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Types of Real Estate Contracts Every Investor Should Know

To be a successful real estate investor, you should become a master of real estate contracts. These legal documents can seem confusing and overwhelming at first. It helps to understand the primary goal of any real estate contract is to protect your investment and limit your liability. Let’s increase your confidence with contracts by breaking down the most common types you’ll encounter.

Purchase Agreement

When learning how to invest in real estate, this will likely be the first type of contract you encounter. This contract is the sales agreement for real estate transactions. It will lay out the terms of sale between the buyer and seller. Purchase agreements change slightly based on the state of purchase or if a real estate agent is involved in the sale. However, a good purchase agreement will cover all the details of the property and the transaction, including any contingencies and which party is responsible for the various costs associated with selling the property.

Lease Agreement

Many real estate investors are looking to earn income through rental properties. If this is part of your investing strategy, you will need to become familiar with lease agreements. As the property owner or landlord, you will outline the terms of rental occupancy in a lease agreement. It should cover rent, security deposit, utilities, and any other expectations for the tenant.

Real Estate Assignment Contract

Slightly more complex than previously discussed contracts, a real estate assignment contract is used when wholesaling properties. This strategy is used when you find a distressed property that you plan to sell to a third party. It provides extra flexibility in your investment while allowing you to secure properties quickly.

You can simplify real estate contracts from their overwhelming state. Now that you have familiarized yourself with the most common types you’ll encounter, you are one step closer to investing mastery.

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