Mike Neiman is the principal attorney at Neiman Law LLC, which works on real estate legal matters with a focus on multifamily acquisitions. He is also a GP of 51 units and five duplexes.
In this episode, Mike discusses common mistakes he sees both buyers and sellers make that can get them into trouble; his tips for structuring entities, deals, and personal assets; and why even the most experienced CRE investors still need an attorney.
Mike Neiman | Real Estate Background
- Principal attorney at Neiman Law LLC, which works on real estate legal matters with a focus on multifamily acquisitions.
- Portfolio:
- GP of:
- 51 units (also passively invested in)
- Five duplexes
- Based in: Columbus, OH
- Say hi to him at:
- Greatest Lesson: The right partnerships can help you grow exponentially. No one can do it all by themselves.
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TRANSCRIPT
Ash Patel: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel and I'm with today's guest, Michael Neiman. Michael is joining us from Columbus, Ohio. He is a principal attorney at Neiman Law LLC, which works on real estate legal matters with a focus on multifamily acquisitions. Michael's portfolio consists of being a GP on 51 units and five duplexes. Michael, thank you for joining us, and how are you today?
Mike Neiman: Ash, doing great today. How about yourself?
Ash Patel: I'm very well. Thanks for asking. Michael, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
Mike Neiman: Yeah, I'm a real estate attorney here in Columbus, Ohio, servicing primarily all of Ohio. Additionally, I love real estate, which is right around my field. I started acquiring two properties, and I plan on doing a few more in the future. So I just started my own firm about a year and a half ago, and looking to expand in the coming years.
Ash Patel: Did you work for someone else out of law school? Or did you go right into your own firm?
Mike Neiman: I did. I worked for another firm here in Columbus and Cleveland, Ohio for about four years through law school, and at a law school. So I learned a ton from those guys; they were great. The team over there were great mentors, and helped me get to where I'm at today.
Ash Patel: Why did you pick real estate as your focus area for law?
Mike Neiman: That's kind of funny, I used to work with my brother-in-law in the criminal defense work, and I decided that that was not the realm I wanted to go in. I wanted to go off and have drinks with my clients, and enjoy spending time. And his clients weren't necessarily [unintelligible 00:02:19.19] so it kind of led me into real estate, which I also had a more long-term interest in investing in, developing this portfolio over some time.
Ash Patel: You couldn't do happy hours with people in the pen, huh?
Mike Neiman: I could. [unintelligible 00:02:33.16] in the prisons, but...
Ash Patel: Yeah. So a real estate attorney, and you see a lot of investors, you evaluate a lot of deals... What's your specific role? Is it just general real estate law? Is it helping people out of sticky situations, or helping on the acquisitions side?
Mike Neiman: The role kind of changes with each plant. So I can either be as actively involved in projects, or slightly more limited, just depending on who the client is. So from time to time I review proformas and give comments on it. But most of the time, my job is to get through contract negotiations, through financing, through due diligence, all of those things that come along with a real estate transaction.
Additionally, outside of just multifamily investments, I do do litigation as well. Pretty much anything related to real estate, I can work on. So it's a broad scope, I do see a lot, I have a lot of interesting conversations, and I do really love how my clients kind of have to peel back the covers and show me what's going on in their companies. And everyone does things a little bit differently, which is interesting to see. So you really get a good balance of people doing things one way, other people do things the other way... I can't share all that information amongst my clients, but luckily, I did see it all, so
[unintelligible 00:03:53.29] some of the knowledge.
Ash Patel: Yeah... You know, Michael, way back in the day, we sat down with my attorney, and I asked him if he has to review every PSA, every LOI that we do... Because that's gonna get expensive. And he's like, "Look, I don't have to, but I should, because when you get into trouble is when it really starts costing money." We could avoid that by having the attorneys in on the frontend. What are common mistakes that you see people that caused themselves to get in trouble on the purchase side of things?
Mike Neiman: I'd say one kind of mistake is just depending on how complex the deal may get, they're not thinking about the timeframes enough, and money going hard on certain dates is one thing I see. Another issue that has kind of come a few times is when we get creative with the sellers, and providing seller financing in second position, or constantly staying in the deal... You really need to have all those terms ironed out at the time you execute the PSA, or else two, three months down the road, when you're trying to iron them out, there's disagreements, heads clash, it's very confrontational... We've sorted out every deal I've done. I've never had one fall apart in that close. [unintelligible 00:05:08.18] But I'm sure if I do this long enough, I'm going to see one or two of those happen over time.
