Rochester Real Estate Lawyer Discusses Mistakes Investors Make

  • Real estate investors’ most common mistake is choosing a bad location. That’s especially true when out-of-town investors buy real estate on the internet, thinking it’s wonderful to be able to pick up a property for $2,000 – not realizing that it’s in a very bad section. Among the things buyers must consider – regardless of where they may invest– are crime statistics, which are readily available on the internet. It might also be smart to visit the area and talk with the neighbors. Availability of public transportation is also key for many properties.
  • Buyers also have the right to access the past two years’ utility costs and should ask for gas and electric costs to see what the actual bills have been for the property being considered. Buyers should also check with local building and zoning offices to make sure the property is in compliance with all zoning and building codes, and to learn about any major renovations.
  • Selling a piece of property won’t allow the seller to escape zoning or building code violations. If the properties are in violation, selling the property will not enable a seller to avoid possible criminal charges.
  • Another buyer mistake is assuming that personal property comes with the real estate. If appliances or anything else are included, they should be specifically listed in the contract.
  • Buyers should protect themselves from liability by making sure the property is not dangerous to tenants or the public, and that there are no defects, using their own inspector examine the property. Remember – home inspectors’ liability is limited to refunding their fee if they make a mistake.
  • It’s a mistake to assume there are no current leases – which should be covered in the Rental Property Rider. It’s important to remember that leases go with the real estate, and that may or may not be a good thing.
  • Most parties expect to close on a set date, and that can cause problems for those who come from other areas and may not be aware that closings here can take a lot longer than in most other states. Unexpected problems can delay the closing past the contract date unless it states that time is of the essence.
  • Another common Seller mistake is failure to transfer security deposits to the buyer at closing. The contract should specify whether security deposits exist and whether any security deposits have been used. It’s actually a criminal offense to fail to transfer security deposits to the buyer upon sale of the property. Also, within five days, the seller is required to notify all tenants – by certified mail – as to the new owner’s name and the amount of the transferred security deposit.
  • As mentioned in the liability section, an investor can be sued for many types of risks which are not covered by insurance. Owning real estate in one’s own individual name exposes that owner to personal liability – unless adequate insurance coverage is carried. That is why the use of limited liability companies is recommended to shield investors from personal liability. Even those who have large amounts of insurance may find that insurance does not cover all potential landlord-tenant risks.

This educational legal video was brought to you by Robert Friedman, an experienced Rochester Real Estate Lawyer.