Listen to the Podcast Here: Podcast Episode by Jason Lee – Premiered November 18, 2021
What You’ll Learn in the Podcast:
- How Rebecca ended up becoming involved in both real estate and law.
- The differences in working within the legal and real estate worlds between Virginia and California.
- The implications of buyers and sellers being the only ones involved in a contract that usually don’t have attorneys (in California).
- The difference between mediation and arbitration, and why you need to understand what choosing one over the other means for you when conflict arises.
- Parts of a real estate contract that buyers and sellers often run into trouble with due to a lack of legal knowledge.
- Why an attorney is necessary in a transaction even if everything is running perfectly smoothly.
- A story when Rebecca was able to save the day, and a boat load of money, for a client she was working with.
- Why you need to focus on documenting everything during a transaction.
- The biggest mistake that Rebecca made that ended up being a blessing in the end.
Summary and Highlights:
The Multifamily Millionaire podcast introduces listeners to prominent real estate agency San Diego to share wisdom about real estate investing and how you can use it as a means to achieve financial freedom.
In the podcast’s 20th episode, Jason Lee welcomes seasoned California Real Estate Attorney Rebecca Larson. Rebecca is an expert at advanced real estate transactions and a title insurance producer in Virginia, alongside owning an RPB title with two of her partners. Moreover, she is also the current owner and principal attorney of Your Home Legal, where she extends assistance to clients by settling real estate disputes, preventing future liability, and managing risk.
Here, Jason and Rebecca will discuss the inner workings within both the real estate and legal worlds between California and Virginia and the importance of having the involvement of a real estate lawyer in your real estate transactions.
Virginia and California: Two Different Real Estate and Law Worlds
As a resident of Virginia, Rebecca shared the two entirely contrasting worlds of California and Virginia when it comes to real estate and law. There is already a noticeable difference between the two, with California having the most expensive real estate. In California, nobody typically hires attorneys when buying personal real estate for their family or when they’re buying an investment property. In fact, the number of times you witness real estate attorneys involved are only when there are really big projects. The everyday real estate investor here also does not use lawyers to buy primary residence or portfolio.
To put it simply, no attorneys oversee the process. This is a stark contrast to Virginia, where attorneys almost always run the process. While there are real estate agents, there is still a need to go to the attorney for the review period to renegotiate certain matters and even deal with home inspection negotiations. In such cases, real estate agents take a backseat since the attorneys typically handle everything, from documents to closings.
The difference in the real estate workings of both places opened Rebecca’s eyes to the situation. She began to wonder how the buyer and seller — the only two people in the transaction that have most at stake — are the ones who don’t have attorneys compared to lenders or brokers. Because of this, Rebecca decided to start a law firm to bring this service to consumers in California.
Knowing Your Contracts
Without a real estate attorney, buyers and sellers often encounter trouble with contracts, especially if they tend to skip over vital parts of it. In California, there is a need to disclose everything, which may breed a false sense of security, allowing buyers to be complacent and take everything said to them at face value. This is more so when you don’t have anyone else to check it to make sure.
Rebecca recounts an experience with a client where there were inconsistencies between two legal documents. Lack of legal knowledge and a critical eye renders disclosure often useless because the buyer usually won’t know what kind of questions to ask, and it becomes the seller’s burden for not disclosing enough as well. With such a scenario, both parties will inevitably have possible ramifications and issues resulting from it alone.
Having a Real Estate Agent vs an Attorney
Indeed, real estate agents make for great companions in real estate transactions because they serve a great purpose by being experts in their field. Despite this, the problem inevitably lies in how they can’t provide sufficient answers to the legal questions — a matter that is inherently vital but often skipped over, especially by first-time homebuyers.
For instance, mediation is a cost-saving and efficient measure to resolve real estate disputes compared to arbitration. Here, you can hire private mediators to help facilitate the mediation while avoiding too much hassle and high costs. If that fails, the next step usually depends on what you agreed to in your contract, and that is if you had agreed to arbitration provision or not. The problem here is there is a misconception about how arbitration provision is required when it is, in fact, only optional with both parties needing to consent.
With only a real estate agent, you won’t know what your actual limitations are in the arbitration, which is a big deal,v to begin with because you will never know the rights you’re giving up in the event you decide to go through it. Also, this can cause dire consequences and potential issues that may arise in the future.
