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Show Summary
In this collection of conversations, attorney Nachael shares her expertise on the legal and strategic dimensions of real estate investing. She discusses her role as a general counsel and corporate strategist, emphasizing the importance of structuring deals to maximize returns, minimize liability, and implement effective tax strategies. Nachael also highlights the complexities of mixed-use developments, the risks involved in creative financing, and the challenges small investors face in navigating real estate law. The discussion covers ownership transfers, legal structures, and market trends, including the rise of multifamily and Section 8 housing. Nachael also provides insights on foreclosure alternatives and evolving investment strategies in the DFW area, stressing the importance of due diligence, adaptability, and partnerships in achieving long-term success.”
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Investor Fuel Show Transcript:
Attorney Nachael (00:00)
a lot of these subject to deals. They actually transfer ownership. And if they transfer ownership and the banks find out about it and people go, how are they going to find out? They’re monitoring the records. You file something in the deed records, they have notifications now. You and I could subscribe for that, but they have these subscription services that let them know if there’s been any type of filing on the property.Dylan Silver (00:10)
through one’s tail.Attorney Nachael (00:28)
One of the better things to do is an executory contract, like a contract for deed. So those do not have to be filed. They’re a private contract. Like with trust, trusts do not have to be filed in the public record. We just have the deed showing that the trust owns the property, but no one knows who the trust beneficiary is.Dylan Silver (00:44)
Right.Dylan Silver (02:32)
Hey folks, welcome back to the show. Today’s guest is a general counsel, corporate strategist herself based in the Dallas Fort Worth Metro and works often with real estate investors. Please welcome attorney Nachael. Attorney Nacheal, welcome to the show.Attorney Nachael
Please welcome.Thank you for having me. Good afternoon, everyone. How you doing?
Dylan Silver
It’s great.It’s great to have you on here. We were talking before hopping on really about everything that you’re involved in. Also my background having lived in DFW and Denton. And this is going to be an interesting episode for me because I’ve had people who do real estate syndication that are attorneys on the show that ⁓ represent people in certain issues like tenant evictions. But I haven’t had a general counsel, corporate strategist.
on the show here, break this down for our audience, really what the scope of work is for a general counsel in real estate.
Attorney Nachael (00:58)
Okay, what you have with a general counsel is they’re there from start to finish. A lot of times people will just want you to dock up the transaction. have an idea of, they have their term sheet. That’s all they’re concerned about is if you can get the terms. I like to look at things in a different manner. It’s like, how do we structure the deal to maximize the return on our investment? How do we structure the deal to ⁓ mitigate liability?both in case something goes wrong with the deal itself or if something goes wrong after we’ve closed the deal. And we also want to mitigate taxes. So I set up a lot of trust. The larger companies have real estate investment trust where they’re looking for small, you know, other investors to come in with them, bird dog agreements, different types of strategies to get what they want in the long run. So I don’t just do documents.
Dylan Silver (01:55)
You know, it’s interesting.You mentioned several different niches and then niches within niches, know, set the correct structure, tax strategy, and then also optimizing the deal itself. ⁓ I would imagine this is pretty uncommon to be involved in all of this and how your clients are able to get real value from working with you. I have a question, maybe a granular question about the tax strategy component of it. ⁓
maybe my level of ignorance or my own 1,000 foot view, when I think about the real estate attorney space, I don’t immediately jump to tax strategy. Is that common for real estate attorneys to be involved with tax strategy or is this a niche within a niche, so to speak?
Attorney Nachael
It depends on your market. Now, I’ll be honest with you. Most people do not even know that the president of BlackRock is an attorney. They’re so used to attorneys just doing the documents. I you know, I paid for this course. It came with the documents. I’m just using a piece of paper. But those people, pieces of paper have rules, they have strategies and the way you mitigate different tax consequences, for example, transfer taxes.We may decide to do an asset purchase instead of a ⁓ corporate structure because a lot of people are holding the properties in the LLC or corporate structure. And so we may decide to either just go ahead and buy the corporation. So you’re not getting a transfer of the property. We’re transferring the shares and the stocks, or we could decide that there’s too much liability associated with the corporation itself.
and we’ll just buy the assets from the corporation. And so then…
Dylan Silver
Okay.So two different deal structures we’re talking about here. We’re talking about, you know, buying and exiting businesses and then we’re also talking about buying deals that they may have. ⁓ Another granular question I’ve got for you. I’m going to have some interesting questions because you’re the first person that I’ve talked to that’s in this niche. Right now there is I would say a push across the country for what I colloquially call like flex use commercial. ⁓
Attorney Nachael
Correct.Dylan Silver
And it seems to be attractive for a number of reasons. You know, you’ll have maybe shops, restaurants, high end on the bottom floor and then residential commercial residential apartments. And it may be in a community, but it may also be mixed in with entertainment and a larger area, really a subdivision, if you will, but geared more towards high end and apartments. This is an interesting asset class because it requires a many times syndication or requires largepockets, for lack of a better word. But I also think that there’s high leverage there, high leverage, high risk. So I imagine the folks that are involved in these types of transactions are going to be folks like yourself, who have the ability to both negotiate, understand the real estate deal itself, real estate background, legal background. So you’re more adept at dealing with this than say, an investor who may strategically be outmatched and outgunned when structuring these types of deals.
