The Land Geek Podcast #83

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Hey, it's Mark Podolski, the Land Geek, with their future favorite niche real estate raw Land website, www.thelandgeek.com. and today is really unique and special because I've never had on the Land Geek Podcast a real estate attorney. And I'm always getting emails about legal issues and attorney issues and all those good things. And so I thought, why not get someone who specializes real estate? And so today's guest is Jeff Lerman, and he has established a nationwide reputation as the real estate investor's lawyer. He's been featured on tv, radio, and in front of numerous real estate investment clubs as an expert on various real estate topics. He's been the president of the Marin County Bar association, chair of the State Bar Real Estate Litigation Section, and chair of the Marin County Bar Association Real Property Section. And even more impressively, he's been selected for inclusion in the 2013 Northern California Super Lawyers. He's not just a regular attorney, he's a super attorney. He has received the highest rating possible for Professional Excellence in Ethics by Martindale Hubbell as rated by his fellow lawyers. He has received the highest rating possible by AVVO.com as rated by his peers and clients. Let's just say it, he's a big deal. So I want to introduce Jeff Lerman to the Land Geek Podcast. Jeff, how are you?

I'm great, Mark. How are you doing today?

I'm doing great. I'm doing great. Thanks so much for taking time out of your busy schedule to enlighten the Land Geek community.

Thank you for having me.

No, it's my pleasure. So after reading your bio, let's face it, I'm going to put on the anchorman voice. You're kind of a big deal.

Well, we do our best.

Yeah, yeah. So walk me through. You know, there's so many subsections of being an attorney. Why real estate for you and how did you get involved in it and what's been sort of the career arc for you?

Well, a lot of years ago, I branded myself as the real estate investor's lawyer because I asked myself what clients I want to represent. And at that time, I also am. And I am an investor myself, own a lot of properties, part of a multi family office, which is a multi. It's a multi generational family office. So we've got three generations of real estate investors in our real estate development and investment company. And so I asked myself, what kind of clients do I want to work with? And the answer was very clear. I wanted to work with like minded real estate investors. And so we branded ourselves as real estate investor a lot of years ago, about 20, I don't know, 25 years ago, and never looked back. I mean there's just obviously in whatever stage of the economy we are in, there are always investors who need help. And it's most satisfying to me to work with other investors. I've been in the trenches, we talk the same language. I know what it feels like to go through the cycle of ownership of real estate and I just enjoy dealing with that particular kind of client. Yeah.

You know what's interesting is most attorneys, I mean, I don't want to, I guess I don't want to just kind of generalize here, but I'm going to generalize and you can correct me if I'm wrong, but it seems that there's deal making attorneys and there's deal breaking attorneys.

That's a good point. Very good point. And unfortunately, if you want to come up with a generalization, I think that is, that's a fair generalization. One of the things that I pride myself on is I am a deal maker, not a deal breaker. And one of the higher level values I think I bring to the relationship, and I say this just because my clients have told me this, is that they appreciate the fact that I understand the business aspect of what they're doing and we bring creative solutions to their problems. Because as we all know, you and I are both investors. Creativity is one of the most important things in this business. And a lot of times the deals aren't made when you go under contract. The best deals are made in the middle of the deal. You know what I mean? When you're in contract, you're doing your due diligence. That's when some of the best deals are made.

Yeah, absolutely.

Yeah, I do pride myself on that, that I am one of the most pragmatic and business minded entrepreneurial lawyers you'll ever meet.

Yeah. And I think that's rare. I think most attorneys, at least that I've come across, they don't want to take the risk of telling their client, hey, let's make this deal happen. And then it goes bad. And then the client says, oh, that guy was terrible.

Yeah, well, I think the reality is that most lawyers just practice law. And the fact that I've been an investor for decades, there's experience that informs everything I do as a lawyer. And it's not slamming other lawyers. It's just the reality is that if you're an investor and you've got a lawyer who only knows the law, but you have another lawyer who not only knows the law, but understands transactions from a business standpoint and knows what it feels like when a deal goes sideways and wants to can relate to your concerns, needs and objectives as an investor, there is a benefit to that?