Lawyers consider the bigger picture and many other factors. Here, lawyers will ask the important questions essential to any transaction and look forward to what needs to be done to protect your new asset. Having an attorney to rely on to understand legal matters helps buyers have a sense of assurance with what they’re going into before making a real estate investment.
Even if you’re not encountering any legal issues presently, they can help you pre-empt situations if you encounter legal-related matters in the future. Also, they significantly help reduce the risks of loss and expenses often committed by unknowing buyers within the industry.
Episode 20: Know Your Contracts! Learn Now From An Attorney!
Watch the Podcast | Read the Transcript
Transcript
00:01
Welcome to the multifamily millionaire podcast. The show that interviews, multimillionaire real estate investors and top producers in the real estate industry. If you’re looking to create passive income and achieve financial freedom so that you can do what you want whenever you want, you’re in the right place.
Our goal is to simplify and make real estate investing easy for you. For more information, you can find us at www.JLM.realestate.
00:30
Jason Lee: All right, everyone. Welcome back to the multi-family millionaire podcast. Today I’m super excited to have Rebecca Larson on the show. She is a seasoned real estate attorney and her company is your home legal right?
00:43
Rebecca Larson: That’s right.
00:44
Jason Lee: Anyways, I’m super excited to have Rebecca. And the first question I want to ask you is kind of what your background is and how you got started in real estate and law.
00:53
Rebecca Larson: Sure. I’m Rebecca Larson. I am an attorney in California. I own your home legal. It’s an entirely real estate law firm and a little bit about where I came from. I got into real estate by accident. I’ve wanted to be a lawyer since I was a little kid and its real estate was never on my radar. But I got a phone call about a year after I graduated from law school from a friend of mine who said she needed some help with doing real estate closings. I was living on the east coast where attorneys are involved in the real estate closing process which is not like what happens in California.
And I was like, I don’t even know what you’re talking about. At that point, I was like, you know, 23 years old, I had never bought a piece of property before I had no idea what she was talking about. But it was whatever it was, it was better than what I was doing. So I get over to the law firm, start learning about the real estate closing process. And I really freaking loved it. Like I love the, the issues that come up in the contracts.
I love the issues that come up in title, like cleaning up all the crap that you can find on title. I really enjoyed working on that. And in Virginia where I was practicing, getting to the point where you’re actually at closing and sitting down at the table and going through everything with the buyer of the seller it was a good process. Like you felt like
everybody was getting what they needed and really understanding what they were doing. So that’s how my real estate world started. I did a lot of litigation while I was in Virginia and then also ran a real estate closing through the firm. And then we moved to California in 2017 and started this law firm at the beginning of 2021. So that’s a really, really condensed version of what I’ve been doing in real estate.
02:36
Jason Lee: That’s fantastic. And so you just moved to San Diego and you just started your law firm. The first question I got to ask is what are some of the major changes you see between, you know, Virginia and moving to California, between the laws and all the good stuff?
02:52
Rebecca Larson: Yeah. That I honestly like, that’s my favorite question because they are two totally different places. You know, I grew up in the Midwest. I went to law school in new England. You know, I was in the Mid-Atlantic where like everywhere is just a little bit different, but then you come to California and it is really different. And the biggest difference is we have the most expensive real estate, you know, next to like Hawaii. We’re the most litigious. We Sue everybody on their mother and nobody high attorneys when they’re buying and selling real estate, whether they’re buying the, you know, their own personal real estate, you know, for the family to live in, or they’re buying investment properties, the amount of times that you see attorneys involved, unless you’re dealing with like really big projects, like the really big projects, but like the everyday real estate investor is not using attorneys to buy their, you know, expand their portfolios. You’re not hiring an attorney when you’re buying your primary residents.
So like right off the bat, that was the first thing I noticed. When I first moved here, I wasn’t licensed in California. I did that about a year and a half later. But what I noticed in the escrow process is there are no attorneys overseeing the process. So that was just my wake up call. I was like, oh, they do things real different out here. Sort of planted the seed of like, maybe we can change things.
Maybe we can bring, you know, because at the end of the day, like the buyer and the seller are the only two people in this transaction that don’t have attorneys, right? Like as a real estate agent or broker, your brokerage has an attorney, the lenders have attorneys, the title and escrow companies have attorneys, your home inspector company. Like literally everybody in the transaction has an attorney except the two people who have the most at stake, the buyer, and the seller.
