GI223: The Landlord Law School with Bonnie Galam

GI223 The Landlord Law School with Bonnie Galam

Bonnie Galam is a real estate investor and a real estate attorney. Bonnie and her husband self-manage a portfolio of over 100 doors in the greater Philadelphia area. Through her experience as a landlord, Bonnie created a law firm to serve investors with their transactional and asset protection needs. She has also created the Landlord Law School, a DIY Asset Protection Program.

Watch The Episode Here:

Listen To The Podcast Here:

Transcript:

Announcer:
Welcome to the Global Investor Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host Charles Carillo combines decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now, here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Bonnie Galam. She is a real estate investor and a real estate attorney. Bonnie and her husband self-manage a portfolio of over 100 doors in the greater Philadelphia area. Through her experience as a landlord, Bonnie created a law firm to serve investors with their transactional and asset protection needs. She has also created the Landlord Law School, a DIY Asset Protection Program. So thank you so much for being on the show Bonnie.

Bonnie:
Thanks so much for having me. I’m excited to be here.

Charles:
So you have a very interesting background from being an attorney to starting your own firm to also being an active landlord. I’ve only known a handful of active well attorneys that have become active landlords. Mostly they’re in like a passive or semi. My first attorneys I worked with never even, they like lost money in like one real estate deal and then they never touched again even though they did like closings all the time for other investors. So I thought that was very interesting. But uh, give us your background both personally and professionally, uh, prior to getting involved with real estate investing and building your own portfolio.

Bonnie:
Sure. So I think I have probably a backwards approach to becoming a real estate attorney than even most real estate attorney investors because I was actually an investor before I was a real estate attorney. Oh. So what happened was I was in law school, I met my now husband, he had already started investing in real estate when I met him and I had, you know, these big shiny dreams of becoming a criminal prosecutor. And I graduated law school and actually did that for several years. And during that time our portfolio was growing and I like discovered this podcast called BiggerPockets and I went down the deep hole, like off the deep end. And so during that time I was like, holy crap, I love real estate. I wanna get into this business more. And so like I started, you know, sticking my nose into things and learning a lot more, going to our closings meet, going to our meetings with our then real estate attorney.

Bonnie:
And then something happened where we got sued <laugh>. And so at that time I was like, wait, what do you mean we’re getting sued? We, I thought we were doing all the right legal things like I’m a lawyer, this should not be happening. And through that process I realized, holy crap, we only really had a piece of the pie when it comes to truly protecting ourselves and I need to like tell all the other investors about this <laugh>. And so I hung my shingle, um, about four years ago and through that time really kind of catered to being the real estate attorney I wanted to have as a real estate investor and having this like holistic approach to understanding transactions, understanding asset protection, understanding landlord tenant law, and then just combining that to have like a really secure streamlined business for not just myself but also for my clients.

Charles:
Interesting. May I ask is, was that something tenant-based that litigation?

Bonnie:
No, it was actually contractor based and it’s something that, you know, has long been settled at this point. So I’m very open in talking about it because it was uh, like a handyman that we had doing business on one of our properties. The relationship fizzled out like as contractor relationships to like, he got busy with other people, we had to start calling other handymen. And then a few years later we got slapped with a lawsuit from this guy saying he like slipped and fell in one of our properties and like injured his back and could like never work again. And we’re like, oh <laugh>. But on top of that he was claiming that we were also his employer. Like he wasn’t a contractor, he was our employee at the time. And so we also owed him workers’ comp and you know, it was something that’s, you know, our insurance ultimately settled uh, for pennies on the dollar. Uh, frankly I think the guy like developed like an addiction issue and like was just looking for like money and he was no longer working. But as insurance companies do, as frustrating as it was for us, ’cause we knew this situation absolutely didn’t happen. You know, they pay the money to make it go away. Yeah. Because they have, you know, their internal algorithms to see how much, you know, they’ve got their actuaries telling them how much this case is worth and to get rid of it. And so that’s ultimately what the situation was. Yeah,

Charles:
Yeah. Be uh, I’m originally from Connecticut so my first properties were in up north and it was, they take like, it could be like years before you get like a slip and fall or something. Yeah. And then I understand it’s so expensive so they settle with them, but this’s just like, it opens the door for more of these cases I guess you would say. But if it had happened, I’m like, people are asking me, I’m like, this isn’t, wasn’t a tenant this, I don’t know what they’re doing on the property. And I never figure that out like decade later, you know what I mean? Yeah. It’s just like one of the things that’s just, and it can happen and you think, oh the, you know, snow’s gone that rain, you know, but you’re like, no, this can come like a year afterwards so you have to make sure you keep all of your

Bonnie:
Years. Yeah.

Charles:
<laugh>. Yeah,

Bonnie:
Laying there we’re like, that was a name I haven’t heard in a while. And you know, the frustrating thing is, you know, as you know I say, oh, it was settled and we dealt with it, but like we still had to go through discovery. We sat through depositions like it was well over a year before this thing settled and we were in active litigation during that time. Wow. And it is just like a hell I wouldn’t worship upon my worst enemy, which is why like I so became obsessed with like asset protection in a sense and thinking about how to not just like protect ourselves in these situations, but like how do I skip this whole thing from the first place? You know? Like I don’t want to get sued, I don’t wanna just be protected when I get sued. And that was the differentiation that I saw a lot of real estate attorneys or as a protection attorneys kind of miss out on it was they were there to protect you but not to prevent.