Ash Patel: Michael, what are common mistakes that you see sellers making?
Mike Neiman: I have not actually represented too many sellers. Most of my clients have been buying. That being said, those same clients, they have exited some assets, and I don't want to say we have made any mistakes yet, but I haven't ran into any quite yet. On the sales side, it's a lot easier, it's what I would say, than when you're buying. When you're purchasing, you have a bunch of moving pieces or parts you need a lineup to get to the closing table. On sale side, you really care about getting a certain price, at a certain date. And there's not too much in between. It's really about just making sure that the buyer can get to the closing table.
I'd probably say just when you're vetting buyers, the highest offer may not always be the best offer. The group comes in and they're not as well known, or don't have as good of a background, although they make the offer that much more. If they can't get to the closing table, that extra million dollars doesn't do very good; it may waste a lot of time and energy, [unintelligible 00:06:15.02] trying to get to a closing with them, and ultimately, you just have to start the process over again.
Ash Patel: What do you say to somebody like me that went up to the attorney and said, "Look, I've done this for 10 years, I've read a lot of PSAs. I've written a lot. Why do I need an attorney?"
Mike Neiman: Exactly what your attorney said - it's the one time that you don't review it that you get in trouble, that you're going to be shaking in your head, saying "I should have spent a few hundred bucks, just letting you look at whatever..." Every transaction is a little bit different, slightly different, and there's new nuances in the PSA.
I have clients who try to do it themselves at times, and it's came back to them. It just makes things more difficult as you go through the transaction. So I would say you spend a little bit of money up front, and it makes everyone's life easier to get to the closing table.
Ash Patel: Yeah, and I wholeheartedly agree with that, because I've had attorneys trying to help me out in situations where they wished I engaged them sooner. I buy a lot of commercial properties from residential realtors, that love using the residential MLS listing agreement - whatever; the contract, right? And I've signed so many of those that I didn't think too much of that, but typically it says "Seller warrants this is not in a floodplain." This one contract happened to say "to the best of sellers knowledge", and I have never seen that before or since. And I had to exit that purchase agreement, because it was in a floodplain. I ended up losing my earnest money... But yeah, the devil's in all the details.
So Michael, you see a lot of lucrative deals that your clients are doing... Are you inclined to do what they're doing as well, get into multifamily, get in different real estate assets?
Mike Neiman: Yeah, I definitely am. My long-term goals right now is a) grow the law firm, and b) kind of in tandem with that trying to grow this real estate portfolio. And the one most recent deal we did, one of my clients actually found it, it was too small for them, so they passed on it and let one of the partners there kind of run with it, who's also my friend... And we ended up doing it together, and it was a 51-unit down in Louisville. So they've kind of advanced past that size, and are doing -- I think they're at like at 80, 90, 100+ unit properties only at this point. So they're just trying to scale up and and really go for it.
Ash Patel: Did you raise money for that deal?
Mike Neiman: We did. So the principals - we contributed about 25% of the money, and then we raised about 75%, and it was roughly a $4 million purchase. So roughly a million dollar raise.
Ash Patel: Was it a friends and family raise?
Mike Neiman: You know, it was, and it was -- I don't want to say shackling easy, but three quarters of a million dollars comes together pretty quickly with people in the real estate industry. It's so-and-so sold an assets, so-and-so has all this money sitting on the sidelines, stock market's uncertain... We're paying a pretty good pref on it too, so that it was lucrative to a lot of people to come into the deal.
Ash Patel: What's your pref?
Mike Neiman: 10%.
Ash Patel: Okay.
Mike Neiman: Another reason why I wanted to invest in it - I appreciate the 10% interest rate that we're returning.
Ash Patel: Absolutely. Now that you've raised money on your first deal, knowing you're probably going to raise money on future deals, are you doing something to prime the pump?
Mike Neiman: Not really yet. So I have a lot of conversations with a lot of different clients, and I think if I ever expanded it to kind of my client network, we could get it done pretty quickly and easily. So I think it just depends on the situation, what comes in, who's a good fit for it... I have some clients who have a few hundred single-family or duplex units, trying to scale up in that bigger space, but these people have been doing it for 20-30 years, and they're -- I don't want to say they have an empty pot or unlimited pockets, but they had some money that they could put to work, and a quarter million dollars here probably isn't a big ask for them; and they're already in the space, so... I think just growing through the network and going about it that way would be the way I would attack it.