Oh, yeah, absolutely. Absolutely. So as far as in real estate law, would you say that the majority of people come to you because they want to structure some type of private placement to raise money?

Well, we do a lot of fundraising, we do a lot of syndications, we do joint ventures. We deal with investors at every stage in the cycle of ownership. Everything from the very beginning, entity formation, fundraising, purchase and sale agreements, loan documents, construction, joint ventures, everything. So, yeah, I mean, there is obviously a lot of that going on, especially in this cycle where we are in this cycle right now. We are, I think from my perspective, we're smack dab in the middle of the. One of the best recoveries and best times to invest in history. And I think maybe the best time to invest that I'll see for the rest of my life. And so as an investor, I'm being as aggressive as I've ever been being out there looking at deals. We've done a couple of deals this year and we're looking to do more. I'm looking to do that year end deal.

Sure, sure.

And so, yeah, we work with investors certainly in fundraising. Absolutely. A lot.

Yeah. I mean, in real estate, it's always about other people's money, right?

Yeah. And that's, you know, you just made a great point, which to you and me may seem like investing 101, but let's talk about that for a second because I think the common sense of that may be lost on. We may be assuming that our audience understands this. But let me tell you a story.

Sure.

I teach syndications and I teach joint ventures a lot. And I was at a conference a few weeks back where I was teaching this topic of how to raise money with joint ventures instead of syndications.

Now, why would you say that?

Why would I say what?

Why would you be saying do a joint venture as opposed to a syndication?

Because I firmly believe. And one thing that's also important for you and your audience to understand is when we talk about this topic of joint ventures versus syndication, I am totally unbiased in everything I say. My only bias is to make sure that my client has enough information to make an informed decision. And actually, if I get hired to do a syndication for somebody, the legal fees on that are quite a bit higher than if you hire me just to do a joint venture. But whenever somebody comes to me and asks me to help them with the syndication, the very first thing I'll do is say, look, before you go down that road, have you considered a joint venture? You'll end up. It's. I think. I firmly believe it's the cheapest, easiest, fastest, and safest way to do deals with opm. Because if you work with. If you do things in a joint venture. And to define joint venture quickly. Joint ventures, where a coming together of two or more people, where everybody's actively involved, as opposed to one person just writing you a check or giving you their money and waiting for you to pay them a profit. So a joint venture where everybody's actively involved. Yeah. You don't have to. That's not a security. If it's what I just said, if your facts are what I just said, everybody's actively involved, then it is not defined as a security. And then you do not have to worry about the securities laws. You don't have to worry whether somebody is an accredited investor. You don't have to worry whether you have had a pre existing substantive relationship with somebody. All this talk you're hearing out there about crowdfunding and all that other stuff, which is another topic that I teach and talk on, all of that complexity and the expense and the time, all of that goes out the window. And you can get deals done a lot quicker. I was at a conference earlier this past year, okay. And I met somebody who had an apartment building and they were looking for money. I met with them. We went out for drinks for about an hour, and I said, it sounds like a good deal. Let's meet in where the apartment building is. Let me look at it. I went there for a day and we made a deal. I brought all the money to that deal, brought $900,000 to that deal, and we had the deal done in 30 days. No securities laws issues. Easy. Wow. Wow.

But now you're living with that guy, you're living with that partner.

Yes.

It's like another spouse. As opposed to the syndication. Of course your partners have a say, but at the end of the day, they're more passive. Correct?

They are more passive, but make no Mistake. If you do a syndication, you are married to your partners in that context as well. There are certain, there are differences in the relationship, but. There's still a relationship and there are still duties that you have to that partner. Yes. Listen, there are, in every real estate investing strategy, every single real estate investing strategy, there are always pros and cons and risks that are unique to that particular strategy. Is this strategy risk free? No. If you're looking for a risk fee, a risk free strategy in real estate, then you should not be in real estate.

Yeah, I agree. Okay, so just tell me and the Landgate community, what is the secret to finding a good JV partner?

Great question. So the secret is to. First of all, and let me underscore for a moment before I answer why that's such a great question because we talked a minute ago about pros and cons and risks and whatnot. If you are going to do a deal with other people's money, opm, whether it's a syndication or whether it's a joint venture, it is so critical to do it correctly because the costs of not doing it correctly can be devastating.