0436
Jason Lee: I never thought about it that way.
04:37
Rebecca Larson: I know. Yeah. Yeah. So like, that’s why my law firm that’s what we’re here to do is, you know, bring this service to consumers in California.
04:47
Jason Lee: Yeah. I mean, I know for a fact, in some states that everything, even escrow, like everything is done with attorneys, right? It’s not, like some states don’t have escrow companies, Correct?
04:57
Rebecca Larson: Right. That’s what Virginia is. So it’s the process is similar. Like you do all of the same things in escrow that you do in California, that you do in Virginia. But the people that are running it, the people who oversee it are attorneys. In Illinois, where I grew up you have a real estate agent, everybody negotiates the contract, everybody signs on the line that is dotted.
And then it goes to the attorneys for the attorney review period where they go and then can re-negotiate things and they deal with home inspection negotiations. Like the agents really take a step back in those types of contingency negotiations. It’s a very different process, but then they also do the real estate closings too. So it’s about half the states in the country use attorneys, the other half use escrow and the other half is generally west of the Mississippi.
05:46
Jason Lee: Interesting. So what are some of like the major disadvantages, like pros and cons of, you know, having an escrow company versus, you know, having an attorney, handling everything.
05:58
Rebecca Larson: Yeah. I mean, there’s having an escrow company. Like they serve a really great purpose. Like they know what they’re doing, but they’re there to handle the documents. The bigger question is, they can’t give you an, a like, if you call them and say, how do I, what box do I check? How do I own the property? You know, like, do I own it a as tenants in common or joint tenants, or if your husband and wife, or you know, you’re married you know, community property or community, property survivorship, they can’t tell you, they’re going to say, you know, look at the sheet that we gave you, you know, otherwise, you know, good luck, right? Like they can’t tell you, they can’t answer the legal questions. Neither can your real estate agent, right? Like the agents that I’ve talked to, like, they’re all fantastic agents. They know these contracts, the RPA and the RIPA. They know
these contracts inside out and backwards, but I can guarantee like every single agent, like I guarantee that nobody knows what the actual limitations are in the arbitration provision. And that’s a big deal. It’s a big deal on what rights you’re giving up. If you go through arbitration, right.
07:05
Jason Lee: That is a huge deal. It is. I mean you know, being a commercial real estate agent, myself who uses the RIPA day in and day out, I know every part of the contract, but I can’t give like super in depth legal advice. I can only tell them what the contract says and what your rights are, but I can’t give them, you know, actual legal advice. That’s where someone like you would come in. And to be completely honest, I don’t know exactly what rights to be given up what arbitration. So I’m happy to go on that topic cause arbitration mediation is part of the contract that many people don’t really understand, I’ve been through it. But the typical first time home buyer or a first time investor has no idea what it is. Would you mind explaining a little bit about, you know, what those two things are and what they mean?
07:51
Rebecca Larson: Sure. So at least in California, as it is right now, you know, September 2021 the RPA, which is the residential purchase agreement and our IPA, which is the real estate investment, right? Real estate investment property agreement it’s for investment properties, both of them have mandatory mediation, which means if you have a dispute with the other party and you can’t work it out between yourselves, you have to go to mediation. Mediation is a third party, neutral, like sits in the middle of you Two, facilitates a conversation to try to reach a mutual agreement about your dispute, earnest money nondisclosure issues, you know, all the crap that could come up in a transaction that’s going to cause a problem.
So mediation is there to help. And it’s a cost saving measure, right? Like it’s significantly less expensive than through arbitration or actually going to court, but you have to do it if you can’t resolve yourselves, you have to go through mediation. And most of the local real estate associations have like a, have a program through their association. So like San Diego county has their own San Francisco and Los Angeles have their own, there are private mediators that you can hire. But they’re there to help facilitate the conversation when there’s a dispute. Now, if you can’t resolve it in mediation, the next thing is like, okay, well what’s next, depending on what you did in your contract, you either agree to arbitration who didn’t agree to arbitration. And one of the big misconceptions is that the arbitration provision is required, right? That’s an optional, both parties have to consent to arbitration in order to go to arbitration. But the difference between
mediation and arbitration is arbitration is binding. Mediation is a suggestion. If you can reach an agreement, great, they’ll put together a settlement agreement, everybody will sign, you’ll go on your Merry way. Arbitration is more like going to court, except you’re not in court. You don’t get a judge, you don’t get a jury and you can’t appeal the decision. It’s time saving. Generally you can get arbitration done faster than you would be if you were to go to court. It’s really not any less expensive than going to court. Because you’re going to have to pay for your attorney. You’re going to have to pay for the arbitrator. You know, you run it like a trial, which means you have to request documents, review documents, interview witnesses, and then conduct a trial. And it’s done with a panel of one or three arbitrators. Their decision is final. And whether you do arbitration depends on what you agree to in your contract.
