Free Intake 704-412-9450

Insights & Firm News

KILLING DEALS The Top 3 Things Investors do to Kill Their Deals, as Seen by an Attorney

Posted by Craig M. Morgan | Jan 27, 2018 | 0 Comments


The Top 3 Things Investors do to Kill Their Deals, as Seen by an Attorney

            As a real estate Attorney and Investor, I frequent many transactions… successful and unsuccessful.  The failures I observe commonly result from the same factors- the “Big 3 Deal Killers!”

1) The “PARTNERSHIP”:  Investing with another party? You may unknowingly form a partnership.  Defined as an association of two or more persons carrying on as co-owners of a business for profit, regardless of intent, this is a legally recognizable entity.  By way of a partnership, liability can attach to all involved! 

            Perhaps after forming a LLC (limited liability company), you believe yourself immune from disaster.  Great!    However, formation alone is insufficient.  An operating agreement, which provides the terms of governance, should be drafted at the inception of the LLC.  This document should articulate the significant details of the working relationship, thus avoiding project loggerheads.  The operating agreement should address such factors as:                     

  • Decision-making authority (potentially troublesome with only two members, as there is no majority);

  • Injection of additional capital;

  • Share and allocation of losses;

  • Inability to sell property and long-term plans.

  • Who will be the project manager?  Simple as it may seem, these expectations must be articulated before the project begins. 

2) The CONTRACT with the Repairperson: Working with a repair professional? If so, then the relationship is likely governed by a contract.

            Oral contracts are valid in North Carolina. If you and your repair professional verbally agree to terms –such as a Completion Date, Expenses, Scope of Work, or the use of Subcontractors – then a contract exists even if a written contract is never executed.  

            With the repairperson, investors should fully articulate the terms of the agreement, and reduce them to writing.  Simply put, repair related issues frequently arise, and a written contract trumps its verbal counterpart. 

3) WORKING CAPITAL:  A lack of working capital is the bane to a viable real estate deal.  Underfunded projects struggle to finish.   Smooth seas are often interrupted with unforeseeable encounters.  Having a reserve of working capital to deploy, combats the inevitable unanticipated repair issue (a project “hiccup”).  

            When a project lacks the requisite capital reserve, trouble arises and lawsuits are filed. I would much rather work with a successful investor healthily growing a business than try to defend one owing great sums of money due to poor planning!

Craig M. Morgan, Esq., Managing Attorney at Providence Law 

Contact Providence Law for more information. | 704.412.9450

On Location in Charlotte and Lake Norman 

Providence Law serves clients throughout NC and beyond.

We counsel Franchise clients throughout the U.S. 

About the Author

Craig M. Morgan

Craig Morgan's practice areas include business and corporate law, franchise law and general corporate counsel. He has represented a variety of businesses including franchise businesses and independent, privately held companies. Craig has represented clients in negotiations and ...


There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment

Contact Us Today

This practice exists to serve You in Accomplishing your Goals.

Our Mission: To Provide Guidance and Care for You and Your Business.