some major legal aspects of real estate investment using the law and lawyers to maximize your...

Some Major Legal Aspects of Some Major Legal Aspects of Real Estate InvestmentReal Estate Investment

Using the Law and Lawyers to Maximize your Benefit and Minimize your Risk

Eduardo R. Arista, CPA, [email protected]

Notice: The following slides consist of general information, and are not meant to be used to analyze any specific situation. These slides should not be relied upon to resolve any specific legal issue. Please seek legal counsel as warranted.

Arista & Herrán, P.L.Gables International Plaza

2655 Le Jeune Road, 5th FloorCoral Gables, Florida 33134Telephone: 305-444-7662

www.AristaLaw.com

Copyright 2006 Eduardo R. Arista, P.A. All rights reserved.

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Why Hire an Attorney to handle your Why Hire an Attorney to handle your Real Estate deal?Real Estate deal?

Why hire an obstetrician to deliver your baby?

1. Reviewing Contract2. Negotiation Support3. Checking Title4. Preparing and Attending Closing5. Tax & Estate Planning / Asset Protection


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HIRE YOUR LAWYER HIRE YOUR LAWYER BEFORE BEFORE

YOU SIGN THE CONTRACTYOU SIGN THE CONTRACT

The Law normally will The Law normally will notnot protect protect you from making a bad deal.you from making a bad deal.


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The Real Estate ContractThe Real Estate Contract

Realtors can help fill in the blanks, but modifying or drafting additional clauses is like taking scalpel to the contract. For that you want a surgeon.

Clauses drafted by non-legal professionals can cause: Ambiguity; Vagueness; Conflicting Provisions; and Unenforceability.

Disputes over interpretation of the contract can cause litigation.

Litigation can cause unnecessary delay, headaches and expenses.


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The Contract: ContingenciesThe Contract: Contingencies

Clean Title; How clean is clean?Appraisal; What if it’s too high?Financing; Good, bad and ugly.Home InspectionHome Sale


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Negotiation SupportNegotiation Support

EVERYTHING is negotiableCommon deal points beyond the “fill in

the blank” and “check the box” parts of a form contract.

Know what you want and ask for it. Know what they want and trade for it.“Let me check with my lawyer first” There is no such thing as a free lunch.


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Checking TitleChecking Title

Identifying vs. Resolving Issues

Excluding from Coverage vs. Taking Legal Measures

Understanding what you are getting and what is covered if things are not what they seem.

Attorneys’ Title Insurance Fund, Inc.


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Preparing for ClosingPreparing for Closing

Seller’s Representations; Put your money where your mouth is.

Deal Maker vs. Deal Breaker

Some People Don’t want you to Hire a Lawyer

Going against legal advice / Acceptable Business Risk


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Attending ClosingAttending Closing

Mortgages, Notes, Deeds and other documents you will sign at closing are extremely complex legal documents.

Forget what you were told by anyone before or during closing; what counts is what the documents say.

Your Lawyer is the only part of your team that won’t lose their commission if you don’t sign those documents.


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““But they told me. . .”But they told me. . .”

There is no Prepayment penalty The interest rate is X% The interest rate is fixed I can “quitclaim” the property to a corporation after the

closing It’s not too late for a “1031” transaction My company is the only one liable for the mortgage I don’t have to live in the property.

TALK IS CHEAP


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Tax PlanningTax Planning

1031 tax-deferred, like-kind exchanges

Capital Gain vs. Ordinary Income

Depreciation Recapture

Consult a qualified CPA before you sell or buy.


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Estate PlanningEstate Planning

Who will manage the property and how when you are gone?– Succession planning– Giving the Appreciation to one heir and the

income stream to another.Who will manage the property and how if

you are temporarily incapacitated?


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Estate PlanningEstate Planning

Durable Power of Attorney– What does it do?– Con: Blank Check

Living Trust– How does it work? Not subject to Probate– Death vs. Incapacity/Guardianship– Transferring assets to Trust & Pour Over


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Asset ProtectionAsset Protection

Getting it right from the beginning

Don’t put all your eggs in one basket; Structuring your real estate portfolio.

Investment Property is not protected by the “Homestead Exemption”

Foreign Owners


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Limit Your LiabilityLimit Your Liability

Insurance is only the first line of defense– Are you really covered?

– What are your limits? Exposure to Tenants, Guests and others. Who gets sued when they “sue the owner”? How a properly drafted lease can help protect

you. Pitfalls of personal involvement in property

management


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Cover Your AssetsCover Your Assets

How to take title?– Joint Tenants (a/k/a Joint Targets)– Tenancy in Common– Tenancy by the Entireties– Limited Liability Companies, Corporations

and Partnerships


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www.AristaLaw.comwww.AristaLaw.com

Eduardo R. Arista, CPA, Esq.Arista & Herrán, P.L.

Gables International Plaza2655 Le Jeune Road, 5th FloorCoral Gables, Florida 33134Telephone: 305-444-7662

E-Mail: [email protected]

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