Charles:
Okay. That, yeah, that makes perfect sense. Uh, so can you, like what, what in this situation, if you were working with a handyman again, uh, what would be some of the high level things that you would’ve done or you would suggest to someone else to do to protect themself to the best of your ability? The

Bonnie:
First thing would be to get a contract. <laugh>. It may sound silly, but like literally put things in writing like it, the biggest problem with this particular lawsuit was that it was a, he said, she said we, you know, I didn’t have something saying he was a contractor, he wasn’t operating as like an L L C or anything. He was, you know, Joe Schmo handyman and he, so when we were saying he’s a contractor, he’s like, no, we’re an employer. It was like the fingers were crossing and we didn’t ever have anything, even just from the get-go saying like, you were going to be an independent contractor, you’re going to 10 99, get 10 90 nines. All that kind of stuff was just kind of brushed over. Another piece of that, just like thinking about how to work with contractors more safely in general, whether they’re a handyman or a roofer or a painter, like whoever you’re dealing with, even a property manager is to get proof of their insurance, it would’ve been really nice.

Bonnie:
You know, we assume that people have their own workers’ comp and surprise surprise when you know, things hit the fan and you hear that they don’t have workers’ comp. It’s incredibly frustrating <laugh>, uh, to say the very least. And so it’s great if their trucks as licensed and insured, it’s great if their contracts as licensed and insured see a copy of that actual insurance. Uh, it should be something they have right there in their, you know, padfolio with the rest of their, you know, documents that they wanna sign or you know, the carbon copy invoice that they’re handing over to you. This should be something they have very readily available to send to you. Uh, so getting copies of the insurance and getting it in writing and that may sound silly, like of course I have something in writing, they invoiced me, but an invoice is actually not a contract.

Bonnie:
If you look at the invoices that contractors often give you, especially like those carbon copy type of ones. Yeah. They, they don’t really have a lot of information on them. It may have a very rough scope of work and maybe, maybe a draw schedule of when payments are going to be due. But other than that they really don’t define the relationship, the term of the relationship, who’s responsible for insurance and all those things. Like now that I’m not a criminal attorney and I’m in the real estate space, I realize are really, really fundamental pieces that you want to have outlined in writing. Yeah,

Charles:
No that makes perfect sense. Would you add ask to be added onto their insurance? I’ve done that many times with

Bonnie:
Roofers roof. Definitely add to be. Yeah.

Charles:
Anything going up in elevation, I’m like, you gotta be, is anybody’s going up like after

Bonnie:
Tennessee? Yeah. Roofers, painters, if they’re climbing a ladder, if they’re getting on scaffolding, you definitely wanna be added as an additional short. And just as an aside, I’ve seen anecdotally people will show you insurance and then they’ll cancel it and by adding you as an additional insured, you would be then notified of any sort of cancellation. And sometimes people cancel ’cause they’re just changing policies. That’s fine. They’ll get you added as an additional insured on the new policy hopefully without you asking, but probably with, with on uh, prompt. Yeah.

Charles:
And, and uh, if there’re a good contractor, what I found and the salt ones I’ve worked with before is they will suggest it to you like in their regular like sales spiel, they’ll be like, oh and we’ll add you as an and so it should already be there. So if I’m not getting that initially, then you’re like okay so this is kind of like red flag number one, you know what I mean? Exactly,

Bonnie:
Exactly. And I feel like that is, and when I bring it up to my clients they’re like, oh my gosh, like do I really have to ask them for that? I’m like, first of all it probably doesn’t charge them anything. Yeah. Like, ’cause most contractors you can add over a dozen people as additional and short. So even if they’ve got multiple jobs going on, it shouldn’t cost them anything. And it’s like a five minute phone call to their broker to do this. It’s very low overhead in terms of what they need to do. In terms of uh, lifting,

Charles:
One last thing you passed over was a workman’s comp for handyman. Can you explain, because I’ve had this discussion before with handyman before where liability and workman’s comp, can you explain what if it’s a single person, like a regular handyman or if it’s a contractor obviously with other people, where am I requiring workman’s comp and you know, liability stuff like this?

Bonnie:
I like to see workman’s comp on everybody. If they aren’t doing this as their work, I should say workman’s comp, it’s a little bit different. Like if you’ve got your buddy coming over and an investor friend who’s gonna help you, you know, lay tile and oh sh or pang some drywall and they put, you know, the nail gun through their hand or something terrible like there, that’s probably not a worker’s comp situation, but if you ever think like I know personally I’ve been in a car accident or if you’ve gone to like PT before, they’ll ask you like, did this injury happen in a car accident? Did this injury happen on the job? And if someone’s going to check that box and say this happened on the job, they’re going that, you know, physical therapist, that orthopedist is going to try to submit that claim through their appropriate insurance because the health insurance isn’t gonna wanna cover it. And so if someone’s going to check that box, yes, this happened on the job, you want to see the workman’s comp insurance.

Charles:
Yeah, no, I’ve just had that discussion before and handyman tell me they don’t need it ’cause a single person and I’m telling ’em they need it and whole thing. So it’s just uh, red flag number two. So it’s just one of those things that I

Bonnie:
Would say that’s definitely red flag number two. So

Charles:
Let’s talk about before getting into asset protection, which and legal stuff, which sounds great. Let’s talk about you and your husband building a portfolio of a hundred plus units. This is awesome. Tell us about like your investment strategy. What, what does it, what does this comprise of like what type of size properties and like how your team kinda give us an overview of your whole operation. Sure.