California has rules about what happens in arbitration of what you can and can’t do just like you do in core, but it’s a little more limited in scope. And there’s code provisions that are in both of those contracts, the RPA and the RIPA that direct you on what can happen during these arbitrations. But like, that’s just one, one area of that contract that like, nobody really knows what it means other than it’s arbitration. And everybody thinks that they have to do it. You don’t.
10:51
Jason Lee: Yeah. So I mean, going in deeper, like what are some other areas of the contract that people might skip over and just, you know, initial, but they have no idea what it means, but it’s very important to look out for.
11:04
Rebecca Larson: Any of the contingencies you know, California is very different from, let’s see Virginia, where California, you have to disclose everything under the sun, right? And there’s a false sense of security that just because the seller has to disclose to you that that means that you can just rely on what they say. And it’s really interesting, even between Southern California and Northern California, where in Northern California, the seller will provide a home inspection report, a termite report, like all of their own contractors and say, here’s the information, right? And you rely on that.
You don’t get your own qualified experts to do a report. It’s a really interesting dynamic just within the state of California and what happens in Northern California versus Southern California. But you do these reports or you rely on the transfer disclosure statement or the properties the seller property questionnaire, and you just take it at face value. I was recently working on a deal up in river in Riverside county and two and a half million dollar deal seller filled out the TDS and the SPQ. And they were inconsistency between the two documents they would say yes, on one document and no on another. And the buyer
in this transaction was like, I don’t understand. I don’t even know what I’m looking at. Like, what does this really mean? But what it does is like, when you can look at it, a critical eye on the seller side, if you’re going to get in trouble on a seller side, it’s going to be from your disclosure, because you’re not disclosing enough or you’re not adequately describing the disclosure. On the buyer side, it’s not asking the questions. And knowing what the ramifications are, if you don’t know that’s sort of a long winded saying like your disclosures are the, probably the next, most important thing in that document. And it’s going to be the one that gets everybody in trouble.
13:03
Jason Lee: It’s funny that you say that because I feel like, you know, most of my clients who are selling their property when they fill out the SPQ and the TDS, a lot of them just check, No, no, no, no, no breeze through it. I was biased against that because I know the ramifications. Cause I’ve seen it happen before on a deal where a seller check [13:23 inaudible], something. And the buyer found it six months later and reverted back to the SPQ and ended up in a lawsuit.
So I feel like sellers are a little too complacent, even that, because they know that you have to disclose everything, but it’s just laziness or pure, I mean, I wouldn’t say I’ve never seen it happen where they’re trying to hide something, but I feel like it’s either they don’t know, or they might not remember like what happens in the situation with like, you know, let’s say a buyer six months later comes back and said, Hey, you know, the foundation was cracked, but you said no on your disclosure that there was nothing wrong with it. And the seller goes, oh, I had no idea that it was cracked. You know, I was not aware at all what happens in that situation?
14:08
Rebecca Larson: It depends. Like, it’s my favorite phrase. It depends. Right. It’s going to depend on the facts. Where on the foundation Was it cracked? Was it underneath flooring? You know, things that are, you know if it’s in the garage, right. And you’re in the garage every day when you’re moving your car in and out and you see it, like the seller might be able to say, yeah, I didn’t really think of that as a foundation issue. Like it was visible. You inspected it. Like you could have seen it too compared to something like, let’s talk about mold, right? Like mold is a big one, especially here.
