5 Legal Mistakes Real Estate Investors Make (and How to Avoid Them)

Investing in real estate can be one of the most rewarding paths to financial freedom. But too often, investors overlook key legal issues that end up costing them far more than they expected.

As a real estate attorney and broker, I’ve seen smart, well-intentioned investors make avoidable mistakes simply because they didn’t know what they didn’t know. Here are five of the most common legal pitfalls I see—and how you can avoid them.

1. Relying on Generic Contracts

The Problem: Many investors download templates or reuse old contracts thinking they’ll do the job. The problem is these documents are rarely tailored to the deal—and can leave out crucial protections.

Why It Matters: One missing clause could mean the difference between resolving a dispute efficiently and spending months in court.

How to Avoid It: Always have your purchase agreements, lease agreements, and co-ownership contracts reviewed (or better, drafted) by a real estate attorney who understands your specific goals and risks.

2. Skipping Due Diligence on the Property

The Problem: Eager to close quickly, investors sometimes skip proper inspections, zoning checks, or title searches.

Why It Matters: Without due diligence, you could inherit boundary disputes, unpermitted construction, or even title defects that threaten your ownership.

How to Avoid It: Conduct a thorough due diligence process—don’t just rely on the seller’s disclosures. Your attorney and real estate team should verify zoning, permits, liens, and encroachments.

3. Co-Owning Property Without a Clear Agreement

The Problem: Friends, siblings, or business partners buy property together without a formal agreement outlining who pays for what, who makes decisions, or what happens if one party wants out.

Why It Matters: When things go wrong—and they often do—lack of clarity can lead to lawsuits.

How to Avoid It: Draft a co-ownership agreement upfront that covers contributions, profit sharing, dispute resolution, and exit strategies. A handshake isn’t enough.

4. Not Understanding Landlord-Tenant Law

The Problem: New investors often underestimate how regulated rental properties are, especially in California.

Why It Matters: Violating habitability standards, failing to follow proper eviction procedures, or not returning security deposits correctly can lead to major legal liability.

How to Avoid It: Know your obligations under state and local landlord-tenant laws. Consult an attorney before renting out property or making tenant-related decisions.

5. Treating Legal Help as a Last Resort

The Problem: Investors often bring in a lawyer after a deal goes bad, a conflict arises, or a contract falls apart.

Why It Matters: By that point, options are limited—and much more expensive.

How to Avoid It: Make legal counsel part of your investment strategy from day one. A trusted advisor can help you prevent issues before they start and structure deals with confidence.

Real estate investing is full of opportunity—but the legal side can make or break your returns. Taking time to get sound legal advice upfront protects your investment, your time, and your peace of mind.

Whether you're purchasing your first rental or growing a portfolio, having a lawyer who understands your goals can help you build long-term success.

Want to avoid these mistakes in your next deal? Schedule a consultation and let’s talk about how to protect your investment.