The most common mistake I see real estate investors making as a Rochester Real Estate Lawyer, is choosing a bad location. That’s especially true with out-of-town investors. They’re buying real estate on the internet and just think it’s wonderful to be able to pick up a property for $2,000. Little do they realize, it’s in a very bad section of Rochester. I’ve seen a lot of cases where property managers have taken advantage of out-of-town investors. Among the things buyers need to consider – no matter where in the country they may be investing – are crime statistics. Those are readily available on the internet. You can find out what the crime statistics are and it might be smart to go and talk to the neighbors. Of course, the availability of public transportation is very key for many properties.
Next, you have a right to access the past two years of utility costs. You should ask for gas and electric costs for the particular property to see what the actual bills have been. If you are selling property, you won’t escape zoning or building code violations. If your properties are in violation, selling the property will not help you avoid any possible criminal charges. As a buyer, you should check with your local building and zoning offices to make sure the property is in compliance with all zoning and building codes, and to learn whether any major renovations have been made.
Another mistake is assuming that personal property comes with the real estate that you’re buying. This is also covered in the Rental Property Rider. If stoves and refrigerators – or anything else – are included, they should be specifically listed in the contract. Protect yourself from liability by making sure the property is not dangerous to your tenants or the public, and that there are no defects. For that purpose, it is important to have your own home inspector examine the property. One warning about home inspectors: their liability is limited to refunding their fee if they make a mistake. I’ve seen a lot of home inspectors make terrible mistakes by missing some really huge structural defects, so make sure you’re getting a good home inspector.
It’s a mistake to assume there are no leases and those should be covered in the Rental Property Rider. When you buy real estate, it’s important to know that any leases go with the real estate, and that may or may not be a good thing. No buyer wants to get stuck with long-term leases whose rents are too low, so be aware of the pros and cons if the property has leases.
One thing that’s true of most real estate closings is that the parties expect to close on a set closing date, and that can cause a lot of problems. Those who come from out of state or down state may not be aware that closings take a lot longer here than they do in most other states and all types of problems can arise. You can’t always count on the closing date as stated in the contract unless it states that time is of the essence. Otherwise that’s just a target date and you may not close on the projected date.
Another common mistake happens when the seller doesn’t transfer security deposits to the buyer at the closing. If the seller is holding security deposits, they are required to transfer those to the buyer. 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. The contract should include whether or not security deposits exist and whether or not 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.
Something else I’ll address in the liability section is people not using limited liability companies or corporations to hold title to their property. As you can see in the liability section, you can be sued for many types of risks which are not covered by insurance. If you own real estate in your own individual name, you’re exposing yourself to liability – and that liability is personal if you do not have adequate insurance coverage. That is why we frequently recommend using limited liability companies to shield yourself from personal liability. You might have large amounts of insurance, but that insurance may not cover all of your potential landlord-tenant risks.
Are you a real estate investor wanting to make sure you don’t make any mistakes? Contact dedicated Rochester Real Estate Lawyer Robert Friedman to guide you.