Break: [00:10:25.25] to [00:12:22.08]
Ash Patel: Alright, I'm gonna make some assumptions here. One, I think you've got the real estate bug. Do you find yourself looking for deals all the time, and kind of browsing through listings?
Mike Neiman: Daily. Every day. [unintelligible 00:12:34.00] writing offers... Sometimes lowballing, just depending on how strong it is... But yes.
Ash Patel: Okay. So if you're doing that as a pastime, you've definitely got the real estate bug, because you could be on TikTok, you could be on social media screwing around. Instead, you're browsing listings, making offers... I'm going to suggest that you prime the pump with everybody you know, just in case this thing takes off, right? And my guess is it will. So what would you say if I suggested creating a newsletter? Not just to family and friends, but clients as well. Kind of blend what you're doing with legal, give them tips, advice, blend some of your personal life, and then blend what you're doing with real estate. And now you're seen as "Wow, this guy's an investor, attorney... All the above", right? What do you think?
Mike Neiman: I think you hit it right on the head. It's something that's definitely in the works. The day to day has been a little hectic, getting deals done for myself and clients... So working on building out a team has been -- I don't wanna say a struggle, but with any new business, it's tough to grow, and scale, and figure out all the different things that come with it. Office space, and this and that, or worry people don't work... But I'm starting to find some good people to help support the team, and I think when they believe in the goal, and the long-term vision, and the newsletter will happen, company events will happen, host some happy hours, [unintelligible 00:14:01.14] things like that, I think we'll go a long way. Especially here in Columbus, we're a pretty tight-knit real estate community; we're a big city, but everyone seems to know everyone in the real estate space. So the more integrated to that network, and the more clients that are kind of feeding off the legal side of my firm, and also they're potentially doing deals together, so I think it'll go a long way in the future.
Ash Patel: Yeah, you're right in the middle of all things networking with real estate; good for you. What's your best real estate investing advice ever?
Mike Neiman: My Best Ever real estate investing advice - I would probably say to pick partners wisely. And I've had a lot of good partners, nothing bad to say about any of the partners, but obviously, some can take you a lot further than others. So I always like to joke that I don't know how to use a hammer. I'm not a construction guy. I don't know how to do anything of that nature. So one of the partners I work with here in Columbus is in civil engineering; he could probably build a house with his bare hands if he wanted to. So just finding people that you sync with, and have good synergies is really powerful, and getting deals done and going a long way.
Ash Patel: Michael, I've gotta share a story with you. My very first syndication that I invested in was seven years ago, probably 100-page PPM. And like a good student, I brought it to my attorneys, and I said, "Hey, look at this." And they're like, "What do you want us to do with this?" and I'm like, "Tell me if I should sign it." And they're like, "These things are so one-sided that the operator can do whatever they want, short of being malicious or negligent... And you don't have a lot of recourse." Is that the case with most PPMs?
Mike Neiman: Yeah, you'll see that a lot... The GPs and principals, they need to be able to control the deal. And I don't know how many people invested in that one, but you can't have 20-30 people raising their hand and voting up things; it becomes very cumbersome for the project to actually happen. So the principal - you need to put a certain level of trust in them. That being said, there are certain restrictions that may be in there, and every deal is a little bit different... But the principals really do have the ultimate control to do the project. And if they make decisions based on their business judgment, it may or may not be a good decision, and could cost the company money. So long as it's a reasonable decision, typically, there's no recourse against them. They're operating in a business fashion in which they think makes sense. So there's very little you can do to go after them for that, unless it's [unintelligible 00:16:39.21] or negligent or something like that.
Ash Patel: Yeah, interesting. Can you talk at all about how you see clients incorrectly and correctly structuring their entities, their deals, their personal assets? Without legal advice given, we'll just throw that out there.
Mike Neiman: Yeah, this is not legal advice. One thing I tell a lot of people, especially when they're first getting started out, is to not overcomplicate things. Some of the structures I've seen for developments and projects, it's a full-page PDF with 30 entities on it, and it can get very complex when you really get into the larger deals. But for someone starting out, or a year into it, my best advice is to keep it simple. And most of the time, for me in Ohio, my Ohio-based investors, it's a matter of registering an Ohio-based entity to operate out of. And the question I get a lot is, "Well, if I have three properties, should I have three separate entities?" And the legal answer I would give is you should, because now you're separating potential liability from the three properties. So they're kind of siloed with each individual unit. The practical answer I'd give as a real estate investor is I don't want to eventually have 30 different entities; that just becomes cumbersome, because truly, you should have different bank accounts, then you start doing different insurance policies, and your agent sets the wrong name at different properties... It just becomes tedious, and in my opinion, overly cumbersome.
