Safe Residential Real Estate Investing

If you’re investing in residential real estate, you want to make sure that you’re investing safely! Just like any business, in real estate investing you’ll find that there are people who will take advantage of you if they’re given the chance. Be smart and protect yourself.

I recently met an investor who shared the following story with me. He said, “Luis, I’m concerned about my portfolio. I recently purchased a lot of inventory and I’m experienced in real estate, but what happened is that I partnered with the wrong people. I did my due diligence. I got my title reports, but I actually was defrauded. I was defrauded because I didn’t take the extra steps to protect myself and verify the work.”

What happened was he was sending money to escrow instead of sending it to a title company. The escrow company actually switched the money to another escrow company -- without his authorization -- and all of a sudden he lost his money. He was defrauded because he did not have control of the escrow. He did not wire to title.

You can get yourself into a mess if you don’t know the process and the procedures to buying real estate. You always have to know who has control and what the steps are in order to protect your money. That’s the key thing. Having the right title officer in place is always key to protecting your assets.

Remember this as well: if you partner or create a joint venture with other individuals, although the cost or the splits between you and that other individual may be very low, if your partners control third parties you’re contracted to, those third entities can cost you money.

For example, if I joint venture with you and you’re my investor, and I have this property that we’re going to buy, I’m going to say you’re going to give me just 10% of the profit. But if I control the construction, and I control escrow, and title is my cousin…all these people are charging you. You’re not splitting on all those third-party services. So I’m getting my 10%, but I’m also getting money from these third parties as well.

Construction is one way we’ve seen people get charged an arm and a leg, just because they do not have the ability to see what the work is really worth. Escrow is another way as well.

What I’m trying to say here is, you have to know what you’re doing. You have to team up with the right people in order to protect your money and be able to purchase properties at the right time and at the right price.

Surround yourself with people you can trust and build and nurture those relationships. They can save you a fortune in the long run.