All Forum Posts by: Jeffrey S. Breglio

Networking with local investors is the best way to find more deals. I'd suggest attending the REIAs! There's one in Utah County and a couple in SL County.

Salt Lake REIA (SLREIA.com)

Utah Valley REIA (UVREIA.com)

Utah REIA (utahreia.org)

Northern Utah REIA (NUREIA.com)

I'm on the board of SLREIA (as their attorney) and Utah REIA (their education).

Corey, first, you're using other people's money (OPM) to loan out. That's a VERY different thing. That's "brokering" and ALWAYS requires a license, period. So the above analysis is irrelevant to what you're doing and it's good you have a license. It's less clear with private lenders using their own money, which is what the majority of local hard money lenders are. All lenders that I work with that use OPM also have a license. So it's good to clarify that to readers of this post. Second, using OPM may also subject you to SEC and state securities regulations and registrations, depending on how you are raising the OPM. :)

j.

Hello All,

I am an attorney here in Utah working with real estate investors. And I hope I was not the one being referred to... :)

Here's the short answer: Any person involved in the origination or making of a loan secured by a first position lien against a “dwelling” is engaged in the “business of residential mortgage loans” and is regulated under the Act, irrespective of whether the loan is a “hard money” loan, a commercial loan or a business loan (as opposed to a loan primarily for personal, family or household purposes). Under the Act, however, a “dwelling” appears to be limited only to residential-type property that actually is occupied or otherwise “used as a residence.” Of course, this position is not beyond argument. So, in other words, unconfirmed.

The longer answer, but still short, is that there are two problems with Utah's statute. First, the "use" argument (i.e., if the loan is not used for "personal, family or household use" then you don't need a license) seems to be (and mostly likely will) applied to "mortgage loan originators". These people already have a license so it's kind of moot. They essentially created an exception where there doesn't need to be one. So, why? We don't know. This is the exception that other states, and many federal interpretations, as Jeff S pointed out, have used to allow hard money and private lenders to make loans without a license. Utah has not taken, at least not by statute or court interpretation yet, that position.

The second problem is actually the term "dwelling" that is used in the statute as part of the licensing requirement. Here the term "dwelling" is defined as a home, condo, etc used as a  "residence." (This is different than personal, household use) Like the "use" argument above, this has not been clarified by statute or by court interpretation. But, strictly speaking, if you're not loaning on a "dwelling" then you don't need a license. This is why most of my clients have covenants of "non-occupancy" and "agreement not to lease" in their loan docs to pass the liability onto the borrower in the event the property is ever occupied as a residence. This is the exception that most local lenders without licenses rely on. But not super solid ground to be sure.

Finally, the issue of enforcement is important. How aggressive is the DRE in enforcing this? Not very. Some big lenders have been around a very long time and are quite open and public in their advertising. The DRE always takes a very broad view of licensing. That's their job--to protect licensees and the public. They don't always win their case, however!! In fact, I've often seen them lose. So, just because they take a position doesn't mean they are right. That's what courts are for. I imagine they will take the position that what we call "hard money lenders" will need a license (simply because 15 years of experience with the DRE leads me to that conclusion, not because it's fact). Lenders have to be aware of that, and do they want to be the one to challenge a DRE position... On the other hand, there are strong "strict interpretation" arguments that a license is not required. 

So, see short answer above.

Hope that helps.

Jeff

Antonio,

A joint venture does not, in itself, create any protection. It's a contractual arrangement. So in a JV, you should ONLY work through other entities.

A partnership does create liability protection and therefore can be made up of individuals or entities.

However, there are numerous other differences: bank accounts, bookkeeping, titling, tax allocations, etc, that are also different between the two.

Search through my website. I have numerous videos of "Partnering in Real Estate"!

Thanks,

Jeff

Hi All. Asset protection is far more than privacy. There are numerous ways, including here in Utah, to keep personal information off both the division of corporations website and the county land records. There are even ways to hide yourself from tenants. I have many clients go the distance in privacy, and it works great. It does create some more hoop jumping and many clients don't want the extra hassle. 

