What is a CPR and How Does it Work with Jonny Zahaby

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Interview Transcription

ADRIENNE: 
gave it to me. Welcome back. And thanks for listening to the Team Lally Real Estate show home of the guaranteed sold program or we’ll buy it. I’m Adrienne, and I’m Attilio. And if you have any questions just give us a call at 7999596 or check us out online at Teamlally.com.

ATTILIO: 
Well let’s see here we’ve got our guest today is a published author and founder of Hawaii attorney LLC and he moved to Honolulu from Hawaii in 1994. And has practiced law in Hawaii for over 23 years. He took

ADRIENNE: 
up an associate of arts and psychology over in Kauai Community College and a bachelor’s degree at the University of Hawaii at Manoa. Graduated from William S. Richardson School of Law at UH Manoa with a doctorate degree in business law. Please welcome our guest, Johnny Zahaby.

JONNY:
Hello, Adrienne and Attilio How are you guys? Good. Good. Good. Great.

ADRIENNE: 
Thank you for being our guest and welcome to the show. Yeah, I want to give a quick shout out to Benjy are one of our team members who has had a very long standing friendship and relationship with you, which is how we you know, had come in contact with you in regards to some some real estate’s challenges and ideas. So we just wanted to put your information out to all of our listeners here. Did you move?

ATTILIO: 
Did you come? Did you move over after Hurricane Iniki?

JONNY: 
Yes, yes.

ATTILIO: 
It was like 92. Yeah, still fixing the place? Yeah.

JONNY: 
Oh, yeah, exactly. It was. It was quite an experience. But I think, you know, it really brought the community together at that time. Yeah. And everyone was pitching in to help each other out. So that was an amazing part of it.

ATTILIO: 
Yeah. I see what happened because my sister was on Kauai at the time. So I see what was happening back then. happening. Oh, in Maui. Maui. Yeah, so Hawaii people together and support.

JONNY: 
Exactly. It’s very familiar. Yeah.

ATTILIO: 
All righty. So the, you know, we had crossed paths because we had a property we’re looking at,

ADRIENNE: 
to do a CPR. Yeah. So we’re a subdivision. And you were just so knowledgeable. Yeah. And know the ins and outs of both of those processes. And, like, we know that like, this is something that, like you’re not taking any clients on. But we did want to share some of your knowledge about like both of these types of sub division of land with our listeners.

ATTILIO: 
Yeah, sure.

JONNY: 
I am. I’m helping existing clients, you know, with, I’m doing about four projects now. A couple on Kauai and then two on North Shore here. But it can be an arduous process. So

ATTILIO: 
yeah, and I think that a lot of times people you know, is is well first of all, you know, it’s the CPR, Condominium Property Regime, people. The lay people hear the word condominium and they think of like high rises and stuff, but there can be single family homes that are condominiums. And then

ADRIENNE: 
I think I’m Johnny you had mentioned doing it with something like a boat dock. Yeah.

JONNY: 
Yeah, you know, you really only need some kind of way to describe it. It can be a condominium can be a box of air. So we’ve, we’ve done boat docks, we’ve done warehouse, units, wood, that are virtually just boxes of air. Yeah. You know, condominium law really kind of started in Florida. And it was carried over to here. And we were starting with horizontal horizontal property regimes. And then we kind of got permission through legislation and changes to the, to the regulations throughout the years to kind of do different things with condominiums. Especially when it when you leave the realm of the high rise apartment building, and you’re, you’re getting into just separating parcels of land into separate condominium units.

ATTILIO: 
Oh, thanks to an oath. In our discussions, you mentioned that, you know, it’s, it’s, people have this misconception, like, oh, yeah, I’m just gonna buy as big property and then CPR it, sell off lots and make more money or build homes on there. But talk about the role of a whole big prospect coming developer, because now you’re dependent on an architect and, and a surveyor, you know, having their expertise in their lane, but then you as the owner, you got to collaborate and coordinate all of this. And it’s, it’s tougher than people think.

