Investment Property

By Edith Lank

May 4, 2018 5 min read

Dear Ms. Lank: My wife is all fired up about the real estate people we see on TV. Do you have an opinion about investing in the courses they offer? They offer a free session at a motel here. Any advice about investing in real estate will be welcome. -- W. V.

Answer: Real estate has been called not only the best way to build an estate but even the only way. Real estate investment, though, takes constant effort on your part. You can buy shares of stock and then just check the quotations as they rise and fall. Not so with a duplex three blocks from your home. You must be ready to take a phone call at 6 a.m. about a burst water heater, buy a replacement promptly and arrange for someone to meet the plumber there that very day.

And despite the plumbing problems, real estate investment is not liquid. You can take your money out of the stock market with a single call to your stockbroker. When your capital is in real estate, you shouldn't count on being able to take it out in less than six months. And if the economy gets bad in the community, you could be stuck till things change.

Where to start? Before you do anything else, line up your team -- a lawyer who specializes in real estate, an accountant to analyze your first proposal, a home inspector to check on the home's condition before you're committed and a real estate broker who is interested in helping you reach your goals.

By all means, attend that free session. But keep in mind that the same material is available in local bookstores, online and at the public library. You could start by taking the course required for beginning real estate licensees. That would give you the vocabulary and some basic information, and your fellow students could eventually prove helpful.

For your first few transactions, start small so you're not risking much or taking on a lot of liability while you learn. Something near your own home is best. Look for property that will appeal to the largest number of responsible prospective tenants. And don't hesitate to check their credit.

Good luck.

*Closings Differ

Dear Edith: We are leaving the mainland and buying a condo in Honolulu. We already have a lawyer there, and he says he's not used to representing buyers at closings. What would you advise? -- L.

Answer: Years ago, when my column started appearing in other cities' newspapers -- yes, eventually it did in Honolulu and even in Anchorage, Alaska -- I learned that almost nothing differs so widely from one area to another as final settlement of a real estate purchase.

The process may be called settlement, transfer, closing, passing papers or going to escrow. It may be held in the county courthouse, the lending institution, a title company, a real estate office or an attorney's office. In one city, buyers, sellers, attorneys, brokers and a paralegal representing the lender may gather around a table. In another area, the parties may not meet at all, with everything being handled by an escrow company.

Whatever the local custom, the basics remain the same: The seller proves marketable title. The buyer pays for the property. The seller delivers a deed.

That deed is a bill of sale for real estate. The seller doesn't want to sign it until the purchase price is paid. The buyers, though, cannot pay until they receive the mortgage loan. But the lender will not turn over the money until the buyers have pledged the property as security, which they can't do till they own it. You can see why it all must take place at the same time and in proper order.

If new financing is involved, settlement is complicated by the signing and delivery of a bond and a mortgage, or in some states, a trust deed.

My advice is to follow whatever procedures are usual out there -- and just make sure someone gives you the keys to the front door.

Edith Lank’s column, “House Calls,” can be found at creators.com.

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