You know, you pull out the refrigerator, you pull out the washer and dryer because you’re replacing it because the stuff’s been in there for 30 years and low and behold there’s mold behind any one of those appliances. The first reaction is be like the seller didn’t disclose to me that there’s mold seller might not have known because they didn’t move the appliance for 30 years. And the seller’s not required to go rip apart their house in order to disclose information
about the house. It’s what they know. So like, if you don’t move the refrigerator ever because you don’t clean it or don’t replace it and there’s mold back there, like there’s a reasonable, I think you could say, like, I didn’t, I truly didn’t know. Now compare that with and I would say most people do act in good faith, right? They just either of don’t know, or they’re lazy, but there are the bad actors. There are the ones that are painting over and mold and saying, oh, look, look over here, look over here. But it’s as a buyer, it’s on you. Just because if someone has to disclose doesn’t mean that you can just lay back or rest on the laurels of their disclosures. Like do your due diligence.
You’re spending a boatload of money on this property. Make sure that you’re getting what they say. You’re getting. It is. So the way that I look at the contract and this goes for all contracts is your contract is like an airplane tells you where you’re going to sit, tells you how you’re going to sit, tells you where you’re going to go. You’re going to start here and you’re going to go there. Right. In order to understand your contract, you need the flight attendant at the beginning, right? That’s going to show you where all you’re at exits are. In the unlikely event of a water landing. It’s my favorite. His is how you get out of the plane in the unlikely event that you have an issue when you’re buying or selling this home. This is how you get out of this contract. Like having somebody that can walk you through and give you the emergency exits before you’re in an emergency is super important.
16:33
Jason Lee: Yeah. I mean, I think that’s a great analogy. I feel like, you know, legal is the part of real estate that is the most skipped over, in many cases, especially in the single family residential space where you have a first time seller, first time buyer, you might not have the most competent agent directing you through the transaction. I really think that it’s extremely important for someone to have someone like you, because if the agent doesn’t know the contract, you don’t know the contract, the seller doesn’t know the contract. They don’t know what to disclose. The buyer doesn’t know what to do. You know, what do you really have? It’s going to cause a multitude of issues if something goes wrong in the transaction.
17:15
Rebecca Larson: Yeah. And the way that I approach the real estate buying process, you know, whether you’re the first time home buyer or seasoned real estate investors, is that we look at the whole picture, right? It’s not just this snapshot right now while you’re buying this property. You know, when I work with my clients, I’m looking at like, what happened before you bought this property and what’s going to happen in the future because it’s not just right now that we have to deal with. You know, I mentioned a little earlier calling escrow and asking them
what box you check on how to hold title. Like, that’s the conversations that I have with all my clients, because we have to find out what did you do before you bought this property? Have you ever been married? Do you have kids from another relationship? You know, are you in a business relationship, what’s going on? And then we look forward and say, okay, what do you need to do to protect this new asset? Those are conversations that nobody’s having right now unless they know to even ask the question. And right now, nobody know to ask the question.
18:11
Jason Lee: Exactly. Yeah. You have to, you know, being an agent myself, you have to show the client the full picture. Like there’s much more than just the TDS and SPQ disclosures. You got to get, you know, the five year loss run, the insurance policy, the rent roll, leases, tentative [18:27 inaudible], all that stuff that I have to collect for them. And I feel like just even having a coach or an attorney that a buyer can rely on, if they don’t understand the full picture, it’s just really helpful to have an agent and attorney on your side. But the question for you is which you might not like is, can the investor or the buyer, like, is it worth their while to hire an attorney? Even when nothing goes wrong in a transaction when the transaction’s going perfectly smoothly.
19:01
Rebecca Larson: Yeah. It’s like going to the dentist every year. Like I’m going to get my teeth cleaned. I don’t have any cavities right now. But I don’t have any cavities right now because I went six months, have my teeth cleaned. And I’m going to go again in six months and have my teeth cleaned so that I don’t have cavities in another six months. Like even if things are look great on the surface, like we don’t, you don’t know, you don’t know what you don’t know. So yes, and I said it, like in the unlikely event of an issue during, in this transaction, at least you know how to get out.
In the unlikely event, if something happening after you close, you know how to fix this, you know what avenues you have to go down in order to protect your asset. So like, everything might seem lovey, right. Everything might be going really well. Everybody’s getting along, you know, everything’s closing on time, everybody happy. And then you talk about [19:53 inaudible] finds it six months later.