Bonnie:
So the, what we used, what is now called, I suppose the bur method back when we got started was kind of like use expensive money or cash now and then refinance once you’ve got it, you know, bank ready. Now I think everyone just uses the bur term and so that’s definitely what we’re doing. A lot of the properties we were buying at auction, tax auction in Philadelphia, that’s something that I feel like is very hard to do right now. One, the, the properties just aren’t moving. But also like we, we got like an influx of foreign investors, New York City investors and so it just got a lot more com competitive Like over 10 years ago Philly was like still a borderline of dump that like no one like really wanted to be in. And then it got very investor friendly, not from a landlord tenant perspective, but just from like a cash flow perspective.

Bonnie:
It was a great place to cashflow. It went through 20 plus years of rapid appreciation and so we were able to kind of refi and refi and refi and keep pulling money out and buying more properties and pulling more money out and buying more properties for the better part of a decade. In terms of asset class, we largely own small multi-families. I’d say between two and six units. I don’t think we own anything over six units come to think of it. And we have one commercial building that I like to say was my office house hack. And so we bought an office building so I could have a free office <laugh> essentially. Uh, when I first started my law firm, you know, you you are always thinking like, how do I keep overhead low as a business owner? And we, you know, looked at co-working spaces and we looked at office shares and I was like, at the end of the day nothing was cheaper than an office hack.

Bonnie:
And so that’s ultimately what we did. And um, I love that building. I would love to do some more commercial real estate. You know, triple net leases are lovely. Uh, having, you know, seven, 10 year long leases is lovely, especially because a lot of our units in Philadelphia, they’re student rentals and so they’re, they get the crap beaten out of them and they’re high turnover. I mean, best case scenario we get these people for three years and so <laugh> after that it’s turnovers and we’re in the turnover season right now with, you know, school about to get back in session.

Charles:
Yeah. And I think three years is great if usually what I would find is one year, you know what I mean? One year was like,

Bonnie:
Yeah, let’s say three years is a rarity. We sometimes get that with like grad students Yeah. Who are maybe like a doctoral program and like they just don’t have the interest in like bouncing around. Whereas the undergrads, it’s like their friends change every five minutes. They do study abroad. Yeah. Some of the school, like Drexel is a school near us, they have a co-op program so kids leave to do internships six months of the year. And so yeah, it’s, it’s very high turnover.

Charles:
Interesting. So with that being said, can you give us like, uh, when you are managing your, because I, it’s funny about the office hack ’cause I’ve never, my third property was an office hack and I never really thought of it as an office hack until now, but it, it’s, it’s a great way of going because Ann’s usually the harder unit to rent. So if you have other residentials, which I did those like rent really quickly and you, you keep the one that’s a little harder to rent, you know, it takes a little longer to rent versus an apartment. So that’s pretty cool. That’s a great, I’ve never met anybody else that did that. What are some of the systems and I guess processes that you’ve implemented into uh, to streamline your rental portfolio over the years to be able to do all these things you’re doing?

Bonnie:
So I’d say the number one thing we did, and frankly we probably put it off for too long, was really leveraging property management software. I feel like when we got started, you know, over 10 years ago there wasn’t a lot of, I’d say like mom and pop landlord targeted property management software. It was very much geared towards very large portfolios or commercial managers and it wasn’t, you know, where you could have the way that a lot of softwares are now. You could have one property and a property management software. We now use AppFolio and it is a godsend because it’s just like a one-stop shop for tenant communication, repairs, requests, sending out leases, putting up listings. And that is has shaved hours and hours and hours off of our time every single month. And then also I would just say being very conscious of our time now that we have kids, when we first got started we were in our early twenties, we don’t, we now have three kids <laugh>.

Bonnie:
And so time is probably our most valuable resource. And so doing like batching days, like just saying Friday, we call it finance Friday. So the day we do all of the bookkeeping, which if you do it every Friday doesn’t take you that long. Yeah. And it keeps our eyes on like what’s coming in, what’s going out. And so certain days are just kind of allotted for certain things and when you can kind of just get into that deep work zone of just one or two tasks that are related to each other on a particular day, you actually can get a lot, lot done really quick.

Charles:
Oh it makes, that’s great. That’s fantastic. It’s great having bringing software into it. ’cause I’ve found it, like you said, is that you didn’t really utilize all of the parts of it and then when you really utilized everything that you’re paying for, um, and I’ve done that like through all of our different software we’re using for like emails or our C R M or all that stuff and when you start like utilizing everything that you’re paying for, you really can shave off a lot of time if it’s done correctly. And I’m like, this is what’s supposed to be made for, I’m using it for like 1% of what’s supposed to be done.

Bonnie:
Totally. And even just things like a few years ago I templated like the most common types of emails that we would send. And so now like it’s literally like one click to send all sorts of, you know, we’re gonna do a showing we need to get into access to do a repair. Like all those things are like one click and even if it only took us five, 10 minutes to write these things before, those things really compound over time, especially as the portfolio starts to grow.