Attorney Nachael
Well, it’s interesting what you’re talking about. The concept of these mixed use developments is actually started in the DFW area with a concept called Blue Zones. Now, Blue Zones are areas that are designed to mitigate environmental impact. The whole sales feature is work, live, thrive, and reduce your carbon imprint on the society. So you do have a lot of, it’s a public-private partnership.Those entities that you see really in that space are partnering with the local government, sometimes the county government. But that’s an interesting thing that most small investors may not be privy to is the role that government plays in the real estate game. Getting variances, getting grandfathered in, those are very, very local specific areas. And a lot of investors I see are coming in, small investors,
are coming in with a course. And the courses are not telling them how the big boys play it. It’s just, okay, this is an easy way for you to be a passive investor. Okay, one thing about passive investors, you get taxed more by the IRS. You have to actually be an active investor. You have to go out, look for deals, manage the property. There’s a variety of ways that you can structure it.
Dylan Silver
Yeah.Attorney Nachael
As I said, there’s a variety of ways where you can structure it so that you mitigate your tax liability. Rather than sitting up there going, this is a passive income, I’m paying a lot more. I’m at a higher tax bracket because it’s passive. And these are for the small investors. I’m just saying that a lot of times they don’t sit down and talk with an attorney. They just focus on, I took a course. I paid a couple thousand dollars. And one of my pet peeves are the courses that say things like subject to.Dylan Silver
Right.Attorney Nachael
Like I am going to, I need a property, so I’m going to buy subject two. Most of the courses do not tell you to look at the deed of trust that’s currently on the property and see if it has a due on sale clause. Because all of a sudden I have these clients, they’re going, wait a minute, I bought this property, subject two, and I’m sitting up here, I paid this guy and he didn’t pay the bank.Dylan Silver
Yeah.Attorney Nachael
He didn’t pay the bank and now they’re foreclosing. What do I do? How to get my money back? Well, you took the risk because subject to means you’ve transferred theDylan Silver
You did?Attorney Nachael (11:45)
a lot of these subject to deals. They actually transfer ownership. And if they transfer ownership and the banks find out about it and people go, how are they going to find out? They’re monitoring the records. You file something in the deed records, they have notifications now. You and I could subscribe for that, but they have these subscription services that let them know if there’s been any type of filing on the property.Dylan Silver
through one’s tail.Attorney Nachael
One of the better things to do is an executory contract, like a contract for deed. So those do not have to be filed. They’re a private contract. Like with trust, trusts do not have to be filed in the public record. We just have the deed showing that the trust owns the property, but no one knows who the trust beneficiary is. They may know who the nominal trustee is, but that’s where lawyers come in.Dylan Silver
Right.Attorney Nachael
They serve as a nominal trustee. So there are lot of different tax strategies out there. I’m saying tax strategies, but their liability strategies both for, okay, you own an apartment complex. It could be a quadruplex, but if someone slips and falls, you don’t want to be sued. You just want your insurance to handle it. But if they see you have really deep pockets, you have other assets, they can pierce the corporate veil. LLCs notoriously⁓ notoriously not the best vehicle if you have liability concerns. Because end of the day, when they sit up there and say, hey, is this a separate entity or are you, this is just your, what we call an alter ego. It’s just me. It’s really just me. I’m just using this LLC’s name, but I’m doing everything myself. So what I do is I deal with bigger boys who do have
Dylan Silver
Yeah.Attorney Nachael
multiple assets, multiple LLCs, but we have a holding company that’s set up so that they can’t reach us and the holding company is held in trust. So we’re doing layer upon layer upon layer. And that’s where the smaller investors sometimes, you know, doesn’t get to take advantage. They are just like, oh, well, why do I have to do all that? I’m just, you know, assigning contracts to somebody else. Okay, that’s fine. But there still could be some liability.Dylan Silver
I’m good.There definitely can be. I’ve been involved before I was an agent in this space exactly, assigning contracts, and you mentioned subject two, and learning along the way that there’s legal landmines everywhere, and that the whole idea of creative real estate is basically using ⁓ legal tools to eliminate the initial burden of
Financially being able to come up with the money for the property, but long-term you’re increasing the legal burden and As someone who was unlicensed in this space. It was a lot of learning on the fly Then when you get licensed, I went to champion school in Fort Worth They basically drill into your head that this whole Wholesale thing and I don’t want to speak for everybody but in a lot of ways this whole wholesale thing Creative finance if anyone comes to you with a creative deal They’re subject to basically run and I was thinking no, that was me
⁓ So I have both perspectives on it, but to your point, you know, it’s way, way, way, way smarter for anyone starting out to proceed with lots of caution when you’re going about anything creative in the real estate space because it’s already litigious. If you add that element into it, you’re really potentially ⁓ not aware of all the dangers that could unfold. I do want to pivot here.