But then when we can look back and we can roll back the reel and say, okay, well what happened? There may have been issues that popped up and nobody knew were issues, right? When you have somebody on your team, that’s looking at it from the legal lens, we see things different. We’re looking at it from a risk side, you know, risk aversion side. And we’re looking for like, where are the traps on the legal side. Where are you exposed Mr. Seller, Where are you exposed Mr. Byer? And I mean, on the multifamily side, like that’s a huge thing, you know,
especially when you’re dealing with, you know, tenants in place and making sure that you’re making sound financial decisions, you know, if you’re inheriting a shitty business, like that’s on you. How do you clean that mess up?
20:43
Jason Lee: Exactly. No, that’s a great answer. I think it’s even more prominent that it’s needed in the investment space. Cause there’s so many more things that can go wrong. There’s financials, there’s tenants, there’s laws of the tenants. And then there’s, you know, a lot more people you’re dealing with in the transaction cause you’re inheriting, you know, people that live on the property.
21:08
Rebecca Larson: And all of their baggage. It’s all of their baggage too. You know, whatever happened with the previous owner, all that baggage, all the tenants baggage, and like you need to know how to navigate around that stuff.
21:22
Jason Lee: For sure. So can you share a story of how you came in and kind of save the day or help in a situation where a buyer or seller was really struggling in a transaction?
21:34
Rebecca Larson: Yeah, so I was working on a project this was a six unit beach front and there were some major issues and this was like, this was more on the broker side really. But things went really fast. Things weren’t explained. The, the big issue though, and this, you know, speaking to your real estate investor clients and I know that you’ve done a podcast on 10 31 exchanges. This was the issue, right? Like she’s had this, this seller was having some issues with the contract and how things were going. And one of my questions to the seller was, are you doing a 1031 exchange? She looked at me like I had two heads. I was like, she’s like, what do you mean?
I was like, this is an investment property. She said, yeah, but I live in one, and I was like, mm-hmm <affirmative> but like 80% of this property is investment. Are you doing an exchange? And just the wide eye, right? This was an over 3 million transaction. She was looking at a tax bill of about a million. It was just a hair under a million dollars. But the question was, we need to get your tax planner on the phone right now, find out what your capital gains are. And then we need to get the people in place in order to help you avoid paying taxes or at least avoid paying taxes right now. Cause that’s the whole point of it in exchange, you kick it down the can or kick the can down the road. But like that was a huge one, you know, like, because the agent either didn’t know or didn’t care to set the client
up for the best possible outcome, you know, she could left a million dollars on table.
23:12
Jason Lee: So she was doing an exchange into the property that she was buying.
23:16
Rebecca Larson: No, she didn’t even, she was selling a property that she lived in One of the units, there were tenants in the other four units or five units and was selling it outright to another investor. The question that I had for her because this is, you know, part of the real estate process is, you know, we have to have the exchange accommodator lined up. We can’t have any money touching your accounts before you buy a replacement property, all this fun stuff. But just saying 1031 triggered me to investigate further because she didn’t even know what it was.
Didn’t know that this was an option. Didn’t know what was at risk, which was a million dollars, right. A million dollars for her kids, a million dollars for her retirement, a million dollars for fill in the blank of whatever she wanted to use as money for. So to think like, I mean, if you want to talk about like saving the day, like saving your client a million dollars on taxes, I mean, I didn’t personally do it, but like you ask the questions that can get you to that next result.
24:14
Jason Lee: So she didn’t exchange and she was able to save.
24:16
Rebecca Larson: Yeah. She had to do an exchange in order to save that million dollars, but had she just done a straight transaction, She would’ve lost a million bucks, you know, to the pitch, the FTV and the IRS.
24:27
Jason Lee: Yeah. That’s interesting though, cause if you live in the property, you can’t do an exchange though. It’s your primary home.
24:34
Rebecca Larson: You can carve it out. So, you know, in that particular scenario, there were five or six units. Her unit occupied about 26% of the total square footage of the building. So was the other 74% was exchanged. You know, so on the personal resident side, you can carve that part out and you deal with that how you normally do, you know, if you’ve got the half million dollar exemption, if you’re married, you treat that part like your regular primary residents transfer on
the tax side mm-hmm <affirmative> and then the investment side, you can still exchange that money. You can exchange that you can exchange the boot, all of that stuff. So, but if you don’t do that and you just sell it straight, I just write the check to the FTV and IRS, like it’s gone. But if you don’t even know to ask the question, like how do I protect? And like you’re talking about new real estate investors, right? Like most of them are probably not going to have capital gains issues on their first transaction, but they might. So it’s super important to build your team, get your CPA, get your tax advisor, get your attorney to make sure that everybody’s on the same page so that you can minimize your tax liability.
