Real estate is fraught with legal landmines, which is why many buyers and investors make it a point to learn the salient laws and regulations. It’s easy to assume that laws are designed to hinder honest investment, but that is not the case. People can rely on legal protection to safeguard their investment and financial wellbeing.
It’s essential to know how to protect yourself before buying real estate. Your first step is to hire a conveyancing lawyer to deal with all the legal work required to complete a real estate transaction. They’ll help you with all the relevant laws and regulations for property transfers.
Investing in real estate need not be a complicated process. Here are a few things you should know before buying a property:
Get good insurance
A good insurance policy might cost a pretty penny, but it will protect you from tenant or construction problems. Without one, you’ll have to pay out of pocket for any damages you might incur.
Let’s say you’ve recently bought a rental property, spent a considerable sum of money renovating it, and leased it out. Faulty electrical wiring then causes a fire, which destroys most of the building as well as the tenants’ inventory, installations, etc. Without an insurance policy, you’re on the hook for the damage to your and your tenants’ property.
There are multiple types of insurance you might want to consider to cover all the bases. Some of the most common for property owners include fire insurance, liability insurance, and construction insurance.
Use a holding company
If you own multiple properties, using a holding company protects you from personal liability should a disaster strike. If you were named as the owner of the property and you haven’t done all the necessary precautions to prevent damage, you will be held responsible for each infraction you might incur.
However, if a holding company held your properties, you would be personally protected from any liability. You can then focus on finding a solution to the problem instead of getting bogged down in litigation.
Double-check the contracts
Many real estate investors think that a lease agreement should be sufficient for most transactions. However, a standard agreement doesn’t protect you from many types of crises, especially ones that were caused by the tenant. It’s vital to secure the necessary contracts to protect you and your investment.
For instance, an indemnity agreement holds you or your company harmless for any loss or damages caused by accidents outside of your control. Let’s say a tenant injured themselves while doing renovation work. If it can be proven that you are not responsible for the harm, the burden of liability is then transferred to the tenant.
Hire the right people
Real estate management is too complicated for one person to handle. If you want to ensure that all bases are covered, then you need to hire the right people to help you. For instance, hiring an accountant can help you navigate tax laws in your state. That way, you can reduce your tax liability and maximize your profit.
These things can help you become a better and smarter real estate investor. Legal shortcuts can jeopardize your investment, and one tiny mistake can lead to losses and litigation, which is why you must do things by the book.