JONNY: 
Oh, it is, I mean, you know, when you submit the document, as getting permission from the real estate branch here, to sell units, or condominium property regime, it’s called the developers public report. And they’re calling you a developer for a reason, because the people listed on that public report, are the developers, usually the owners, right. So I think a lot of owners think that they can hire the three main professionals, the attorney, the surveyor and the architect, and that the three of those professionals are going to get together and kind of develop the property for you. Yeah, but the develop the role of developer is actually a pretty substantial role in the whole process. Because, you know, unless you want to run up attorneys fees and or other professional fees, you know, you got to do a lot of legwork on your own as the owner and you know, I can tell you right away that the first survey’s not going to come out, correct. First as built, drawings aren’t going to come out correct. There’s going to be errors and things that need to be fixed. And even when the whole package gets put together. We’re referring to the condominium map and the as built and elevations and certifications. All of that is referred to as the condo map. And, of course, on the real estate grant side, they hire other attorneys, as consultants to review. Your professionals work. Yeah. So when you have experience in condominiums, and you’re hired as consultant by the state, you want to make sure that you’re finding errors in there that or things that don’t really jive with the way you draft draft documents might not even be a real mistake in the document is just not drafted in your style. So there is a long process going back and forth with the real estate grant consultant, as well as the attorney drafted your documents and they make changes and so you really are developing property and it should be it should be viewed that way I think.

ATTILIO: 
Yeah, I think the common statement from the professionals involved in this at the end of it is well there went a year of my life I’m not getting back

ADRIENNE: 
which is which is why I know John, you are pretty selective with how you spend your time and how much time you spend on this type of work even though you have done hundreds of them. And you’re you’re you’re quite the expert yourself on CPRs and subdivisions. I think you’ve

ATTILIO:
gotten to the point where you’ve run 100 marathons and you’re like I’m done. No more marathons for

JONNY: 
me. You Okay, yeah, not to be really negative on the process. I mean, it does have a lot of benefits and for a developer or a family that owns property, and it’s not really productive, it can make the family money. Yeah, you know, so. No, but the buyers also on that side, need to be aware of what they’re buying to they’re not purchasing a dually subdivided parcel of land, they’re, you’re kind of you’re joining a partnership with other landowners on the same parcel. So I think I’ve mentioned it, a condominium is really often glorified co tenancy agreement. Yeah. No. So it’s just

ATTILIO: 
the thing that we learned. And this is for you sellers out there who have big, you know, vacant land or big, you know, or just parcels of land, big parcels of land that you want to subdivide or CPR. And then you hire a real estate team who works on it for years. And you’re like, just communicate to the buyers all the potential of what this property can be. And they think that the realtor is going to wave their magic wand and sell some kind of story to potential buyers on what this property can be because they want the now price,

ADRIENNE: 
or they want they want the price that would it be like after all of this work is done. So potential

ATTILIO: 
for you vacant people selling land, you know what I’m I’m gonna, I’m gonna give you a hard time because your agent isn’t giving. I’m gonna on your behalf of your agent who hasn’t. Who has been too nice and haven’t given you a hard time. Stop expecting your agent to step into your shoes as developer and or explain it to future to potential buyers what the property can be when this thing I mean, we’ve got an expert on the show right now telling you it’s tough. Yeah. And I mean, there’s a probability it will go through.

JONNY: 
I mean, we’ve all been in this business a while. Yeah. So I we can’t say that there aren’t glory days too, there are glory days. Whereas CPR, for instance, like a spatial unit CPR, which is just boxes of air. Yeah. I mean, I’ve been in deals on Kauai, where you did a spatial unit CPR for a family, they sold off a parcel for more than half of not a parcel, sorry, a unit for more than half of what the total value of the property was. The family got a big wind, good chunk of change. Yeah. And then the people that purchased the property were really amicable. And everybody got along, and everybody lived happily ever after. Right. But, you know, there’s the other side of the coin too

ATTILIO: 
us what you know what agent Friday said and the FBI, he said, there are many stories in the Windy City. There are many CPR stories, some good some bad and but Breda and I are first time research and having lengthy conversations on this is like, there is a lot easier a lot of moving a lot easier ways to do real estate than trying to do a CPR and not that it’s impossible. But I think what the message that we’re trying to send to people is that we need to manage your expectations and work with Yeah, go watch the late night infomercial. Hey, Brian, thank you property and subdivided and make a ton of money. And you can be on this boat with all these ladies in bikinis. And I came to this country know, you know that that late night infomercial stuff doesn’t work in the real world. And we know, you’ve been doing this for 20 years.

