Real Estate Attorney Explains How to Avoid Buying a Bad Investment Property

Hillary Johns (00:00)
Do your due diligence and kick the tires as we were discussing. So you need to know what you’re buying. Do not take someone’s word for it. You know, a very zealous seller or broker is going to really want to, you know, they want that commission and they want to sell. You need to know what you’re buying and you can’t rely on photos. I would always recommend that you have your own contractor licensed who really knows what they’re doing and understands what a condition of a property is, who’s going to pull permits, make sure these things are done correctly.

Micah Johnson (00:04)
You need to know.

Hello everyone, welcome to the Real Estate Pros podcast. I’m your host, Micah Johnson. And today I’m speaking with Hillary Johns, who’s making some serious moves in her career for the last 30 years. Hillary, welcome in, glad to have you.

Hillary Johns (02:13)
Thank you, Micah. Thank you for having me.

Micah Johnson (02:16)
Absolutely, glad for you to be here. I’m excited for folks to listen in. You’ve been a real estate attorney for quite some time now, which provides a tremendous perspective on our industry and what’s going on. So for folks who aren’t familiar with you yet, tell us a more about yourself and what your main focus is right now.

Hillary Johns (02:33)
Well, I’m a trial attorney, we also handle transactional matters. So we have offices in Southern California, Northern California, and New York. We also do business in Montana and the District of Columbia. And we are the people you bring in when there’s a problem or you want to prevent one. So the phrase speak softly and carry big stick does apply to trial attorneys because once you have one, they know you’re serious. We deal with insurance companies, brokerage houses, investors, real estate companies, and individuals.

It’s…

Micah Johnson (03:03)
Well,

what led you there? What got you into that field?

Hillary Johns (03:07)
⁓ you know, I-I…

I really liked real estate law. I really liked the business aspect of it. I liked the personal aspect of it because even if you’re not living in a property you buy it is personal because it’s either your business or how you’re doing that. And I think, know, we live in such a great country and, you know, one of the amazing things about it is how much land we have and how unique it is and how diverse it is. Like, you know, I know we were talking about just before the show that there are different parts of Florida and there are different parts of California.

Micah Johnson (03:10)
you

Hillary Johns (03:39)
and how different they can be. if you’re going to our coast, either of our coastlines, as opposed to being up in the mountains or the trees or up further north, know, but yours closer to Georgia, ours closer to Oregon, how different this country can be. you know, what a sense of pride it is for people to be able to own a home or to invest in properties and to make those properties work. And I just found that it’s ever-changing. It’s very interesting. It’s personal on a certain level. And it’s, I think it’s,

done a lot for a lot of people, but that is the American dream, right? Go and get your plot of land or your plots of land and that’s what you’re going to be doing with your life. I like being able to be a part of that and to assist them to navigating that process. As we were talking about, there are a lot of things that people, if they knew beforehand, can keep you out of trouble or you can avoid some heartache too. I think there are a lot of good opportunities for investing. see them all the time. And every time I’m looking at listings and things

like that and that’s what’s great about it but I think it’s ⁓ there’s been a lot of evolution in this area a lot.

Micah Johnson (04:47)
Right.

Well, you live on the side that typically sees the worst happening. So what is it that you could share? what should you, you know, give us about a few things that, hey, you got to think about this before you’re buying a property. Like, what are some points that folks can at least try to hedge their bets a little better upfront?

Hillary Johns (05:07)
it.

Do your due diligence and kick the tires as we were discussing. So you need to know what you’re buying. Do not take someone’s word for it. You know, a very zealous seller or broker is going to really want to, you know, they want that commission and they want to sell. You need to know what you’re buying and you can’t rely on photos. I would always recommend that you have your own contractor licensed who really knows what they’re doing and understands what a condition of a property is, who’s going to pull permits, make sure these things are done correctly.

Micah Johnson (06:00)
You need to know.

Hillary Johns (06:25)
also

recommend when you buy a property, you go see it. There are so many things being sold online these days and people buy it and based on these beautiful photos and you that are all staged, you’re showing the best aspect of yourself. And you know, we see this online every day, right? People are AI-ing their, we’re not AIed, but you people are AI-ing themselves and they look fantastic. You need to really know what you’re buying. And that means not making an emotionally based decision. This is a business decision. And as we have discussed,

Micah Johnson (06:40)
Right?

