If you’re purchasing an investment property in New Jersey, whether it’s a rental home, multi-unit building, or commercial space, you’re likely focused on the numbers: cash flow, cap rate, and ROI. But one area investors sometimes overlook is title insurance, which can play a critical role in protecting your real estate investment.
At Scott Title, we help both first-time and experienced investors secure their properties and avoid costly surprises. Here’s what you should know about title insurance when it comes to investment properties.
What Is Title Insurance, and Why Does It Matter?
Title insurance protects buyers and lenders from legal claims or defects tied to a property’s ownership history. These issues can include unpaid property taxes, undisclosed heirs, forged signatures, recording errors, or other problems that could challenge your legal right to the property.
In New Jersey, a title search is conducted before closing, but even the most thorough search can’t uncover every risk. That’s where title insurance comes in — it offers peace of mind by covering legal fees or losses if a title issue arises down the line.
Is Title Insurance Required for Investment Properties?
If you’re using financing to purchase the property, your lender will require lender’s title insurance. This protects the bank’s interest in the property, not yours.
To protect your investment, you should also purchase an owner’s title insurance policy. It’s a one-time cost paid at closing that covers you for as long as you own the property. Considering the value of most investment properties, the protection it offers far outweighs the upfront premium.
Title Risks Are Often Higher With Investment Properties
Investment properties, especially those purchased at auction, in foreclosure, or as part of a distressed sale, can carry a higher risk of title defects.. Common issues include:
- Unpaid utility bills, taxes, or contractor liens
- Previous owners with unresolved legal judgments
- Boundary disputes or unrecorded easements
- Missing or forged documentation in past transfers
These problems don’t always show up during the title search but can result in serious financial or legal headaches if not covered by insurance.
What If You’re Buying Through an LLC or Holding Company?
Many investors choose to buy real estate through an LLC for liability and tax reasons. In these cases, title insurance can still be issued, but it’s important to make sure the policy properly names the entity and reflects the correct ownership structure.
Scott Title regularly works with investors, attorneys, and real estate professionals to structure title policies that align with business goals while still providing full protection.