Charles:
Yeah. One thing I’ve done over the years is like take notes of stuff I’m doing re repeatedly and then figure out exactly like is there a better way of handling this? Whether it’s like you said, doing a set of email or doing this or doing that. And when you do it, it, you know, it’s a little harder. It takes more time to set up so you really don’t wanna do it, but then when you do it, you’re happy you have and uh, that’s the beginning of a system, so that’s awesome. Thank you very much for sharing that. Of

Bonnie:
Course. And it’s, it’s funny you say that because I was just going to uh, tackle on that as a lawyer I have a very similar system for improving my legal stuff, which is anytime something fee went wrong or something felt like overly difficult, then I think what’s a legal way that I can prevent this? Like should I add a new term to my lease? Do I need to be, you know, screening tenants differently? And so I will just add, not only if you’re doing something repeatedly to try to make a system out of it, but if something is consistently hard or consistently going wrong, there’s usually like a contractual way you can improve upon that.

Charles:
Yeah, yeah. That makes perfect sense. I, I remember one, uh, when I was self-managing ’cause I self-manage my properties for six years. One thing that came up was lockouts and it wasn’t in the lease I had. So adding that into it, um, clearly states in a section there that hey, you know, this is what it is during office hours or after because I was sending people over there, you know, and it was, and you know, you, you have to like figure out, let people know, hey this is like, this is what happens if we have to send someone over there to let you in, you know, at night or whatever it is. And I think having that, yeah.

Bonnie:
It’s funny you say that. That was one of the first things that we were like the middle of the night lockouts are a lot less fun when you’ve got a newborn outta home <laugh> or like, we used to live in the city very close to our units and now that we move to New Jersey, it’s a schlep. And so we’re like, hey lockouts during these hours, one time lock hours after that is gonna be a surcharge. And you’d be surprised they, they stop getting locked out a lot more. Also, key pads on doors help as well.

Charles:
Yeah, yeah. I didn’t have, we didn’t have like key pads back then. This is 10 plus years ago. But it was, yeah, exactly. But it’s funny, when I, the first time I like called pulled rank on someone and told ’em, hey you know this isn’t the lease and I was wondering how this is gonna work out and they got back into their unit amazingly so without breaking anything. Yeah. So it’s, they can happen.

Charles:
Do you have money sitting in the stock market? And you’re worried about it or worse. You have money sitting at the bank, not keeping up with inflation. My name is Charles Carillo, founder and managing partner of Harborside Partners. And since 2006, I’ve been investing my money and my family’s money into income producing properties. These are real assets, real properties with real addresses that produce real cash flow. At Harborside Partners, we provide passive investors who love real estate with a turnkey investing solution. If you want to put your money to work in real estate, but can’t find deals, don’t have the time to get funding in. The last thing that productive people want to do is manage real estate. We find the deals. We fund the deals and we manage the tenants, the termites and the properties. Partner with us at investwithharborside.com. That’s investwithharborside.com. Go to investwithharborside.com. If you love real estate, you like the idea of passive income and believe that income producing properties will appreciate over time. Go to investwithharborside.com. That’s investwithharborside.com.

Charles:
So tell us about, a little bit about like going into more of your asset protection and I kinda wanna cover this ’cause this is what you specialize in at your firm and obviously it’s something that you have firsthand knowledge of as being a landlord. Can you give us some of the misconceptions? I think that, ’cause I think real estate investors are only sold on this L L C by getting an L L C and this is like your life will be and then it’s like done with the asset protection. That was 30 seconds. Yes. And now we’re going on. So tell us some more misconceptions about asset protection specifically let’s say for real estate investors.

Bonnie:
Sure. I mean you took the words right outta my mouth. I’d say the first and the biggest one is an over reliance on the L L C. They like you get your L L C, you check the box like and you’re like done. Maybe you also hire an attorney to give you like a lease template. Wham bam you’re like I have tackled legal. That is forever it. But the reality is is that LLCs are only there to protect you once things have already gone wrong. And legal can do so much more. As I hinted at like earlier in the conversation, we want to prevent these things from happening in the first place. We wanna prevent lawsuits, liabilities, just legal headaches. Sometimes just landlording headaches if that’s, you know, waking up in the middle of the night to do a lockout or not do a account.

Bonnie:
A lot of these things are all legal issues that we face frankly every day as real estate investors. And so when I started thinking about asset protection, particularly after our lawsuit, ’cause I was like, I had the L L C I had the insurance policy, I had the umbrella insurance policy and I had an attorney drafted lease and here I was still getting sued. I was like, <laugh>, there’s gotta be a better way. And so the first thing is like, don’t just think the L L C, even if you’ve got the fanciest, you know, I call them the designer bag LLCs, the Wyoming, the Nevada, like the fancy asset protection guru kind of L L C states, like you still very much can get sued. And so I don’t say that to be like fearmongering. I think it’s just like you need to know that you are still going to get sued even if you have an L L C if something goes wrong.

Bonnie:
And sometimes even if things don’t go wrong, you can <laugh> have something pop up years and years later as I found out. And so that is the first major myth. The second thing is, as I said, there’s offensive and defensive asset protection. So when you’re thinking about what are the offensive types of things I can be doing to protect myself, that is, you know, things like getting basically everything in writing. Even like little things like having been a litigator before, knowing that like text messages are extraordinarily difficult to admit into court saying, okay, I’ll just take the next step of telling my, uh, tenants that they have to email or after a phone call we follow up with an email that way we always have a paper trail, but also like an admissible paper trail thinking like, you know, there’s what would Jesus do? It’s what can I admit into court <laugh>.

