up question to your lawyer after the one above.
- What liability risks might I face from investor-buyers?
- How can I protect myself from liability from investor-buyers?
- What's the safest way for people to send money to me? (From my experience I like wires. It’s simple and safe: Go to you bank and set up an account for ONLY wires in)
- What disclaimers do I need in my business and where should I put them? What points need to be covered in each disclaimer? This could be a long conversation so go in with specifics.
- What are some best practices that the most successful real estate investors follow that you would advise I also adopt? Keep in mind they are real estate attorneys so they should be able to give you some advice. Take it with a grain of salt because they probably have a lot of opinions and they probably work with many different types of real estate investors.
- Where are the biggest mistakes made by real estate investors who face legal complications? This is a good question and may scare you to death but again, listen to them and ask them "wow.. I don’t want that to happen to me" if they tell you some gruesome story. From my experience, when investors get in trouble, it’s often because they overpromised to the seller or buyer.
- Ask about how the closing process works and whether the lawyer has any recommendations on who you should close with (depending on the state, you may use a title company).
You may have a lot more questions for them but I wanted to get you started with these. This should get you started and you may need more than an hour but at the end of the day do it in 1 hour chunks you’ll thank me later.
Don't let these questions scare you away from real estate investing. These questions incorrectly make it seem like you are going to face an onslaught of lawsuits once you become an investor. But by asking these questions (even though they SOUND scary), will give you the confidence to go out and get moving towards the deal.
After your meeting with the lawyer: You don't have to take ALL of their advice
After your meeting with the lawyer, sit down and review your notes. The lawyer will have given you a lot of advice and remember, their JOB is to focus on the negative. So it might not all apply to you. They list a whole bunch of things that you should do but not all of those will necessarily be practical for you to implement. It's like your mechanic who tells you to change the oil every 3000 miles when you may really need to change the oil after 5000 or 7000 miles. So just like any other professional who gives you advice, take in all of their advice and then apply only the stuff that is right for you.
For the record: I’m not saying don’t listen to them. Be a grown up and read between the lines and I don’t recommend you go out and do an overly complicated first deal (and ideally never do a complicated deal). Just take it in small steps.
Make changes to your forms and your website and your emails as you see fit. (WARNING) Don’t get to the point where you’re building your business to constantly be protected to the point where you do nothing.
Create a bullet list of things you're supposed to do or avoid when writing ads, and make sure your virtual assistant gets a copy of that list
...Then get started investing.
When you grow your real estate investing business and add new types of investing or you start investing in a new area, make another appointment with the lawyer to make sure you're still covered.
It all comes down to one thing…
I'm going to level with you: I think I this is an area that keeps a lot of brand new real estate investors away. They get focused on the expense of a lawyer and the threat of lawsuits and those things can be big roadblocks. But if you spend some time with a lawyer, it will be a valuable investment.
It’s crazy to me that wannabe investors will invest thousands on mentors but never invest in a lawyer that can help them with the biggest piece I see that holds them back – contracts and law suit liabilities.
It all comes down to one thing: Massive action. So what's your massive action assignment? Find a real estate investing lawyer and schedule an appointment!
Your friend and mentor,
Mark Evans DM,DN
PS, I want to hear from you. If you are a real estate investor, add a comment below with the question or questions that you really wish you asked a lawyer. We're not going to answer them on this blog but brand new investors will benefit from your experience.