RJ Palano build to rentThere is a lot more to building real estate investment houses than you might think, unless you are a builder.

Permit fees are self-explanatory, as you can get the information from the county where the lots are located. However, sometimes a developer who went bankrupt did not live up to all his commitments when his project was ongoing and you will have to pay for his lapse.

This happened to me with the first lots I acquired as the original developer never put the “top coat” of asphalt on the street.

For us to begin the real estate investment project, we had to give a bond to the county which was our guarantee to them that we would complete the process. That cost me $61,600 and was a total surprise.

People are often aware that there is a “Declarant” associated with a planned community or condominium, but the identity of the Declarant may be unknown. Fortunately that identity can almost always be determined by reviewing the public land records in the county where the planned community or condo at issue is located.

Build-to-rent houses in Atlanta metro area

Build-to-rent houses in lesson No. 3

The concept and designation of the “Declarant” arise from the formation of a planned community. When the developer subjects land to restrictions described in the “Declaration,” that developer has the opportunity to reserve certain rights to itself as the “Declarant.” Although there is no requirement that the developer reserve such rights, it is common practice to do so and very unusual for a developer not to reserve these rights.

 Why is this important?

Without getting into all the legal jargon around this, it is important to know who has these rights when you buy lots because you are then subject to these rights when you start to develop.

For instance, these rights could indicate the type of materials that must be used, whether brick or stone, vinyl siding or concrete board. Typically, they will also indicate the minimum and maximum square footage to be built.

In the case of foreclosures, this can be very confusing as the right may or may not have been foreclosed. In these instances you really need an attorney who is familiar with these situations.

To make matters more challenging, you have the Home Owners Association to deal with. The HOA will have some requirements as well and may also tell you that you cannot rent the houses out. They must be sold to homeowners. That’s right, some communities have rental restrictions.

Thus, your due diligence must eliminate any surprises because the Declarant Rights and the HOA will impact the value of your lots. The more red tape, the less fun it is. If it was easy, more people would do it.

It’s not easy. Developing and building is not for everyone.

Know your exit plan before you begin.

Want to know more about RJ’s business in Atlanta? Click below.

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  • R J Palano

    RJ Palano is the acquisition director of BuyCashFlowProperties.com, a Tampa, Florida-based company that primarily provides turnkey houses for investors in the metropolitan Atlanta and Tampa Bay areas. His property management experience spans more than 35 years, and he has been involved in more than 3,000 real estate transactions in 12 states and more than 50 cities. Contact him at 813-495-3006 or rjp@buycashflowproperties.com.

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