Bonnie:
And, and that’s why I’m always kind of thinking like not in a, you know, I’m not sending everything by certified mail, but I am thinking like, if I needed to prove this, especially if things get funky, like every investor has had those moments where like the hair sticks up on your back and you’re like, I don’t know how this is gonna shake out. Like in those moments you definitely want to make sure that you are memorializing things or even if you’ve just got a difficult tenant. As real estate investors, we deal with legal issues all the time. And as an attorney I realized that there really is no baseline level of knowledge that I could say, oh I know that all my clients know how to properly handle a security deposit or they know how to properly withhold a security deposit at the end. And so just knowing what you don’t know and kind of realizing that there’s just a foundational level of legal knowledge that you need to have as a real estate investor, that your attorney is not going to be able to step in and hold your hand through all that one.

Bonnie:
It’s just like not cost effective to call your attorney who’s, you know, billing you $350, $400 an hour for, you know, every time you, your, your tenant texts you or something. And so just getting those pieces in place I think is absolutely crucial.

Charles:
What would you say, because you’re talking a lot about offensive uh, asset protection and kind of then you don’t really have to go on defensive. What are some of the other, you know, ’cause I guess what I was told by my attorneys about like, ’cause they talk about all these like privacy states for the LLCs and they go, well, you know, if you, it gets sued you have to, you know, you’re gonna be the one that’s going to, you know, accept that service and then they’re gonna amend it and put your name in it so it doesn’t really matter. It’s like a privacy thing. Yes. <laugh>. It’s privacy, which is great. So they can’t like find you at the bat, but you know, it’s not like you’re gonna evade. Right.

Bonnie:
They’re still just gonna pass it over to you. Yeah.

Charles:
Yeah. So, which makes perfect sense. And what are some of, like how do you, how are you filling some of the gaps left by the L L C for your investors? Let’s say if there’re new investors, they don’t wanna get into like a huge, this is their first or second rental property and then I mean like, you know, you put that together with people. No one wants to get financing for their one to four unit in their own in an L L C because of the Oh, additional financing.

Bonnie:
Absolutely. And a lot of my clients come to me very early on as investors and so they’re even like house hacking. They’ve got an f h A loan. Yeah. They can’t even get the L L C. And so they’re like, what do I need to do to protect myself Totally removing the L L C from the picture. And so whether you’ve got one or not, I think the next best bang for your buck is insurance. You’ve gotta have not just adequate insurance but the right types of insurance. And that’s a really common mistake I see investors make, especially if it’s a property that needs to go under very heavy rehab in some way, whether it’s a 2 0 3 K loan or they’re buying something cash is having the right types of insurance on the property depending on its condition, whether it’s going from owner occupant to tenant occupied, whether it’s going from under construction to occupied.

Bonnie:
All of those are different types of insurance classifications and insurance company’s favorite things to do is to decline your claim. And so if they can find that, oh, you still had this as an owner occupied property ’cause you were house hacking it, now you’ve moved out it’s totally tenant occupied but didn’t let them know because that was going to increase your insurance. Right. You’ve got a problem on your hands and so I’d make sure you have adequate insurance. And then also umbrella policies. I don’t think a lot of people really are utilizing them enough. I think that there’s this perception that it’s for like the very, very wealthy, like, oh, what do I need a million dollar policy for? I’m not worth a million dollars. Well it’s not so much what you are worth. It’s also like, what is this claim worth <laugh>? Yeah. And so thinking about, you know, the basic pro, you know, slip and fall type of, uh, and lawsuit is going to be a six figure, multiple, six figure type of lawsuit.

Bonnie:
You want to make sure you’ve got adequate coverage. And then along those same lines, a very common misconception around asset protection is that the biggest risk in your life is actually the new rental properties that you’ve just purchased or the flips that you’re under contract for. Whereas statistically the most common lawsuit people have in America are car accidents. And so that you also have to think about what is my personal life a risk to my real estate? And that’s not usually what people think about. They’re always thinking, oh my god, someone’s gonna get hurt on the rental property and I’m gonna lose my house. But what if you get in a car accident and you lose your rental property? And so making sure you’ve got adequate insurance, personal lines of insurance as well is really important to be able to have that really holistic asset protection that you, I think most investors are looking for.

Charles:
Yeah. And when you’re getting that, uh, in rental policies, it’s important to notice that uh, you know, when you’re going through that you’re listing your assets to them and they’re making a quote for you and all this stuff, you know, make sure to tell them that you have this rental property, they’ll add it in there, it won’t be that much more. And even if you have a rental property that’s in your own name or even in an L L C, you know, I, what I found before is that they will, they’ll add that on. But most if it’s, even if it’s, you know, business owner policies usually have a million dollars of liability, so they can add that on. You have an additional million dollars, you know, for that rental property that’s in your name with that umbrella policy. But you just have to let them know about that because it won’t be just, you know, if they don’t know about it, it’s not like added in there.