So getting started on it, keep it simple. As you advance further, I'm recommending meeting with the accountant and the attorney maybe once a year once semi-annual, and just to make sure everything that you're doing aligns with the long-term goals of the company, so that you can identify any issues that you may have in the structure for the long-run.
Ash Patel: Yeah, thank you for the breakdown on the legal versus practical approach. I know people that starting out had this crazy structure where there's an S corp that reports to a C Corp, and somehow they think they're getting some tax benefits... But in all honesty, at the end of the day, it's income. And when there's income, it's getting taxed.
Mike Neiman: Exactly. And another thing I see a lot is Wyoming LLCs, and Delaware LLCs... And in my opinion, especially if you only have a few small units here in Ohio, there's no need to have a Delaware LLC involved. A lot of annual fees associated with it... Here in Ohio, when you register an entity, it's $99 upfront. And that's it. There's no more future fees. So we live in a pretty real estate friendly state in that sense, where you can set things up cheaply for the long run, and not gonna run into all these fees for your few units you're dealing with.
Ash Patel: Yeah, that is great advice. Michael, are you ready for the Best Ever lightning round?
Mike Neiman: Yeah, definitely.
Ash Patel: Michael, what is the best book you've recently read?
Mike Neiman: Recently, I read The One Thing. I forget the author's name. It's escaping me at this time.
Ash Patel: Gary Keller?
Mike Neiman: Yeah. And that book was great for me, because doing a lot of different things, you could go in a lot of different directions, and trying to flip single-family homes, or duplexes, and things like that, versus trying to find I was more on simply building a law firm, and the bigger asset portfolio. So it helps me narrow down and really focus on what's important, versus spending a bunch of time, wasting time on the smaller projects, is what I would say.
Ash Patel: Michael, that's an interesting point. So you're trying to scale both your legal practice and potentially a real estate business as well. What lessons have you learned about scaling? And what have you seen that's worked for some of your clients?
Mike Neiman: I would say the biggest lesson I've learned is getting good people in place. I had one client who started to grow pretty quickly... Really building a team culture is important for them, and it has helped them grow from - I think they bought their first commercial 24-unit about 18 months ago, and they're north of like 600, 700, 800 units now. So they're really growing quickly. And it takes a team of people to do that. You're not going to do it on your own; you've gotta rely on people and trust other people. So that's what I would say.
Ash Patel: Yeah, it took me a lot of years to learn that one. Michael, what's the best ever way you like to give back?
Mike Neiman: The best ever way I like to give back - every year I ride [unintelligible 00:21:09.02] It's a bike ride race for cancer research. So it's actually coming up this Saturday, so I'm riding 57 miles to raise money for cancer research at the Ohio State University.
Ash Patel: Good luck to you. And the weather is looking very favorable for Saturday.
Mike Neiman: I hope so. I thought I saw some rain... But I'm not much of a cyclist, so... Last time I rode was last year in the event, so...
Ash Patel: Wow... 57 miles and you haven't ridden in a year?
Mike Neiman: Exactly.
Ash Patel: Good luck, man. Good for you. And Michael, how can the Best Ever listeners reach out to you?
Mike Neiman: My LinkedIn is probably the best. I'm not a big social media guy. I haven't had time to really focus on that, build that up. But either my website, neiman-law.com, would be a good place to find me. And you can type in any questions you can have, and it just comes right to my email. Additionally, with my LinkedIn, if you just search my name, find me there, and we can connect there.
Ash Patel: Michael, thank you for your time today. I know you're very busy, but you gave us some great insights on what it's like from the attorney's perspective on real estate deals. So thank you for sharing your time with us today. And good luck to you on your real estate adventures. Once you scale a little bit, we'd love to have you back, and let's dive into that more.
Mike Neiman: Yeah, definitely. Thank you, Ash. Thanks for the time today.
Ash Patel: Awesome. Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five star review. Share the podcast with someone you think can benefit from it. Also, follow, subscribe and have a Best Ever day!
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