Attorney Nachael
Thank you.Dylan Silver
a little bit and ask you about the deals that you look at with your partners. And you don’t have to mention specific deals, but is there an asset class in particular that larger investors are maybe more privy towards nowadays? We talked about Flexuse commercial. I know that there’s a lot of people that are ⁓ looking at acquisitions across so many different asset classes in and tangent to the real estate space. But what are you seeing out there?Attorney Nachael
Okay. ⁓I’m seeing a lot of focus on multifamily because there are a lot of distressed multifamilies right now. And there are even distressed specialty hotels and motels that can be easily converted for ⁓ short-term to long-term housing with the assistance of the government. People do not understand how many foreclosures are occurring currently.
Like for example, Dallas and Texas in general, we do foreclosures on the first Tuesday of every month. Dallas, yeah, Dallas had 900 foreclosures, mortgage foreclosures, just this last month. Tax foreclosures, about 200. So people see a real opportunity in coming in and buying these distressed properties.
Dylan Silver
Super Tuesday.Attorney Nachael
And that’s great. But, you know, if you don’t have a partner on the ⁓ public side, the public has list and list and list. And people think, my goodness, I’d never do section eight. But section eight has gotten great now. Because of the prior administration’s push to get away from, you know, poverty pockets, they are encouraging ⁓subsidized housing throughout the neighborhoods. So if you’re sitting out there now and you’re able to get ⁓ two and three bedroom apartments, the best thing, the best use for those would be section 8 because you can get approximately in the DFW area approximately a thousand dollars a bedroom. So people are looking at things like that. They’re looking at assisted living, living ways to basically have co-living.
Dylan Silver
Yeah.Yep.
Attorney Nachael
co-living facilities, either on a larger scale or smaller scale, but that is a new trend because people are not able to maintain private ownership of housing. It’s becoming too tedious, taxes are going up, and the taxes go up, so do the insurance. you can… Yeah. So people are literally have been in their houses for, you know, 25, 40 years, suddenly their housesthat they bought in the 70s for, you know, $50,000. Now they have a value of $400,000. Now the problem
Dylan Silver
You mentionedtwo areas that ⁓ I’ve seen a lot of traction in myself, just from guests on the show and kind of qualitatively being able to see, there seems to be some swing here. Section eight, I think for folks who are not in the real estate space, you may get this kind of negative connotation of section eight. And I don’t know exactly what it breaks down to, but it’s something like a third of your income has to go toward the housing. So even still,
Right now, especially you mentioned the way that it’s set up in the prior administration. There’s a lot of what you would say is nicer Section 8 and you wouldn’t immediately look at it and say, okay, that’s Section 8 housing, but it is Section 8. It’s for Section 8. And so you mentioned, know, $1,000 in rents. Wouldn’t you like to get that and basically have it be guaranteed? So regardless of what happens, you get your check every month. I am seeing a lot of that. I did want to…
pivot though a little bit here and ask you about your journey as an attorney in the real estate space for folks who may be attorneys and listening and they may be younger attorneys or they may be scaling in their career but thinking about I’d like to get more involved in structuring these deals in corporate real estate and working in strategy. What advice can you give folks based on your journey and how you want about it?
Attorney Nachael
What I think is that a lot of attorneys look at it and say, okay, real estate is covered by the property code and they stay right there looking at the property code. They don’t understand that the family code, there’s the banking code, all these things are intertwined. And if you focus in on, want an attorney that does one thing and one thing well, that’s all you will get.that one thing done well when real estate itself has a lot of moving parts is contract law. So you have to look at the uniform commercial code because all these things have to be in writing. You have to look at the property code to see exactly what the timing of everything.