Bonnie:
Absolutely. Absolutely. And you know, thinking about personal risks as well, the one thing I I don’t see a lot of people doing is thinking about like, should I have a prenup <laugh>? Do I have an estate plan in place? There’s a lot of personal, I call them like liability bombs that can happen in your life like a divorce or even just passing away. I mean, how many of us have purchased estate properties as part of our portfolio? And if we are, you know, we’re all after generational wealth, but everyone’s liquidating as soon as we die because either they don’t know what to do with it or we didn’t properly plan for it either from like a tax or a legal standpoint, then we’re not really, you know, hashtag creating generational wealth. Are we <laugh> we’re just liquidating, you know, something that is probably gonna disappear in a generation.

Charles:
Interesting. Uh, so for a new investors coming that might have that F H A and uh, so they don’t, they’re not able to, unless they like do a quick claim or something, but that’s a whole different state. But if it’s like, what are they doing for their second property, right? So they bought, you know, they bought a duplex, they’re renting it out, it’s f h a, they’re gonna go a second one, it’s nearby, they’re not, they can’t do F H a, I mean, how are they doing this? Where, how, when are you telling them it’s right to finance in their own name versus financing the L L c? I mean, are they doing it now or is this something that they should be doing it all in their own name or is, I mean everything obviously is different per person, but how do you usually like, you know, come to terms with this when you’re talking to a client?

Bonnie:
So there’s usually a two part conversation that I will have with them. The first is like, what makes you sleep better at night? Because I never like to project my own risk tolerance to my clients. Some of my clients like don’t have a single L L C, they buy in cash and they just keep, you know, they never hit an issue with a lender where they’ve re reached some like debt to income ratio issue and they just keep buying and buying and buying and that’s fine. Like I probably wouldn’t be able to sleep at night with, you know, the size some of these people have, you know, all cash portfolios. But like if that works for them, then like have at it. I, you know, they have heard the spiel from me about the pros and cons of investing, whether it’s through debt stripping or using LLCs or other asset protection things.

Bonnie:
That’s fine. They’ve got their insurance, they sleep at night for other people, the thing to consider is one, are you going to want to move it into an L L C later? And if so, is there going to be a taxable implication of that transfer If there is, like for example, Philadelphia, you’ve got over a 5% transfer tax to do that later. And so that is off of the value of the property, not the like dollar deed that we’re gonna do to move it into the L L C. It’s 5% of like the tax assessed value. And so that is usually very expensive. And so I say, look, if you’re gonna want it in there later, you’re better off doing it now if you can afford it. If you can afford the commercial loan, if you can afford, you know, the l c is usually the cheapest part of this process.

Bonnie:
It’s usually not the cost of the L L C that is the hindrance. It’s usually a financing holdback. But if not, then I say, look, maybe in five years you’re gonna have enough equity, we can refi, we can roll the transfer tax cost into the refi mm-hmm. And we’ll just do it then. And so there’s, there’s always options. There’s always workarounds and so it’s usually a combination like I said of like, what’s their risk tolerance and what’s their financing situation? Those are usually the two um, factors that will determine if we should do it now or if we can wait and then their risk tolerance will tell them now <laugh> or later.

Charles:
Interesting, interesting. Tell us a little bit about your, you know, your do it yourself program that you’re, that you provide.

Bonnie:
Sure. So this program actually came to be in 2020 when the eviction moratoriums went in place. I had people calling me out the wazoo saying, what do I do? What do I do? And I’m like, the courts are not open and we don’t have an opening date. It was very clear after two weeks that this was not gonna be a two week shutdown. And so what I did also because it was right after I had my second child was say, I don’t have the time to be doing a million cash for keys agreements for everyone or payment plans or whatever. So what I did is I created five different templates of different types of cash for keys, uh, tenant payment plans. And also the one that was probably most commonly used was just leave. Like, we’re gonna just mutually terminate the lease if you are telling me you cannot pay, I’d rather you just leave than be be stuck in a situation that I’m not gonna be able to get you out.

Bonnie:
And so I put those up on my website and people started buying them, my clients started buying them and it was just easier for me. And then it, I realized that, you know what, there’s, there’s a lot more education. And so I wanted to create something where I knew that not just my clients but investors nationwide would have this baseline level of understanding of like, what are LLCs? Do I need them? How do they work? How do they protect me? What holes do they leave open when it comes to insurance? What do I need to have in place? What are the loopholes that insurance companies are going to have? And really be able to empower investors to be able to spot their own legal red flags mm-hmm. <laugh> to be able to do all of those like operational types of really important legal decisions that we do as investors without having to call an attorney.

Bonnie:
And so it grew to over 25 lessons, over 30 templates inside the program to really just kind of not just have investors protect themselves, but able to just say like, Hey, I’ve got a legit business here. Like I know I’ve got my insurance on lock, I know I’m doing my bookkeeping properly. I know I’m doing, I’ve got all these email templates and contractual templates for you to use on like a fly like 10 minutes or less. You know, basically plug a template’s, you know, tenant’s name in, put the properties name in and I just rock and roll with it. And so it has, you know, taken off. It is my pride and joy because I don’t take any pleasure when my clients do something wrong. And I really, I started my firm as <laugh>, the investor who got sued with the goal of preventing this stuff from happening.