Give me an example of devastating.

Well, I do litigation as well as transactions and we do transactions all over the country. Do litigation in California only if you end up in a dispute that ends up, whether it's a syndication dispute or a joint venture dispute, to get through the resolution of that dispute, whether it's through mediation, arbitration or court, let's just assume it's going to be court in order to get through a trial. These days in this wonderful land of opportunity that we live in, you got to expect it's going to cost you at least $100,000. And real estate disputes can be one of the most expensive disputes to resolve because the stakes are so high. I mean, in real estate, it's not unusual to have multimillion dollar disputes.

Sure.

And in a multimillion dollar dispute, it is not unusual, unfortunately, to have legal fees that are in the mid to high six figures to maybe even the seven figures. I did the deal. I had a client in a, in a joint venture dispute not too long ago where it involved three. He was in a joint, he had a joint venture with one partner and they over a 10 year period had done three development deals. And you know, you're a land geek, so you, this is right within your wheelhouse here. I mean, these are, these are guys who took raw land and then took it all the way through development.

Sure.

Three deals over 10 years and multimillion dollar dispute and there were, by the time that deal was done, by the time that, that arbitration, it was an arbitration, a three. Three purse, three panel, three person panel. Because of the size of the dispute, multi million dollar dispute, his legal fees were in seven figures, over a million dollars in legal fees.

Okay, so this is not something where you want to cut corners and say, oh, you know what, I'll go to legalzoom.com and fill out some JV paper.

It's unusual to have to have experts involved because you might have lost profits issues and all sorts of stuff. Yeah. When it comes to any kind of OPM dispute, the stakes are very high, the benefits are huge. Obviously. I mean, you're always better off to do deals with other people's money because you can leverage everything. You can leverage your time, you can leverage your money, you can leverage all your resources. So I firmly believe in our family office. Over the last 50 years, most of the deals that we've done have been with joint venture partners. I'm a firm believer in, in using joint ventures. And this is not something that's unique to me. This is. I could show you an article that was recently in Forbes where they're talking about this notion that multifamily offices like ours, which are defined as ultra high net worth family real estate businesses, they are using the exact strategy that I'm talking to you about right now, not because they need the money, but because they want to diversify the risk. They want to diversify their risk. And so people, the super wealthy in this country and the super wealthy real estate investors are using this strategy not because they need the money, but because it's prudent to diversify your risk.

Yeah. I mean, Jeff, I used to do investment banking. I mean, these guys never use their own money. And we're talking about, you know, billion dollar funds.

Yeah.

And they would coventure with other funds to diversify their risk. I mean, this is just something that, you know, the wealthy do.

Right.

It's just, it's just a smart strategy. So.

But I got off track. I wanted to answer your question.

Yeah, let's get back to the secret.

So I was at this, I was at this conference and I was talking to a gentleman who didn't know that I was about to get up on the stage and teach this topic. And I was saying, I was just trying to get to know him. And he was telling me, I said, are you doing, I said, tell me a little bit about what you're doing right now. He says, well, I'm not doing a Whole lot right now. And I said, why not? He says, well, because I got all my money tied up in my deals. And he was very proud about the fact that he had a pretty sizable portfolio, but he owned 100% of all his deals. And I told him about this exact strategy that I'm telling you about. Remember, this is a guy who's sophisticated enough to have a pretty decent sized portfolio that he funded all himself. And I said, you know, this is a great time to be investing. And you're not investing because you have all your money tied up in your deals. If you got a couple partners to come into your existing deals, you could pull equity out of your deals. Just, you know, your partner comes in and you take that money that they pay you to get a piece of your deal and now you've got money to go do more deals. Which to you and me seems maybe elementary and obvious. But I'm telling you, when I told him this, his eyes lit up and his whole body language shifted and you could just see that it was an epiphany for him. And he told me later, he said, you completely shifted the way I think and I am restructuring my entire business to now do exactly what you said. So. And it's actually a lot more powerful to use this strategy for deals that you currently own as opposed to deals that you're thinking of buying, because the story is so much more compelling to say, look, I believed in this particular deal so much that I put 100% of all the money required for this deal in myself, number one. Number two, I've removed a lot of the risk because I have now seasoned this investment over a period of time. And those are two. In this business of doing deals with other people's money, the story is so crucial to the process of trying to convince others to invest with you. That's a very powerful. That's a very powerful, truly powerful story. This is a strategy which, and I'll tell you another story which I think drives the point home. I was at another conference a couple weeks back and I was teaching. It was a weekend that I was teaching syndication the entire weekend. And I was at one of the breaks, a guy comes up to me after I just got finished explaining everything, all the do's and don'ts under the securities laws when you're trying to do syndication, talking about accredited versus non accredited and talking about how important it is that you have a pre existing substance relationship with somebody for at least 30 days before you start pitching them a deal and the deal can't be a deal that you already had in process when you establish the relationship and all the rules and all that. He comes up to me and says, well, what if I need money now? I need money now. I don't have time, I don't have a 60, 90 day window, a lead time to start to build up an investor list that I can, that I can make sure I am making an offer in compliance with the securities laws. And I said, well, then your really only option is to do a joint venture. Because in a joint venture you don't have to worry if somebody is accredited or not accredited. And you don't have to worry if there's a pre existing substantive relationship because it's not a security. It's just Mark sees Jeff and they meet at wherever, start talking. And the SEC doesn't care about what you and I do as long as we're both actively engaged.

