Paper Trail: Legal Documents Every Real Estate Investor Should Have
Real estate investing can be a lucrative and rewarding career, but it is also a highly regulated industry. As a real estate investor, you are required to take certain actions to protect your assets and comply with the law. If you fail to do so, you could be facing civil and criminal penalties.
Table of Contents
Crucial Legal Documents
Escrow Agreement
The escrow agreement is the most frequently used document in real estate investment deals. It is used to hold funds that are due on the sale of a property. The escrow agreement requires the buyer to pay the seller a percentage of the sales price and then hold the remainder until the seller receives their portion of the sales price. The seller will then release the funds to the buyer when they receive their portion of the sales price. This is a very common document used in real estate transactions.
Lease
The lease is another key real estate document that every real estate investor should prepare. This document will explain your rental agreement with the landlord. It will list the terms and conditions of your rental property, including payment terms and rules for pet ownership. It will also include information about the landlord’s insurance requirements and any other terms or conditions that are specific to your lease. Leases are required for many residential properties, including single-family homes, duplexes, and condominiums.
Covenants, Conditions Of Use, And Restrictions
Covenants, conditions of use, and restrictions (CC&Rs) are legal documents that are usually found in condominiums and townhouses. They are also sometimes found in commercial properties such as office buildings, retail spaces, restaurants, or hotels. CC&Rs include details about the property’s use, maintenance, and appearance. They can contain a wide range of restrictions on what you can do with your property and how you can use it.
Expense Statement
All real estate investors should prepare an expense statement at least annually. This document lists all of your costs associated with the properties you own. There are several different types of expense statements, but they all have one thing in common: they list every penny you spend on your properties. In addition to listing your expenses, you should also include an itemized list of each expense item so that you know how much you spent and what was spent on each item.
Letter Of Intent(s)
A letter of intent is another key real estate document that every real estate investor should have prepared. This document is used when you are negotiating the purchase of a property with a seller or buyer. It is a contract that outlines the terms of the transaction and includes details about the property to be purchased or sold. It will also include details about any conditions that must be met before closing the transaction. A letter of intent is also required when you are negotiating a lease with a landlord or tenant.
Nondisclosure Agreement (“NDAs”)
An NDA is another key real estate document that every real estate investor should have prepared. It is a binding contract between two parties that prevents them from disclosing confidential information about each other to anyone else. It can be used to keep information about a property secret from potential buyers or tenants who may want to purchase or rent the property from you. In addition to protecting your privacy, an NDA can also be used to protect yourself from competitors who may attempt to steal your clients’ business by advertising your current properties at below-market rates. NDAs are sometimes used in mortgage and lending transactions as well.
Agreement For Assignment Or Transfer Of Leases (“ATLs”)
An assignment or transfer of lease agreement is another key real estate document that every real estate investor should have prepared. This document is used when you are transferring ownership of a property from one owner to another owner. It is a legal document that requires both parties to sign it before it can be transferred to the new owner. The agreement will also outline what conditions must be met before the transfer can take place. This document can be used when you are buying out the original owner of a duplex or triplex or when you want to sell your duplex or triplex to an investor who will then rent it out to tenants.
Photographs And Floor Plans
Photographs and floor plans are two additional documents that every real estate investor should have prepared for every property they own. Photographs are an important part of any property’s marketing strategy because they help prospective buyers visualize themselves living in a particular property. They can also be used for insurance purposes if you want to submit proof of damage to your property for reimbursement by an insurance company after an accident or other occurrence. Floor plans can also be very helpful in marketing properties because they show prospective buyers what each room looks like inside a particular property. Floor plans can be used by buyers to verify that they are getting exactly what they think they will get when they purchase a property from you.
Signed Originals And Warranties
As a real estate investor, you will want to have signed originals and warranties for every property you own. These documents provide proof that you have owned the property for at least one year, which is required before you can sell it at its full value as determined by your local zoning board or city council. You can also use them as proof that you have complied with all local zoning laws for your area by obtaining a building permit for each property you own. These documents can also be used as proof that you have repaired all building defects before selling a property at its full value as determined by your local zoning board or city council. In addition to these documentation requirements, you should also acquire financing documentation for each property before selling it at its full value as determined by your local zoning board or city council. These documents include promissory notes (also known as “mortgage notes”) and deeds of trust (also known as “mortgage deeds”).
Wrapping Up
There are a number of important real estate documents that every real estate investor should have prepared. These documents help to protect your privacy and protect you from competitors who may try to steal your client’s business. They can also be used to prove that you have complied with all local zoning regulations and laws. By having these documents prepared in advance, you will be able to sell your properties at their full value as determined by your local zoning board or city council.