Bonnie:
And so I realized that the traditional law firm model just was never going to fill that role because it was too expensive. And so how can I bundle this information in a way that was, you know, reliable in a way that like, say like an Instagram post is not <laugh>. You just, you don’t really know where that comes from and kind of busts a lot of myths and even makes them a smarter client because a lot of my students are from states that I’m not personally licensed in. And so they’re working with other attorneys and they feel like they’re smarter. Like they know the right questions to be posing to their attorneys, to their insurance brokers, to their title companies. Even just things like I’ve, I walk through a title commitment, like a lot of people are like, oh, I’ve got a commitment, I’m covered. I’m like, actually have you ever looked at the exception page and what does that mean and what should you be pushing back on sellers if there’s issues on a survey or things like that? Because a lot of that stuff is just missed. And I realize a lot of states are not attorney closing states and so it’s just totally getting missed. And so, you know, really leveraging due diligence as an asset protection tool, <laugh> has been one of my favorite things to teach people how to do better. Oh,

Charles:
That’s awesome. That’s fantastic. So as we’re closing up here, Bonnie, can you uh, give us some of the common mistakes I guess you see real estate investors make? And this doesn’t have to be legal, this can be anything throughout your, you know, your long experience with working with investors and investing yourself.

Bonnie:
Sure. I think the first thing that I see investors make as a mistake is they wait too long to treat it like a business. They’ve only got one property or maybe they’re just house hacking and they’re just kind of taking it step by step. And there’s this very common adage as real estate investors, I’m sure you’ve heard it’s like buy one property and then just buy another and you just buy another. But that doesn’t really work in terms of like the ops side of things. And so you wanna make sure that from the beginning you’re building it on this foundation that is not going to be a house of cards. The second mistake that I see very commonly made is probably the complete opposite side of the spectrum is basically creating an asset protection type of strategy that’s for like billionaires. I had a client who’s spent like 30 plus thousand dollars creating this very complicated asset protection structure for a property that was worth about one 20.

Bonnie:
And every time he refied he needed to pull it in and out of the asset protection structure and pay these attorneys a boatload of money to do that. And his C P A didn’t know how to, you know, file taxes on this whole convoluted structure. And so he needed asset protection from his asset protection. And I, he’s not the outlier. I see that happen a lot where people just, they, you know, they go to seminars, they go to conventions and they get the bejesus scared out of them <laugh>. And it’s a shame that, you know, that’s a very common strategy a lot of attorneys will take is just like the doom and gloom. It’s all gonna come crashing down upon you if you don’t do, you know, this land trust with Wyoming LLCs and you know, all these subsidiary things and it just, it doesn’t have to be that way.

Bonnie:
I think the best type of asset protection is the asset protection that you know how to operate. If you don’t know where the rent check is going and what bank account that needs to be deposited in, the whole structure is useless. Mm-hmm. And so you don’t want it to be something that is overly convoluted. And then if I could give just one more mistake, something that I really see investors kind of step on it with <laugh> is this sense of treating tenants as their enemy <laugh>. Like they think it’s landlord versus tenant. And I am like, you are in this together and that doesn’t mean you become a doormat because people say, oh, treat your investments like a business. Like every time a a tenant wants you to pop up, I’m like, no, really I want you to treat it like a business because you, you’re doing your taxes properly.

Bonnie:
Like that’s treating it like a business, but really seeing your tenants as other human beings. And I think by allowing you to do that allows you get to really creative solutions. Like I think that’s where cash for Keys came from. It’s like sometimes people would rather get evicted ’cause they don’t have anywhere else to go. And if you can then creatively pay them perhaps less than what your holding costs are gonna be during the nonpayment period or what an attorney is gonna charge you for an eviction, then everybody can be on their merry way with each other and actually come out on top. And so I think that when you start looking at things from that like business owner perspective and somewhat like your tenants or a client or a customer, then you actually have a much easier operational process, particularly if you’re self, uh, self-managing investor.

Charles:
Interesting. Yeah. Cash for keys is, and I’ve used it, uh, many times as being self-managing my properties and it’s a great way of getting your apartment back in good shape. Yes. Because if you’re just like, oh, you know, if you’re just like cutting a lease and they’re like just gonna leave, you’re like, eh, no, if, if they’re waiting for you to give them money and now they’re like serving you kind of in a sense and they’re waiting for that cash. The, the apartments, I’ve never gotten one that was like trash, you know what I mean? And so you get in there and you’re like, okay, like so we can just get in here clean and paint and rent this thing again. So it’s really a fantastic way of doing it. And you know, if you have the template or whatever, I mean you don’t have to deal with any attorneys in there as well. So that cuts down on like a lot of, a lot of costs and a lot of headache.

Bonnie:
Exactly. And it’s something where it’s just completely in your control. And I think tenants are often surprised when it happens. I, I have a lot of investors who I think are very like Jaden, they’re like, they’re waiting for the cash for keys. I’m like, I don’t think any, most tenants have heard of this concept. And so if you say to them, Hey look, I know you’re in a hard spot for whatever reason you’re not able to afford rent here anymore. If I was to give you a thousand dollars if you were able to leave by the end of the month, would that, you know, help you out? They like fall over themselves. They don’t even realize that like it’s in our best interest as well because otherwise, I mean here in, you know, Philadelphia could be months before a lockout and same thing in New Jersey months before a lockout. And so we’re coming out ahead, they feel like they’re coming out ahead. Finding those win-win scenarios is something I’m always trying to do because it’s very easy to just like drop the gun, send the notice for the eviction and move on. So I like to make a phone call then drop the for eviction if it looks like it’s going nowhere. ’cause you always have that in your back pocket.