Okay, so let's define actively involved because. Okay, so for example, I've got a subdivision I bought from the county in Texas, and it's 200 lots, right. And I want to put mobile homes on some of these lots. And I don't know anything about mobile home investing, so I'm looking for a JV partner actually right now to do that. So when we're done with the podcast, I'll have to talk to you about that. But what kind of partner should I be looking for? Who do I get in bed with? How do I know that this is something that's going to work in six months down the line? We hit a bump, they're not going to sue me.

Yeah, That point about how do you make sure you got the right partner? We're moving around a little bit, so I apologize. There's so much to cover and everything's all interconnected here. We do a. I've got. Making sure that you have the right partner is very important. And there I have two special reports that I created that addresses both of these. One is called 17 Steps to Setting up a Successful Joint Venture. And what that is is describes the process, the dialogue, the conversation that you need to go through with somebody that you are thinking of creating this business marriage with. Because make no mistake about it, as you said, it is a marriage, it's an important relationship and there's a right way and a wrong way to do it. And so one of the ways that you make sure you're working with the right partner is to have this kind of conversation where you are talking about all the things that you need to discuss. And this is not intuitive. This is not common sense. This is a 17 point success strategy session that you need to go through. And I always go through this with my clients to make sure that they have asked all the hard questions and had all the tough discussions up front when they still each have enough leverage in that discussion to make sure that each one, nobody's being taken advantage of and they're going in with their eyes open. I got another special report I created called 12 warning signs you're headed for a lawsuit with your partner. Because there are always warning signs. And after seeing clients in my litigation practice for these several decades and seeing how many of these deals fall apart, I decided, and having been on the front lines when they do fall apart, I wanted to put together this report so to educate my clients as to when they should recognize that there's a problem. Tell you another quick story. I have a client who was in a partnership and he showed up one day to his office and his key didn't work. His partner had changed the locks. He called me up and told me this and asked me, what do I do now? I said, well, what did he say? Why did he change the locks? He said, because I've been trying to get your attention for weeks and weeks now and you've gone dark on me and this is what I felt I needed to do just to get your attention. Wow. Yeah. And so there are always warning signs when the communication starts breaking down, when emails don't get answered, when calls don't get returned. My friend, you have a problem. And if you. I have dealt with some of the smartest, wealthiest, most sophisticated people you'll ever meet. And this concept is not something that only applies to somebody who's never done it before. I can't tell you how many times people who are smart, sophisticated, wealthy, they get lost in the weeds when it comes to some of the stuff.

Sure. I mean, you know, people want to avoid conflict, typically. And if you've got a JV partner that you're having issues with, that's something that's really hard. That's a hard conversation to have.

It is.

And you almost need to have a third party like yourself to kind of help mediate it and say, look, I'm having issues with my partner. I don't know how to bring it up.