I take a rational approach to privacy because Lew is right, some things are just impossible to hide. But for those looking for privacy, Utah does allow private registrations. I also act as the registered agent AND the governing person (that's how you stay private in Utah, those are actually different things!). We also use asset holding trusts in combination with LLCs. When someone is looking for a client and they call me, I am not obligated to give any confidential information about the company (name of members or managers) without a court order. In other words, I run interference. I've had multiple occasions where the other party just gave up. So that does work.

BUT, if you're really looking to protect your assets, the more important consideration is the structure in which you hold them. There are different types of entities (LLCs, FLPs, Trusts, etc.) and you protect different assets in different vehicles!! We customize the structure for our clients depending on their needs. We generally stick with simple! Why?

The second most important thing in asset protection, after the legal structure, is MAINTAINING it! If you don't run it correctly, you could lose all the protection the legal structure set up. I find a lot of attorneys charging a lot to create highly complex structures that the client almost immediately screws up. The thousands they paid for the structure becomes worthless. We start simple, help you understand what you're doing, and then grow with you.

You should always seek competent legal advice when setting up ANY legal entity or asset protection plan!

Happy investing!

Jeff

Josh,

Welcome! You can start networking with investors by attending UVREIA, SLREIA or Utah REIA. Each group is great and extremely helpful! Where are you looking to start in your real estate journey? Buy and holds, flips or wholesaling?

Always good to see new investors!

Tyson,

Because the market's so hot right now, finding good "deals" on the MLS can be challenging (I've found it generally is). Many beginners or uneducated investors are happy with negatively cash-flowing rentals, not knowing any better, and so they buy and sell them at prices that don't make much sense to other investors--especially right now, like I said.

If you're dedicated to working with this agent, start asking if the owners will seller-carry or seller-finance. These seller-fi deals might may or may not cash flow better, but the goal should be to get in the duplex with little or no down payment. That way, if your cash flow isn't great, you've still saved a massive amount in the down-payment, which is available to invest in other opportunities. 

I myself prefer non-MLS opportunities. You can get lists from title cos. of "absentee" or non-owner occupied multi-units, including duplexes. Then you can mail postcards directly to the owners, asking if they'd like to sell. Contacting owners this way can be the best way to find under-performing or non-cash flowing properties, that you can then take and repair, raise rents on, etc. It's hard to find an investment property to buy that's already performing optimally, at a price point that makes sense to an investor.

There are many avenues to locate properties aside from the ol' MLS. Most agents just trawl the MLS, sometimes they find gold, most of the time not.

One thing you might not be considering is that yes, while your duplex might be not be a positive cash flow property, what's your replacement alternative? You're going to need a place to live for you no matter what, perhaps a mildly negative cash flowing duplex is better than an extremely negative single family or worse yet, RENTING! 

Good morning Bigger Pockets! Our law offices provide live education for our clients and a number of our real estate investors have recently requested a comprehensive, 3-4 hour seminar about self-directed IRAs, 401ks Trusts and IRA LLCs.

We wanted to gauge the interest here on Bigger Pockets and if people are interested, we were considering filming the live education and distributing it via the forum. Our big questions are: whether such a seminar would be useful for the community here and what questions investors would like to see answered during the class?

We're holding the live education component on May 30th, in Salt Lake City, with the video to be distributed shortly after! Looking forward to your questions and any way we can help! Thanks all!

Breglio Law Office

Chad, it's important to note a distinction here: you only need to go the SEC filings route if you're soliciting people who aren't close friends or family or are soliciting more than one million dollars. 

The SEC filings quagmire is meant to protect you from preying on people who don't know any better than to throw their checkbook at you. Friends and family are ok, whereas soliciting strangers or people you meet at real estate functions isn't. Since it sounds like your partners all work with you and everyone knows each other, a 7-10 member LLC is a perfect vehicle for accomplishing your goals. You could likewise do it with a Series LLC, or a Corporation, it depends who sets it up, in which state. In Utah the going rate for a Series LLC is $800-1000, PM me if you want more info/specifics.