Attorney Nachael (21:26)
Every deal is different and a lot of people are being foreclosed on right now. I had a lot, just said 900 last month. The banks are planning on foreclosing more and more. So people are looking for housing alternatives. And sometimes you might want to sit up there and say, rather than get foreclosed on, maybe I should take on a tenant. Maybe I should do a contract for deed so that, you know, we can work together. Those aresuper strategies that the homeowners can take on. But if you’re in the business world, mean, sadly enough, I do a lot of partnerships with government. I get referrals from a lot of government entities. And one of the saddest times was during the housing bubble, one of the first housing bubble, what was it like, 2005, 2006, there was a town, have you heard of Forest Hill? It’s right outside of Fort Worth, small town.
Dylan Silver (22:19)
Yeah.Mm-hmm.
Attorney Nachael (22:26)
But their congressional rep was like, hey, I have all these people that are about to be foreclosed on. The mayor is like, my goodness, all these vacant houses in my city is increasing costs because we’re ⁓ getting transients. We’re getting people who are just trying to live in these houses, know, vandalism, et cetera. So there was an incentive to try to get investors to come in and save the houses.Dylan Silver (22:48)
Yeah.Attorney Nachael (22:56)
But surprisingly enough, these people were told, look, we’ll go ahead and give you, you know, five to $10,000 above what you owe. Because as a homeowner, we can always come in and save the house on behalf of the homeowner. So we structured the deal so that we would give the homeowner, we’d cut two checks, one for the bank so they could reclaim their home and one for the homeowner. And out of those,Dylan Silver (23:24)
Right.Attorney Nachael (23:26)
50 some odd people who were about to lose their homes on Tuesday, they had such a vile taste in their mouths that they said, you know, we’re being screwed once, we don’t want to be screwed again. And it was heartbreaking for me, but at the same time, as a real estate investor, my bosses are like, we gave them great opportunity. We said we’d give them cash to move out. If they complete the application, we go ahead and rent to them.Dylan Silver (23:31)
Yeah.Attorney Nachael (23:55)
you know, let them rebuild their.Dylan Silver (23:56)
Yeah, that is a oncein a lifetime. No one does that. mean, there’s it’s almost like a cardinal sin in a way. I don’t want to say this is carte blanche, but if you talk to investors who invest in, you know, single family home distress, real estate properties that are entering foreclosure, if you give folks in this situation an opportunity to kind of get current and stay in the home, the general feedback is, well, they’ve burned the bank. The bank’s got deeper pockets than I do. So they’re going to burn me. The better solution is to
give them money to leave, maybe relocate, and it’s better than losing your home and not receiving anything. So if they were being given an opportunity by a local government to stay in their home, and they didn’t take it up, what else can you do?
Attorney Nachael (24:38)
Exactly. But you have to understand that there’s a fatigue in the housing market that a lot ⁓ of sellers, especially on the residential side, a lot of, ⁓ I should say, they think they’ve been burnt one time too many. They want to hurry up. They’ve seen too many commercials about, you know, closing in three days. They don’t understand that a real real estateinvestor is going to do their due diligence. They’re going to come inside the property, they’re going to check, they’re going to get at least a broker’s appraisal to try to figure out what this house is really worth, check the roof and things like that. But after a while, with all of these internet investors, they’re just like, hey, I’ll put it under contract real fast, real quick for you. And then they never close. People are very skeptical. So on that side, I
Dylan Silver (25:19)
Yeah.Attorney Nachael (25:38)
do empathize. But for the real estate investor out there, I still say it’s better to be diligent than fast. Much better.Dylan Silver (25:47)
I agree,especially right now, you know, it’s not and it’s a little better now than it was maybe six months ago, but it’s not 2021 any longer where people are bidding far over ask and then just flipping it quickly and 90 days and it’s it’s a, you know, another deal in the pipeline. We’re at a different market now. I know a lot of flippers right now and DFW specifically who are no longer flippers. They may be pivoting to
ADUs or modular or ground up construction, but on small mom and pop investors, it’s difficult to make a buck in the fix and flip space. We are coming up on time here though. Attorney Nachael, where can folks go to reach out to you? Maybe they’re in DFW or maybe they’re anywhere and would like your feedback on maybe their journey, deals that they’re looking at, or would like maybe some corporate strategy for an entity that they’re involved in.
Attorney Nachael (26:38)
Sure. Our website is still under construction. will be nachael.com. N-A-C-H-A-E-L dot com As I said, I’ve usually worked with a lot of private investors. Unfortunately, I’ve had some deaths. And so we’re dealing with ⁓ the assets, the trust assets. Again, I help people avoid probate most times, but you can also email me at [email protected] D-U-K-EDylan Silver (27:21)
Atty. Nachael, thank you so much for coming on the show here today.Attorney Nachael (27:25)
Thank you so much for having me. Have a good one. Bye.