Hillary Johns (06:55)
One of the biggest mistakes people can make is falling in love with a house.

making these things, I’ve got to have it here because there’s all, know, making financial decision mistakes are often made emotionally. Most financial decisions are emotionally based. They have nothing to do with, you know, the people are extremely successful. They’ve probably taken most of the emotion out of it, but everybody has their motivating factor here. You need to make sure that you really know what you’re buying. If you don’t know what you’re buying,

Micah Johnson (07:00)
Right.

Right?

Hillary Johns (07:27)
you could be setting yourself up. Is it a fixer? That’s a very romantic notion. I bought a cheap fixer and it turns out to be in Money Pit.

Micah Johnson (07:34)
Right.

Hillary Johns (07:35)
I

bought a commercial space, there’s gang and drug activity at night here. So I have to put up, you know, that that happened in San Francisco, of course, where they had all these people who had stores for years and were leasing and buying. And it was their dream to have this little space. And then they realized, you know, it’s getting broken into all the time. You know, have you seen, tasted and smelled it as we were talking about? It’s very different to be on a seeing a video or to be there in person. Have you looked around? Have you done your due diligence? Have there been lawsuits?

Micah Johnson (07:52)
Right?

Hillary Johns (08:05)
Who is the seller?

Do you know these? You usually don’t know these people. And you would be amazed at how much a seller is more than happy to dump off a piece of junk on somebody else. Saying, I forgot to tell you about the mold. Or, oh, the electrical works fine, but it’s all going to have to be replaced in the next three years because it’s so outdated. It’s not up to code and it’s a fire hazard. You know, they’re more than happy to take your money for that and get a few extra hundred thousand bucks or whatever it is even more. mean, depending on where you are in the US, homes are extremely expensive. I mean, there are homes

Micah Johnson (08:07)
Right?

Right.

Hillary Johns (08:37)
in LA, they go for more $100 million. I think that’s ridiculous. I don’t think any home is worth that. It’s not a castle. ⁓ they do. They do do these things. The only things I could see be worth it is like if you go to Montana or somewhere like that where you’re buying hundreds of thousands, then I could see that. But you need to look at those and do your due diligence. don’t get a contractor as reliable and say, I need you to figure out anything that could be wrong with it. I need you look at the permits, any kind of history on this.

Micah Johnson (08:48)
Right.

So, So, I’m not going to able to do that. I’m going to to it. It’s a great thing. It’s a thing.

Hillary Johns (09:07)
some due diligence to know what you’re looking at. This is what I want to use this for. Do you see any problems? Because the seller’s not going to tell you that. They’re just going to say, easements and things like that, are there issues with neighbors? This is a

Micah Johnson (09:07)
It’s a great It’s great thing. It’s a great a thing. It’s great thing. thing. It’s great thing. It’s great thing. It’s a thing. It’s great thing. thing. It’s a It’s It’s

Hillary Johns (09:21)
big one.

neighbor this has become to the forefront this 20 years ago this was not the case she had a bad neighbor so what get over it suck it up you know don’t act don’t don’t be an asshole excuse my language i hope we can say that i’m thinking but it’s like maybe you’re the problem here but it’s not have bad neighbors bring down property values they cause litigation they cause property damage and they put you at risk

Micah Johnson (09:24)
You have to be able do it. So, I’m to finish this. I’m going start with a speech.

No, you’re good.

Hillary Johns (09:46)
I mean, bad neighbors can be very dangerous. mean, a lot of states, people clearly carry guns, use drugs, rent out their properties to what I would say are very undesirable people. They don’t know that. What if they run out to some drug dealer? He’s just got people running in and out of there in all hours. Would you feel safe with your baby in the crib there, your little kids going out, your kids going out and playing in yard? I wouldn’t.

Micah Johnson (09:49)
Right?

Hillary Johns (10:44)
So these are things that you need to know and you often have to ask the right questions, but you need to ask them, know, is there criminal activity in the area? You just because someone’s not arrested does not mean that there’s not criminal activity. Are there issues with your neighbors? Do you know them? May I go over and say hello to them? What does the, what does your contractor say? Passing inspection.

Micah Johnson (10:44)
Right.

Right.

