Purchasing an investment property or a piece of commercial real estate can be extremely rewarding; but, it is also fraught with potential risks. From personal liability to zoning restrictions and restrictive covenants, there are a number of issues that can quickly sink the profits from your endeavor – and potentially do even worse. Here are some of the top legal issues with real estate investments that usually require the assistance of an experienced attorney:
1. Choosing the Ownership Structure for Your Real Estate Investment
While some casual investors choose to own properties in their own names, there are several important reasons to consider forming a land trust, limited liability company, or other entity to own your investment or commercial property. Forming a trust or business entity and purchasing adequate liability insurance are key components of an effective risk mitigation strategy for real property investors.
2. Understanding What Is in All of Those Documents
When you close on a real estate purchase, you sign numerous complex legal documents. Shouldn’t you know what they say? From the property description in the purchase agreement to the terms of your mortgage or construction loan, there are several key terms that you either need to (i) make sure are correct, or (ii) try to negotiate in order to protect yourself and your investment.
3. Understanding Any Restrictions that Apply to Your Property
If you are purchasing a rental property, do the homeowner association (HOA) documents allow for rentals? Are there any restrictions on rental properties—such as mandatory lease terms—or any other restrictive covenants that will prevent you from doing what you want to do with the property? These are important questions, and you need to be certain about the answers before committing to your purchase.
State laws and zoning restrictions may come into play as well. Finding and understanding all of the laws, regulations, and ordinances that apply to your property can be a challenge – not to mention dealing with the bureaucracy charged with enforcing them. An experienced local real estate attorney will be able to help you navigate the regulatory landscape and make sure that your intended use is not legally prohibited.
4. Entering Into Leases, Sale Contracts, and Other Agreements
At some point, you will either need to lease or sell your property. When you do, you will need to make sure you use a lease agreement or sale contract that (i) adequately protects you, and (ii) complies with all applicable laws. Drafting, reviewing, and negotiating these agreements requires thorough knowledge of contract law principles, the local real estate market, and the various laws that apply to real estate transactions in Washington.
If you will be working with contractors, hiring employees, or seeking financing, each of these has numerous legal implications (and potential risks) as well. Here, too, hiring an experienced real estate lawyer is your best option for avoiding costly mistakes.
Are You Considering a Real Estate Investment in the Tacoma Area?
If you are considering a real estate investment in the Tacoma area, we invite you to contact us to learn more about the legal risks involved. To schedule a consultation with one of our experienced real estate attorneys, send us a request online or call (253) 272-2997 today.