Before buying my first 4-plex

[Parker Stephens]

Hey everyone,

I just had an offer accepted yesterday on a local property (direct seller-to-buyer, no agent involved). Since this is my first deal like this, I want to make sure I’m covering all my bases legally.

A couple of things I’m wondering:

• What steps should I take to make sure everything is buttoned up correctly from a legal standpoint?
• Should I be putting this property into an LLC right away, or is it fine to close in my name and transfer later?
• Are there any specific documents or professionals (attorney, title company, etc.) I should definitely have involved at this stage?

Appreciate any advice from those who’ve been down this road before!

Thanks in advance

[Peter Walther]

If you haven't had a contract signed yet, I would talk to an attorney before presenting one to the seller and an attorney generally cannot represent both parties.  A contract is a serious thing though many treat it almost as an afterthought and only have an attorney review it after it's signed.  By then correcting problems may be difficult if not impossible and then you're stuck with the contract terms good or bad.

How long the seller has owned the property is irrelevant as is how well you think you may know them.  There can be title defects that predate their interest or arose after they purchased.  There can be matters that can't be found via a search of the public records.  Yes, you need to use a title agent or, if in a state such as NC which requires an attorney to do the closing, an attorney, but you should still purchase an owner's title policy to protect you from many of the possible problems.  I suggest you also hire a surveyor and purchase a survey.

You don't mention if your paying cash, I wish I could have at 22.  If you're getting financing, you'll need a lender and that probably needs to be provided for in the contract.

If you intend on buying other properties in the future as to create a portfolio, I suggest looking into joining a local real estate investors group.  There you may learn some of what you don't know you don't know.