Hillary Johns (11:08)
It’s not the bare minimum. I mean these people do a good job, but you know, they don’t know everything I mean, they’re not gonna rip open the walls and say okay. Well, you’re your electricals here You know if you have a rodent infestation how much work had done on this? How long have you owned this property because we’re getting a lot, you know They’ve started to come down and regulate flips because this was a very common thing. They take it They’d see those very showy things on TV. Oh, can flip a house and then they don’t really do the works that’s necessary. So the bones are no

Micah Johnson (11:19)
Right.

You

Thanks.

Hillary Johns (11:38)
okay. And so, and they look at this and you know, this is a rickety thing that probably should have been a tear down, you know, because it’s probably cheaper. And they put it back together and they sold it, probably for a pretty penny, your penny. And it won’t just be penny thing. And so you need to

Micah Johnson (11:39)
Right, exactly.

Right.

Hillary Johns (11:59)
be aware of these and the here’s the unfortunate reality people get into these they sign something called an arbitrate which has an arbitration clause not realizing that when they go to arbitration it can be a very efficient way to have something resolved it can also be a very expensive way to do it for example and you if you’re paying an arbitrator in the state of california new york you’re probably playing five to eight hundred dollars an hour so imagine going to imagine going to trial

Micah Johnson (12:08)
Mmm.

Wow.

Hillary Johns (12:27)
So eight hours, that’s

Micah Johnson (12:28)
Right. ⁓

Hillary Johns (12:30)
at 500, which is a low rate in this state. And you’re paying $4,000 a day for a two week trial. One week is $20,000. Two weeks is 40. You’re splitting that and you’re paying your lawyer. In addition, in some states, including California, if you go to arbitration, you have limited rights of appeal.

Micah Johnson (12:33)
Thank you.

You need to have great experience.

Thank you.

Hillary Johns (12:49)
So unless the arbitrator showed clear favoritism like, yeah, by the way, the broker is a friend of mine and I’m never going to find them guilty, you have very limited rights for objecting to evidence and getting things in. Often cases turn on, did you improperly disallow this evidence? Did you not let that in? Did you not let this person testify? You’re sort of at the mercy of the arbitrator. And I’m not saying I have friends who are arbitrators. They’re very, very good. But that’s how this works.

these things with like a dispute resolution. The other hammer I would also say when you’re signing an agreement you need to look and see if there’s an attorney’s fees clause. And I recommend and the reason I do is because if you win as a consumer or a private investor and I consider private investors consumers because they’re out in the market doing that.

Micah Johnson (13:35)
Thank

Okay.

Hillary Johns (13:42)
If you look at that provision, it does not have an attorney’s fees provision, you could also hear the defense, which I appeal is saying the cost to litigate this is more than your case is worth. So you’re going to wind up paying your lawyer because you’re going to have to, and maybe you’ll win from me, but we’re both going to pay our lawyers and you’re not going to get much. Make sure and think seriously, this is where you need a lawyer to help you review these and say, I want attorney’s fees and cost provision so your experts can be covered, your jury fees can be covered.

Micah Johnson (13:43)
And that’s what we’re doing.

Hillary Johns (14:12)
you know, are you going to, you know, any other costs, deposition costs, those are expensive. A deposition in the state of California usually runs two to $10,000 a pop, depending on how long it is. The attorney’s time, the cost of a court reporter who do excellent jobs, do not use AI, use a court reporter, a real certified court reporter.

Micah Johnson (14:23)
Wow.

Hillary Johns (14:32)
These are not cheap and people don’t know that. Most people don’t know that. They’ve never been involved. And so they look at it and I’ve had this unfortunate situation with so many people who probably have been wronged.

And they realize how much it’s going to cost to pay me or someone like me to litigate this. And a person who does something wrong, they know that. This is why insurance companies who are not in the business of paying out will often pay out on a claim because it’s cheaper than litigating unless they’re trying to get an example of someone. And most people know that. And so when they look at these things, where is your case going to be tried?

Micah Johnson (14:46)
Thank you.

right

Hillary Johns (15:53)
You know, it’s not necessarily to the advantage of a California me to have a case tried in Florida where you are, for dispute over something that happened in California. You have to look at that clause in the agreement. And most people sign these, they’re long agreements. Some of them are forms, like California has a CAR form, lots of other states have a form. They don’t know what they mean. They just look, okay, initial here, sign here, what’s this, where’s my deposit?

Micah Johnson (16:12)
And it’s just thrown

in the paperwork.

