Owning investment properties in Stockton, Modesto, or elsewhere across the United States continue to be an excellent investment but the reality is that there are common mistakes that some owners make with their investment properties.
In this article we will provide you with insight into some of the most common mistakes that investment property owners make, so you don’t make similar mistakes yourself.
Common Mistakes Owners Make With Investment Properties
1. Failing to Transfer an Existing Property, Via Deed, to the Real Estate Entity. Upon forming an entity, the real estate investor must execute a deed transferring the real estate to their newly formed real estate entity. The deed must be recorded in the county in which the investment property is located. Failure to do so will cause the investor to remain personally liable for property related issues and largely defeats the purpose of creating the real estate entity.
2. Failing to Insure the Property Under the Name of the Real Estate Entity. It is imperative to have written proof that the real estate entity is insured, so that an insurance company is not provided with an easy reason to deny coverage.
3. Failing to Comply with Entity Maintenance Obligations. It is critical that you maintain your real estate entity’s good standing and have written records outlining various actions taken by the real estate entity. Additionally, some entities require the filing of annual documents in order to maintain “good standing.” For example, certain Arizona entities are not required to file annual reports; whereas, some entities must file them. Another maintenance issue that arises is the failure to keep accurate records, like segregating business banking activities and personal ones.
These are not the only mistakes that we see. For instance, most real estate investors do not know that, upon transferring real estate to a real estate entity, the business must update its title insurance policy to reflect this new ownership. Failure to do so can result in a title claim being denied. Another common and avoidable mistake is failing to execute all contracts in the name of the real estate entity. This, too, can defeat the entire purpose of creating a real estate entity.
Contact RPM Central Valley
For more property management tips, or to speak with us about the services that we can offer you, contact us today by calling (209) 572-2222, or click here to connect with us online.