Well, and that's a great point, because when I give these talks, more often than not, somebody in the audience, because I talk about this notion how the stakes are high and the cost of not getting it right can be so expensive. And almost every Time I give this and I'm talking, I'm very interactive with my audience. Somebody tells me, yeah, you know what? I just got finished with a dispute with my partner and it cost me $100,000 just to get through the mediation. Didn't even see the inside of a courtroom just to get through the mediation. Because again, the stakes are high and you know, so yeah, it's. But having said all that, I don't want to dwell on the negative again. There are risks in every real estate situation. The good news is, number one, I am telling you as somebody who has seen the good, seen the bad, seen the ugly, I still love joint ventures and it's my preferred way of doing business. Because I'll tell you why, everybody, everybody has a challenge in real estate. And I believe that every challenge that you have in real estate, virtually every challenge you face in your trying to achieve your real estate investing goals, the solution is a joint venture. For me, I'm a busy lawyer, I got a full time practice and I'm also an investor. And my biggest challenge is that I don't have enough time to find the great deals. That's my biggest challenge. That's why I go to a conference to speak or to network with high level real estate investors. And I'm looking for somebody who's got a great deal, has found that deal and I'm fine bringing the money to their dealers and I'll do that all day long. So I, like somebody has a deal that they've already vetted and it makes sense and it meets my acquisition criteria. To me, that's a faster way to get deals done than to sift through dozens or hundreds of emails from brokers to try to find the needle in the haystack and then do enough analysis so I can identify which deal actually makes sense, etc. Etc. I mean, we both know how hard it is to find good deals. So for me, for me, that's my biggest problem in this business. Not enough time. Everybody's got a problem right now in.

My niche because the deals are typically smaller. What I found is that we can find great deals all day long, the way that we target it and we're getting 300% to 1,000% margins, but it's hard to find somebody on the other side of it that's really good at marketing that land. Right? So what I found with a lot of my students is that they're really good at getting the deals, but then they struggle in selling it or vice versa. They're great marketers, but they don't like the process of hustling to get the deal.

Exactly. Again, in this business, there's so much involved in getting from the beginning to the end that. And if you try to be a one man show, one person show, it is infinitely more intimidating, challenging, difficult than if you have the right strategic partner. And every single word in that phrase I just used is important. The right strategic partner. Don't just partner with one person just because you happen to meet somebody that seems like a nice person. It's got to be. You got to determine what value would they bring to your relationship. Is it a value that you need? And even if it is, then you need to go through the correct vetting analysis to make sure there's a good fit between you and your partner. And that's how you minimize your risk and maximize your profits doing deals with joint venture partners.

That's great. That's great. Well, I'm going to be downloading your free reports for sure.

All right.

We're at that point in the podcast now where, Jeff, I get to put you on the spot and ask you, what is your tip the week? And you're going to have to come back in the podcast because this is such a weighty subject and we could probably talk hours and hours about it.

Yep.

But, you know, what is your tip of the week? Like a resource or a website or something that can help our community grow their investing businesses?

Well, I think my tip of the week is really, if what we've been talking about here has touched a core, if it resonates with you, then I think if you're interested in pursuing this strategy, I think in order. So many of us in this business get intimidated to the point where we don't even start. I think the first thing you need to think about, I think the first thing you need to do is get into some. Spend a few minutes doing some possibilities, thinking just like we would. If I met you at one of these events and we started having a conversation, I would ask you, what is your biggest challenge? What has been holding you back from doing more deals right now? And you need to answer that question. Once you get that kind of clarity and it shouldn't be that difficult for most of you. It's a pain point that you should probably be able to answer right now. If I was in a conversation with you somewhere, most people can say to me, they could say, I don't have any money, I got bad credit, I don't have enough time. I don't know, I want to do land Deals, but I don't have the guy to market it, whatever it is. This is not something that most people have to think about very long because unfortunately, they think about it all the time. It's so frustrating because you. Here we are again in this time of great opportunity, but for some reason, you're not getting the results that you want. So think about it. And it could be two answers. Maybe Like, I did a joint venture that had four partners in it. One, I brought the money. Somebody else brought the deal and got the loan. Somebody else was the broker who was going to sell. This is going to be a housing subdivision. So we had a developer, we had a broker who was going to sell the houses once we were done, we had the guy who brought the deal together and got the loan. And we had myself and I brought the money to the deal. So there are four people who are actively involved in that joint venture. Who do you need to get your success to take your real estate investing career to the next level? That's my tip of the day. Get clear on that. And then when you want to start looking for people that can fill that void here, I'll give you one other tip. I have a free LinkedIn group called Real Estate Joint Venture Matching Group. Real Estate Joint Venture Matching Group. If you go to LinkedIn, just search that and you'll find my group. And we got 3,500 members in it right now. And I'm very actively involved managing that. So I, I really tried to weed out all the promotions and make every post there an actual deal where somebody is looking to find a joint venture partner. That's a place that you can go to right now for free. And you can see some joint venture opportunities and see some potential funding sources. And that's a free resource to you right now. So there are two tips to get you moving, get you some momentum.

