Real Estate Investing School Podcast

Episode 211: Real Estate Law Simplified for Investors with Bishoy M. Habib
Release Date: November 18, 2024
Host: Joe Jensen
Guest: Bishoy M. Habib, Real Estate and Business Attorney

Introduction to Bishoy M. Habib

Joe Jensen welcomes Bishoy M. Habib, a seasoned real estate and business attorney with over 12 years of experience in Florida and New York. Mr. Habib has been instrumental in handling more than a thousand transactions valued at over $12 billion. His expertise spans commercial real estate, finance law, and business transactions, making him a highly recommended attorney for developers, lenders, and real estate brokerages.

Bishoy’s Journey into Real Estate and Law

Bishoy shares his deep-rooted connection to real estate, stemming from his family's immigrant background and his father's early ventures into property investment. From negotiating his first commercial lease at 15 to obtaining his law degree, Bishoy's path was always intertwined with real estate. He initially worked in New York for a Manhattan hotel developer before returning to Florida to focus on finance and real estate law. In [05:52], Joe praises Bishoy's comprehensive understanding of the investor's perspective, noting, “if you can find a real estate agent and real estate attorney and all the different pieces that are investors themselves and truly understand that side, it's going to be such a better experience.”

Novation vs. Wholesaling in Real Estate

A significant portion of the discussion delves into the nuances between novation and wholesaling:

• Novation: Bishoy defines novation as replacing an old agreement with a new one, allowing properties to be listed on the MLS for potentially higher profits. He explains that novation involves a limited power of attorney, enabling the attorney to act on behalf of the seller without transferring the mortgage. “[14:19]... it gives us... a new contract between the parties and we can list it on MLS, whereas wholesaling, typically, you don't want to do that.”

• Wholesaling: Contrasted with novation, wholesaling typically involves assigning the existing contract to another buyer without creating a new agreement. This method is faster with lower fees but doesn't allow for the listing of the property on the MLS.

Bishoy emphasizes the strategic use of each method based on property condition and seller's circumstances. “[14:19]... it's a different strategy... shares similar end results but different functions.”

Short Sales Explained

Short sales are defined as transactions where the bank accepts less than the owed amount to remove the property from its balance sheet. Bishoy outlines the process:

1. Contract Acquisition: Secure a purchase contract with the motivated seller.
2. Short Sale Package: Document the property's condition and market value.
3. Bank Negotiation: Present the package to the lender to accept a lower sale price.

He notes that short sales have become more challenging post-2008 as banks have tightened their processes to prevent past abuses. “[30:56]... the lenders have created a system that's more systematized so that it's not just like backdoor handshake deals.”

Subject To Transactions and Land Trusts

Bishoy provides an in-depth explanation of "Subject To" transactions, where the buyer takes over the existing mortgage without formally assuming it. This strategy leverages lower interest rates and avoids the complexities of obtaining new financing.

• Land Trusts: A cornerstone of "Subject To" transactions, especially in Florida, where they offer anonymity, limited liability, and estate planning benefits. Bishoy elaborates: “Land trusts... keep your name off the public record... provide anonymity... and aid in estate planning by avoiding probate.” He highlights the historical use by Disney World to acquire vast land efficiently.

• Legal Safeguards: Utilizing land trusts helps protect all parties involved and aligns incentives between buyers and sellers, fostering a cooperative environment. “[28:29]... it really gives you more flexibility...”.

Bishoy also discusses the limitations of land trusts in states without specific statutes, cautioning about potential legal ambiguities.

Common Mistakes in Real Estate Investing

Drawing from his personal experiences, Bishoy warns against:

1. Trusting Unverified Partners: Emphasizes the importance of referrals and thorough vetting. “[54:29]... be very careful who you're getting in bed with.”
2. Lack of Written Agreements: Stresses having detailed, written contracts to avoid misunderstandings and protect all parties.
3. Advance Payments to Contractors: Advises not to pay more than expected or give advances to prevent contractors from disappearing. “[55:23]... the mistake you make with contractors is paying them more than they're expected or giving them an advance.”

Final Insights and Advice

Bishoy underscores the importance of transparency, proper documentation, and working with trusted professionals to ensure successful real estate transactions. He advises investors to:

• Understand Responsibilities: Clearly outline roles and obligations in all agreements.
• Ensure Proper Insurance: Address who is covered and the limits of coverage.
• Maintain Proof of Transactions: Keep detailed records of payments and communications.

In his final thoughts, Bishoy advocates for doing the right thing and prioritizing freedom and flexibility over mere financial gains. “[58:35]... Freedom. Money doesn't buy you happiness. It buys you flexibility, and it buys you freedom.”

Notable Quotes with Timestamps

• Bishoy M. Habib ([00:00]): “The mistake you make with contractors is paying them more than they're expected or giving them an advance. That's when they disappear.”

• Bishoy M. Habib ([05:52]): “We have a team of 10 people full time under us, and we... have closed probably 50 deals in the past year.”

• Bishoy M. Habib ([28:29]): “i.e., then when they close, we have to say, okay, now you got to give the deed to this buyer.”

• Bishoy M. Habib ([51:25]): “It's freedom. Money doesn't buy you happiness. It buys you flexibility, and it buys you freedom.”

Conclusion

This episode of the Real Estate Investing School Podcast provides invaluable insights into the legal aspects of real estate investing. Bishoy M. Habib's expertise offers listeners a comprehensive understanding of complex strategies like novation, short sales, and "Subject To" transactions, alongside practical advice to avoid common pitfalls. For anyone looking to deepen their knowledge in real estate law and investment strategies, this episode serves as an essential resource.

For more information or to reach out to Bishoy M. Habib, visit legacylegal.com or connect via his social media handles.