That’s a huge one. Right. That’s how you’re going to make your money is to avoid paying taxes, at least avoid paying taxes right now. I’m not advocating, not paying your taxes, pay your damn taxes and hire a qualified tax professional to get you there. That’s not me. But it’s, you know, it’s just asking the questions to get you there. In another situation, this was a commercial tenant case they wanted me to review a lease. It was a five year commercial lease for some, you know, sweet space in [26:14 inaudible] and I’m reading it and there’s a personal guarantee in there and they didn’t know what that meant. And I was like, okay. So if you default, this means you’re on the hook for the whole amount of the lease. And this was like a million and a half dollar lease. And I was like, can you pay that? And they’re like, no. And I was like, okay, well, I mean, it was a little goofy, but the guarantee was actually through like, not their landlord, it was through their company. It was just, it was an interesting setup, but explaining terms in under, in a way that they understand what the actual implications are, is another way that I work with my clients. So like we can deconstruct the contract and explain it in terms that make sense to you and then their practical application.
So personal guarantee. Do you even know what that is? If your answer is no. Okay, great. At least I know where my baseline is. And if you say yes, okay, Then I probe a little bit further, make sure that you actually know what it is. And then we talk about what does that actually mean for your contract, you know, in this case, the commercial lease. But you know, one of the big things that I find, especially with real estate investors, especially the newer ones is the contracts like good Lord, the contracts. You know, they’re using stuff that they got online or they’re using stuff that, you know, a friend of a friend of a friend gave them. But they’re just, they’re not, they’re not good contracts.
Like they don’t protect, especially in the wholesale situation like if you’re doing any wholesaling, like we should have a chat, make sure that whatever you’re doing is okay. Because the wholesale contracts require a lot of different language and then making sure that you have the whole contract suite set up, because you need to have your assignment agreements and you need to have all that stuff. So that your end user and buyer, you know, is, is protected too, right. Puts you in a better position as a wholesaler to actually deliver a product that
you’re going to be able to sell and not be on the hook for. So just random like giant traps. Those are things that I love, I love dealing with.
28:20
Jason Lee: Yeah. I mean, back to the wholesaler topic I feel like it’s a huge gray area in the real estate business.
28:25
Rebecca Larson: Totally. Especially in California.
28:27
Jason Lee: For sure. Are you making like, are you like drafting special contracts for these wholesalers that Come to you?
28:34
Rebecca Larson: Yeah, so I have this real estate investor program where you know, I work on a flat fee basis. I don’t do any hourly billing, but for my real estate investor clients it’s this basically a 90 day incubator period where we, I’ll review your contracts packages, but in my experience, like they’ve all been enough that it just, we might as well just pretend they don’t exist. We go through what your goals are. And I have a contract that is basically a rinse and repeat contract that you can use, right? We tailor it to meet the needs that you have. We tailor it to meet the needs that your end users are going to have your, you know, your final investors so that you have a contract that you can actually assign. Because if you’re using the RPA, the RIPA you technically can’t assign those unless you follow certain things, right. The way my contracts work is they don’t require that extra step with a seller in order to assign it.
That’s one thing. But I build out your whole contracts package. The contracts package already has a prebuilt TDS, and SPQ. You know, it’s modeled off of the RPA and RIPA and those documents, so it’s built into the contract. So when you’re sitting down with your seller, you can fill everything out. One of the other things that we talk about is, you know, how not to get screwed when you’re working with people who are over the age of 55, right? Because you have to be very, very, very careful when you’re working with, I hate even saying that over 55 is elderly, but city of California treats people who are over 55 in a different category, right? The elder abuse laws in California are really aggressive to people who violate them. So we talk about how to, how to approach clients who are older, so that you don’t run a follow of people saying that you abuse them. Because that’s where all of the bad stuff happens. It’s the bad contracts, the slick talking and, you know, forcing them into something that they don’t agree to. Not my type of people to work with, but it’s just something to like, be aware of. Like, if
you’re out there in the market and you’re, you know, you’re driving for dollars or, you know, you’re door knocking and you come across a potential seller that is elderly. Like that should be like a handle with care and make sure that you’re getting the advice that you need so that you don’t get screwed.