Hillary Johns (16:17)
Yeah, exactly. And they’re like, just sign this. you you can’t blame the brokers or the agents. They’re doing their jobs. It’s not their job to do that. if you also remember, if a broker tells you something and it’s not in the agreement, that’s not a material representation necessarily. This happens with insurance, too. I see this where they said, I talked to my broker. They said I’m covered. I is it in the is it in the thing here? Where does it say that? And it’s not.

Micah Johnson (16:36)
Hmm.

Hillary Johns (16:47)
And so the person, here’s the reality. This is what you signed. This is what you have. Keep your paperwork. I know in Montana, for example, if you don’t have your endorsements, it’s not part of the policy. You need to read these things. And if you don’t understand it, get a lawyer to help you understand it. We frequently consult with saying, what does this mean? And I didn’t know what this meant. I go, do you understand this? What’s it mean? And again, you hope everything works out. At this time, it does.

But it’s becoming more and more often as private people are getting into the market, real estate investing used to only be for the very, very wealthy. Now a lot of people can, which is a great opportunity for people to grow wealth, to expand their portfolios, to get into a market they want to do. Maybe it’s another career for them, selling and maintaining properties and all that goes with it. But you need to know that these are real risks for you. And I also want to

Micah Johnson (17:15)
Right.

Right.

Thank

Hillary Johns (17:45)
I think people

Micah Johnson (17:45)
you.

Hillary Johns (17:46)
fall into the panic like well, I’m such and such age. I have kids whatever it is

I should own a house now. I should be a millionaire by now. Why don’t I have the… Sure, at some point you may start to get concerned, but as we’ve seen now, people are living a lot longer. People have second in careers. There can be life circumstances like a divorce, a death in the family. Maybe they’ve had a bankruptcy. It doesn’t mean they can’t revive their careers and things like that, but the traditional time frame does not apply anymore. It doesn’t at all.

Micah Johnson (18:07)
Right.

No.

No,

script has been flipped now. anybody that’s, if you’re using that, it’s going to come to a point where it’s an excuse and it’s either holding you back forever or you’re going to overcome it. Cause that’s what it really requires. You have to actually believe something new. Are you willing to, if you’re the one, if you’re out there telling yourself, I can’t, and this ain’t for me and all of that, that’s just the story you believe the requirement. Will you believe the opposite? And if you will,

Life opens the doors, everything becomes possible as long as you keep becoming the person who can do it. That’s what I learned from successful people. You’re not a byproduct of hope. That wasn’t your strategy to get where you are. You just ran a process over and over and over again, adjusted as you went along the way, learned new information, added new information. That’s what you’re doing and anybody can start that at any time.

And that’s what I want for folks is just get started and keep doing the little things each day. Even just like what you’re talking about here when it comes to a deal. I mean, to be a professional investor, you check the little things. You got to inspect what you expect, because if you don’t, that’s where it’s those details that bite us in the rear end, right? The one you thought you could just, ⁓ this one will, this will be fine. Nope. You rip that wall open and all you find is an extra a hundred grand. You didn’t think you were spending.

Right? Those are the things when we try to cut those edges. So Hillary, I love, thank you for sharing that today. I really appreciate it. Thanks for coming on the show for those that are listening in that, you know, they’re in the areas that you work that want to learn more about you, possibly book an appointment. What’s the best way for them to find you?

Hillary Johns (19:58)
The best way to reach me is in my phone number, 310-492-4009. If you mentioned that you saw me on Micah’s podcast, there’s no charge for the consult. We also have a website, is hillarytriallawyers.com And if it’s something that’s not in our area, we may know someone in another area. I do have a pretty expansive network of other attorneys that we refer to. sometimes it’s just knowing where to start and who to call. So we want to be that person you call as a resource just for information and things like that.

Micah Johnson (20:22)
Right.

Love that. Thanks for sharing. If you’re listening and watching and in check our show notes, you’ll find all Hillary and some contact info there, her website, reach out to her, touch base with her. Make sure that you’re kicking those tires, understanding what you need to understand to be successful at what it is you’re doing. Again, Hillary, thank you so much for being with us. Thank you everybody out there for being with us. If you got value out of today’s episode, please like this episode, share it with someone else you think you get value out of it. And if you’re not a subscriber yet, you know what to do.

Click that button, follow along with us here. We appreciate every single one of you that do. We’ve got more conversations coming up with operators just like Hillary. Folks out there building a real business in the industry. Thanks for being with us today. We’ll see you on the next episode.