When it comes to working with a private money lender and flipping houses, there are several legal issues to be aware of. Keep in mind that whether you’re working alone or with a group, rehabbing buildings is a business venture. This means that it makes a lot of sense to formally start a business. One reason this is important is that it will limit your liability in the event things don’t work out with your investment as you had hoped. Things can go south, even when you do extensive research and are very careful. Be sure your personal assets are safe if that happens.
You also want to make sure you have the right type of insurance that will cover anyone who is hurt while working on the property. Before you even find hard money lenders, you should speak with an attorney about what type of business entity makes the most sense for your circumstances.
Contact a Real Estate Attorney, as well as Hard Money Lenders
Once you’ve found properties to invest in, there are other legal issues to take into account. Many investors find good deals on foreclosures. However, before committing to the sale, make sure that the current owners are actually gone, so you don’t have the hassle of evicting them. Investors are also well-advised to consult an attorney about issues like the right of redemption.
Next, make sure that the seller got the appropriate permits for any improvements on the property. Not having the right permits can make reselling the property very difficult. If you have plans to convert a residential property into a commercial one or the other way around, make sure that the local zoning laws allow for this.
Finally, make absolutely sure that there are no problems with the title to the property before buying. Title insurance is a good idea. However, don’t rely only on the search the title company makes. Check public records to be sure there are no outstanding liens. Also make sure that the title has no ambiguities about ownership. Even small things, like listing the owner as “Jake Jones” rather than “Jacob Jones” can create problems at selling time.
LendingXpress is an experienced private money lender. If you need to discuss legal issues around house flipping, give us a call. We’ll point you in the right place to get help and advise you on what kind of loan makes sense once you find properties to buy.