31:04
Jason Lee: So what is the proper way to deal with that kind of situation?
31:08
Rebecca Larson: Document, document, document, document, document, everything, every conversation that you’ve had, what was said, who said what. That way in case something happens in the future, you have covered your as much as you can. And that goes for any transaction document, that document, you know, put it in writing, right, like don’t do any of this handshake crap, right. For real estate PS, a handshake on a real estate deal is not enforceable. But like document everything. This goes, you know, whether you’re dealing with real estate, whether you’re dealing with business transactions, like whatever, the more you can document, the more you can protect yourself.
But yeah, my real estate investor clients, you know, that’s generally what we do and we’re working with building out their contracts package for California. And then you know, a lot of our folks are buying outside of California. And my network is pretty fantastic where I have attorneys that are in basically every state that if they say, okay, I’m buying in Florida, I’m buying in Texas, I’m buying in [32:11 inaudible] wherever the hell you want to buy, I have somebody that I can plug you in with like immediately and they can help you on that side.
32:19
Jason Lee: That’s amazing. Rebecca, it’s been an amazing show. I think you’ve brought another like side to the podcast that people haven’t seen before, because you know, legal is such a huge part in real estate and most people don’t understand it as much as they should. So thank you so much for coming on, but I have a few more questions here Before you go If you don’t mind. Number one is, what is a big mistake that you made in your career that felt awful at the time, but it’s helped shape your career in the way that it is today?
32:56
Rebecca Larson:Oh my God. That is such a good question. Honestly, it’s probably waiting this long to start my own business. I wanted to, I’ve wanted to have my own law firm forever. And there’s a lot of fear, a lot of fear of like going out on your own. There’s a lot of fear of like, not knowing what the hell you’re
doing, right. Like if I could do it all over again, I would’ve started a law firm, you know, 12 years ago, who knows what that would’ve been, you know, I can’t figure that out, but like, and I wouldn’t even call out a mistake. Not so much of a mistake is a, like, this is what happens when you grow up. Like, but if I could do it all over again, I would’ve started my own law firm a long time ago.
33:38
Jason Lee: Got it. I mean, I feel like that’s huge to say on the podcast, because I feel like there’s a lot of people who might be listening that are kind of scared to take the next step in their career to kind of go off on their own and either start their own business, start their real estate career, buy that first property. So I think it’s huge and it sounds like you’re, you know, [33:58 inaudible] doing great. So I hope the best for your business. And thanks for coming on the podcast.
34:07
Rebecca Larson: Something to the, you know, to the ones who are on the fence or who are scared to take that leap, you don’t, what I’ve learned over the years is like, you don’t have to do it on your own, right? You surround yourself with people who are going to support you, whether they’re business coaches, advisor, mentors, you know, whoever’s going to help support you get to get to that goal.
Surround yourself with those people, right? The negative, the people in your life who are complaining about, you know, their jobs, their life, all that, all that negative garbage stuff, like clear away to get to a place where people are going to like love and support you for the goals that you have, whether it’s starting your own business, buying your first piece of, you know, real estate investment, you know, real estate investment property you know, painting, learning how to sky dive, that like doing whatever, literally just surround yourself with the people who are going to support that goal.
34:59
Jason Lee: It’s a powerful answer. I couldn’t agree more. Rebecca, thank you for your time. If more people want to learn about you and
Want to get in touch with you how could they do so?
35:09
Rebecca Larson: Sure. You can go on our website, which is www.yourhomelegal.com. We are on all of the social media platforms. All of them are at your home legal follow us like us. If you have any questions, you can drop our DMs. You can leave a comment on our website. But yeah, thanks so much for having me, Jason.
35:29
Jason Lee: Of course, it’s been a blast. Thanks for coming on. 35:33
Rebecca Larson: Thank you. 35:34
Jason Lee: Yeah. Hope to talk to you soon. 35:35
Rebecca Larson: Likewise.
35:36
Thank You for joining us on the multifamily millionaire podcast. The show that interviews, multimillionaire real estate investors, and top producers in the real estate industry. We’re here to help you create passive income and achieve financial freedom so that you can do what you want whenever you want. We’ll catch you next time on the multifamily millionaire.
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