ADRIENNE: 
So I know like we’ve got about, we’ve got about six minutes left in our show, and I wanted to touch on another. I mean, you are well versed in many types of law, you know, being in this business over what 23 years and, you know, many types of real estate law. Yeah. One of the things that’s like a hot topic is the interest rates seller financing. So yeah, we start to see more seller finance, financing agreements of sales, like all sorts of creative things that come into the marketplace when the interest rates rise. Let’s talk to our listeners about about that. And some maybe some tips that you have.

ATTILIO: 
Yeah, what’s been your firsthand experience with that?

JONNY: 
So if you if you go the you dig deep into the history of the Bureau of Conveyances, or land court, you’ll find agreements of sale, right. It used to be something that we did a lot in Hawaii. And that kind of re emerges every time interest rates go up. is that there’s a lot more seller financing, which, which is basically an installment contract that that’s a big buzzword now across like a state planners, business attorneys, you know, and it’s because you’re you can get tax benefits from it. The people that are offering the installment contracts such as agreements of sale or, or even placing a mortgage on a property that they sold, they can collect an interest from the buyer. So they’ve kind of done two things, they’ve not only sold their property, but they’ve created an investment for themselves that may pay more than you can get in, like, a high paying mutual fund or, or whatever, right. So you can pay if you can charge 7% on an agreement of sale, and you’re selling a million dollar property. And they put maybe two $300,000 as a down payment, which is kind of something they’re going to give up the down payment, if they don’t pay, and, and then they’re going to pay those interest payments. And it’s good. If the seller, a lot of times sellers might be elderly people, and they and they might sell to a family member, and they’ve got a little investment there that pays them interest. You know, it’s also interest write off for the buyer.

ADRIENNE: 
So you’ve done quite a few of this like internally for differently family sales, is what I’m hearing. Right.

JONNY: 
Right. And just educating families on how we need to follow the rules, like a lot of, of the family members make the seller financing or offering the seller financing like the trustees of a trust. So that brings in a whole new bunch of requirements because as a trustee of a trust, you’ve got fiduciary duties to the beneficiaries. So you can’t just be running around giving sweetheart deals. You know, you know, your, your loan, or your seller financing has to look reasonable.

ATTILIO: 
Market you can’t be well, yeah, it was beachfront property and Kahala. $100,000 1% interest?

ADRIENNE: 
No, no, right. And fair market value, right, I think is what we had talked about fair market value. Yep.

JONNY:
At that point. Did you know Did you file a gift tax return? Yeah, give you give them something, you know.

ATTILIO: 
That’s the proverbial son who called his mom every Mother’s Day. It was a good boy. He called every everything.

JONNY:
Exactly. So, but but it can be beneficial. You know, I mean, in when you can offer some kind of mortgage and you know, maybe a second mortgage, even that’s willing to subordinate under another commercial mortgage, you know, that that might be helpful for somebody just starting out, because we have such high property values here that it’s hard for young people to get their foot in the door, you know?

ADRIENNE:
Well, Johnny, we are very sad, but the show has come to an end.

ATTILIO:
And we’re leaving and wanting more because we’re gonna get a hold of us, Johnny for this stuff. And

ADRIENNE:
you can go to Hawaiitrustattorney.net to find out more about Johnny Zahaby, or just go to Teamlally.com. And we’ll have the show uploaded there. Thanks, Johnny. Thank you. Thank you for calling in. Thank you. 

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