Property Management Ownership 101: 5 Things To Remember When Investing In Real Estate

As a real estate investor, there are hundreds of laws that can influence your investments every day. From determining whether an encumbrance exists on a property to suing for a hidden defect on property, it is vital that you have a basic understanding of these laws to protect your best interests as an investor. Understanding the laws can ensure that you proceed with appropriate measures, such as a record title search, before you purchase a piece of property. Here are the most important types of real estate laws that you must understand if you wish to invest in real estate.

1. Understand what constitutes an “encumbrance” in your jurisdiction

Before you ever purchase a piece of real estate for investment purposes, you should make sure that the title is free of encumbrances. An encumbrance is a legal term that refers to anything which could diminish the ability to transfer title. An encumbrance may be a mortgage, a zoning violation, restrictive covenant or other items. If you’re still unsure about this legal term, or anything else in this article, talking to an Experienced Real Estate Attorney in San Jose or whatever local area you’re looking to manage property in would be a good idea.


2. Be aware of the specifics of the Marketability Title Act for your state

Every state has its own Marketability Title Act. The Marketability Title Act will extinguish certain interests and claims in land after a period of time. For example, Florida has a Marketability Title Act that extends for 30 years. This means that a homeowner may not be able to bring a claim for an encumbrance if he or she has knowledge of it and does not file the claim within 30 years of discovering it.


3. Always conduct a record search to be aware of a prior bona fide purchaser (BFP) for value

Real estate investors should be aware of any prior bona fide purchasers for value who may own the property. If a grantor has previously conveyed the property to another grantee, then a new investor may not legally have ownership of the property. Every investor should conduct a thorough record search to ascertain BFPs before purchasing a piece of property.


4. Be aware of how capital gains taxes may impact your sales

Real estate investors should be prepared to face tax liability for any sales of real estate that they make. They could face significant capital gains taxes for the sale of real estate.


5. Speak with a real estate attorney to clarify your understanding of how real estate laws impact your investments

A real estate attorney will be a great help in explaining real estate laws and helping you deal with them. Real estate attorneys can also represent your best interests in the event that you are involved in a lawsuit by another investor or buyer.


These are the top real estate laws that every real estate investor should know. Understanding these laws can help a real estate investor make a smart and profitable purchase or sale.

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