Let’s face it – everyone objects to paying for advice; after all, our parents probably provided more than we ever wanted to hear when we were younger. Conversely, very few object to paying for emergency care after a disaster has struck. It is human nature to ignore or downplay the warning signs when you start your hike into the wildnerness; it is also human nature to spare no expense demanding a helicopter rescue when you’re trapped in a ravine with a painful broken leg, night is falling and so is the snow.
Here’s a critical fact that most people fail to grasp: the hourly rate your attorney charges doesn’t change. However, the number of hours of legal service that you will require can be dramatically different, depending whether you are meeting with your attorney in his office before the transaction takes place, or in the courtroomafter the transaction went sour! Like the injured hiker stuck in a canyon with a broken leg, the cost to extract you from a legal mess is of secondary importance to the need for an immediate rescue. So, if it costs less to get the advice in advance, is it possible to get relevant legal advice for free?
The answer is a qualified “yes.” It is important to distinguish “legal advice” from “investment” and other forms of advice. Recently, I saw an article titled “How to Avoid Drowning,” and quipped: “Don’t go near the water.” Accurate, guaranteed, and free advice, but neither helpful or practical. Good legal advice is designed to put you into the best position – from a legal perspective – to protect your interests while allowing you to achieve your objectives. Staying away from the water will protect them from drowning, but does little to help them achieve their objective of having a fun day sailing, surfing or swimming. By analogy, the answer to the question “How can I protect myself from risk in a real estate investment?” would be “Don’t invest in real estate.” Again, accurate but useless advice.
For real estate investors, there is no shortage of “advice” provided in books, articles, seminars, workshops, and classes, as well as a virtually unlimited amount available on the Internet. You already knew that, or you wouldn’t be reading this! If you take the time to review this material, attend courses, and identify your investment objectives, learn how to accurately calculate return on investment and account for expenses, and develop a plan that is designed to achieve your personal and financial objectives, you will drastically reduce the range of variables that need to be considered when assessing your legal risks. Further, understanding the importance and value of assembling a team of professionals: brokers, contractors, property managers, insurance agents, and accountants, you will develop decision-making methodologies designed to optimize your personal situation while identifying and – hopefully – minimizing the degree of risk involved.
In addition to assembling a team of professionals, you should join a local Real Estate Investment (REI) association that meets regularly and features guest speakers on different topics related to real estate investing. By listening carefully to these speakers, as well as interacting with like-minded individuals who attend the meetings, you will learn a lot more than you can imagine! Stick to REIs that offer educational programs, and steer clear of those that sell books, investment packages, etc. However, when you meet someone who specializes in selling certain types of real estate investment products, remember you are the customer. You can ask questions, check references, and do your due diligence to further minimize your risks. Make certain you get all agreements in writing. After a careful and objective analysis, if the proposed investment appears to help you achieve your personal and financial objectives, you will have accomplished the single, largest and most important element of reducing your exposure to liability or loss. Ignoring or postponing this analysis could be extremely expensive and, in most instances, futile.
And that, dear reader, is very relevant, practical — and free — legal advice. But it only works if you use it!