Charles:
Yeah. And every time I’ve done it, I’ve always asked them what they’ll need to like float them over to their next thing or what they’re doing to move to whatever. And the amount they give me is always less than what I’m willing to pay. So it’s something that uh, you know, and it’s, you maybe even more be like you offer ’em a little more, Hey, if this is clean and you’re actually out by noon on Friday like you said, then I’ll give you this. And then you’re like, you know, you’re gonna walk in there and thing’s gonna be like sparkling clean or just all their stuff’s gonna be out, which is just cuts down in hassle. So we get this thing on the market next week. So it’s very interesting if you take that approach. ’cause I don’t think people know this. They’re not like on BiggerPockets your tenants and like reading over <laugh> how they’re gonna get every dollar out of their landlord. So that’s, that’s that makes

Bonnie:
Sense. Yeah, no, I really don’t. And sometimes like we’re like, I’ll give you your security deposit back on top of the cash for keys if it’s clean. Like I just want this to be <laugh>. Yeah. Turned over as quickly as humanly possible, Bonnie.

Charles:
So what do you think are some of the main factors that have uh, contributed to your success over the years?

Bonnie:
I think one of the biggest things is just keeping our eyes on the prize. Like we haven’t really deviated a lot in terms of asset class. We haven’t deviated a lot in terms of geographic area. For the first, I’d say seven years, it was the same city. And so that allowed us to get really good at the landlord tenant laws, really good at who our tenant class was. And from there just keep improving, improving, improving. And I see this as a mistake I see a lot of investors make, it’s like they start off, they start off as both wholesalers and flippers and con and real estate investors and it’s like whatever the deal fits is what I’m gonna do with it. And those are really three different businesses that have three different legal strategies and are not necessarily congruent with each other. It’s not like, oh, I did a bunch of flips and so now I’m gonna be a better landlord.

Bonnie:
It, it’s really not the case. Maybe you, you can do a rehab better, but in terms of the rest of the time you own that property, you’re no stronger for having done a ton of flips. And so, you know, really keeping a very, very narrow view on what we do and not really deviating from that I think has one of been the best things because it’s also allowed us to streamline, create really effective systems, have awesome leases and <laugh> things that just are really tailored to our business because it’s not like we’re a one-stop shop who will do, you know, anything that walks in the door and we’ll buy any property that we see that cash flows. We really have what I call like our north star type of property that this is what not just works for us in terms of cash flow, but it works for us in terms of our lifestyle. I mean little do we know that like doubling down on student rentals where there’s a turnover season and then we don’t really have to do anything. The other nine months of the year is fantastic when you have young kids <laugh>. And so, you know, really thinking about like, hey, if I want to leave my job or if I want to only work five hours a week, like what are the types of properties that will allow us to do that? Because not every asset class is geared for that.

Charles:
Yeah, no, that’s perfect. And also the greater property too. You want to have, people don’t understand this and I think new investors are always sending me less than ideal properties and I’m like, you’re just, this is like a daily maintenance like headache of hell. You know what I mean? Yes. Like buy a little better. I know it’s gonna hurt a little bit more when you write that check, but it’s gonna appreciate and it’s gonna cash flow and you’re gonna get better tenants and they’re gonna stay longer and the whole, everything’s great and it’s

Bonnie:
Difficult. Yeah, that’s, I feel about like single family rentals. Like I know some people really love them. Those, to me, like the small multi space is like my bread and butter. Yeah. To me, small, uh, single families sound like a huge headache, but I know some people they just jump ’em up and that’s how their systems work and that’s fine. But I, I do think that there’s also very different, you know, from single family to small multi to large multi, those are also very different businesses. Even if you are just a consider yourself a landlord. Yeah.

Charles:
Awesome. Well thank you so much Bonnie. How can we learn more about you, your business and uh, your program that you offer to landlords?

Bonnie:
Sure. The best way to get a hold of me is on my website, bonnie gallim.com. There you can find more about my program, my podcast, good bones, real estate investing and just all sorts of nonsense that I throw out there. Freebies, guides, checklist, all that kind of stuff. Alright,

Charles:
Well thank you so much for coming on today, Bonnie and, uh, looking forward to connecting with you here in the near future.

Bonnie:
Likewise. Thanks so much for having me.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

Announcer:
Thank you for listening to the Global Investors Podcast. If you’d like to show, be sure to subscribe on iTunes or Google play to get new weekly episodes. For more resources and to receive our newsletter, please visit global investor podcast.com and don’t forget to join us next week for another episode.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.

Links and Contact Information Mentioned In The Episode:

About Bonnie Galam

Bonnie Galam is a real estate investor first, real estate attorney second, and real estate educator by necessity. Bonnie and her husband self-manage a portfolio of over 100 doors in the greater Philadelphia area. Through her experience as a landlord, Bonnie created a law firm to serve investors with their transactional and asset protection needs. However, after several years in private practice, Bonnie saw that the conventional law firm approach to asset protection wasn’t serving investors best so she created Landlord Law School, a DIY Asset Protection Program.

Are You a Fan? Subscribe, Rate, Review & Share – Click Here To Learn How

What question do you always wish I would ask but I never do?

Connect with the Global Investors Show, Charles Carillo and Harborside Partners:

Scroll to top