That's great. That's great. Okay, so my tip of the week is I'm going to shamelessly promote Jeff's site, I. E. I S online dot com. Because I have a feeling that if we just retain Jeff hourly, it would be really expensive. But he has packages already put together. And Jeff, can you kind of enlighten us about some of these packages?

Yeah, we have packages on all sorts of. All sorts of topics that again, I try to put things out there that are unique. I don't like to do just a repeat of what somebody else has done. So we represent clients in both transactions, litigation and transactions as anything in the cycle of ownership. So everything from asset protection to entity formation, to purchase loan agreements, loan documents, construction, and disputes that may arise in the context of any of those. So for right now, if you need money to invest, we have home study course for syndication. We have courses about construction, how to. We have courses about if your property is in distress, courses about fraudulent transfers, how to avoid those commercial loan workouts. And some of these are for free. We offer them just to give you some help in times of need. I think our fraudulent transfer course is free, for example, and that's something that everybody needs to know about. And I think our construction course is also free. But go to the website and you'll see if this topic that we've been talking about today is of interest to you. This is something that we do not yet have loaded up on the website. So in order for people to get more information about that, I think, Mark, you're going to.

Yeah, I'm going to provide a link for everybody to go there and check it out and learn more.

All right, so you'll provide that link and they'll get that information that way.

Exactly. Exactly. Well, Jeff, are we good?

Yeah. I enjoyed talking to you, and you're right. This is a very important topic that we could be talking about for hours. But if people don't want more information about it, you're going to give them that link and you'll tell them how they can get it?

Yeah, absolutely. Absolutely. What's interesting about you is you take kind of a drier subject and you make it really interesting. So maybe you'll come to one of my boot camps. I'll have to talk to you about this. After the podcast. I try to do a PowerPoint presentation on syndication. I mean, there wasn't a. I mean, people were just falling asleep on me.

Again. I just taught a weekend on it. I was teaching. There were two instructors, myself and somebody else handling some of the business aspects of it. I had to talk for seven hours over the weekend on just the legal aspects of it. And I am proud to say that I did not see one person nod off. So I was very proud of myself.

That's incredible. I mean, my whole thing was everything. I'm about to say, review with your attorney, but this is the basics of it. It was like maybe 30 or 40 minutes, and it was like, please skip this next time. All right, Jeff. Well, I really appreciate you coming on again. Learn more about Jeff Lerman. What's the main website people can go.

To for my firm? For my firm, it's realestateinvestorlaw.com realestateinvestorlaw.com Again.

Download those free reports that Jeff was Talking about the 17 Ways to Find a Appropriate JV Partner or 17 Steps of Successful Joint Venture.

So successful joint venture and 12 warning signs you're headed for a lawsuit with.

Yeah, absolutely. So definitely get those at the very least. And look, give me some love. If you want to learn more tips and tricks and techniques on how to make an incredible income actively and Passively, go to www.thelanegeek.com and download for free the Passive Income Blueprint. Get the ebook how to Avoid the Three Fatal Land Buying Mistakes. And of course, get this always informative and engaging podcast delivered each week to your email inbox. And if you're looking for some wholesale land, go to frontierpropertiesusa.com Anyways, Jeff Lerman, I appreciate your very valuable time once again. And this is Mark Podolski, the Land Geek. I'll see everybody next week. Thanks, Jeff.

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