So, welcome back to our partnering series. And what I want to do today is I want to
talk about what happens now that we're under contract, we're buying the property
and we haven't exactly closed on it yet. What should I expect when I'm actually
under contract in going through that purchasing process?
When you're partnering up on a deal, it's important to understand what's going to
happen next? So, check it out. We've got our property on a contract and there are
important deadlines that are associated with this property. Every REPC or real
estate purchase contract basically says during the purchase process, there's
these many deadlines along the way that you could actually get out of the
property without penalty, if you wanted to. At some point, the earnest money is
gonna go hard which means you can't get it back. So, we're under contract, you've
written a check $500, $1,500. Some kind of
check that says, "This is my earnest money, now we're going through a period of due
diligence." So, there's actual deadlines. And depending on the state we're doing
this in. There's inspection deadlines, due diligence deadlines, loan deadlines,
appraisal deadlines. And I want to walk you through these. First of all, when we
get under contract, we don't always know if we're actually going to stick with the
property and buy it. So, we're doing some different things. One is we're getting an
inspection on the property. We don't want to buy it and then find out later that
there was several thousand dollars worth of problems that we need to fix. We want
to know that up front. So yes, we're doing an inspection on these properties and
yes, we're finding that out. Part of the due diligence is the loan. We've already
if the partnership is lined up. We've already been through the lending process
and we know that we're solid and golden on the loan. Same thing on the appraisal,
we're not looking for the appraisal to tell us that we have won a lion's share
of equity. The appraisal these days never really tells you anything other than the
home is at least worth what you're purchasing it for. Sometimes people are
hoping that the appraisal reveals that you've gotten some great discount
because you have it under contract for $180,000
and the... And that appraisal comes in at $200,000 and
then you say, "Oh, I can feel good about that."
Appraisers. There has been a major crack down this last decade. They're not
going to pray something for more than the REPC ever. Even if that you're
getting it at a huge discount, they're still only going to appraise it for that.
The C-M-A or the ROI analysis is really what's going to determine whether we have a
good deal or not. And we've been evaluating other homes in the area. We've
done that math. We knew that math upfront. So, we don't even need to wait for
inspection due diligence or things like this. Inspection is a period of time for
us to negotiate a little lower price or to know what we're walking into. And then
it's also important during the loan process before we close that we actually
insurance on the property. You know, on the property, you're going to need
insurance for the home. One of the things that will happen in the process is one
of our third-party vendors will actually reach out and actually collect the
information to provide insurance on the property. Now, you and I, we want to
maximize our cash flow which means lower insurance means more money in our pocket.
So, they may actually ask if we can bundle this up with your other insurance
carriers, with your other properties, with your other cars, with any other insurable
items that you have. Because what that'll do when you bundle it is it will drop
the price in like 95% of the situations, we're actually saving our
clients, money on their own stuff which I don't really care that much about. But it
doesn't mean that we'll have a lower payment on the insurance on this
property. Which means higher cash flow, higher profitability. So when they reach
out, use it as an opportunity to bundle everything up and save yourself money
across the board. Now, what to expect in the end is that it comes time for
closing. And closing is when we basically call you up and say, "we need you to meet
at a title company or we're having a notary come to you." They've got the loan
docs. And what will happen is you'll sit down at the table, they'll read through
all of the information, all the numbers. They'll show you the expense sheet, the
Good Faith Estimate. We've already gone through that. If you're partnering with
me, I've already meticulously gone through everything. I know the numbers.
And really what you're going to do is what I do. It becomes a race for how fast you
can sign. Now, when you're new to it, you should read through and make sure you
understand what you're signing so that you can be a good steward. But once you
have it down and you've done it a million times like me, so it feels. You
just get in there and you sign, sign, sign, sign, sign. And what you're basically
signing says, "We're agreeing to the mortgage a million times over." Because
they're going to make you sign for that over and over again. They're going to
make sure that you understand exactly what you're doing and then once you're
done with that, that property once, it's closed on, you're going to wire a certain
amount of money through the funding partner for that down payment. And that
basically is what's going to allow the closing to fund. Now, the bank has their
money, the bank has put the loan in place and my team will be reaching out to say,
"Talk to my accounting team and we're going to deed the property into the LLC
so that essentially we can be there to make the payments." We may have you get
involved to get us on the you know, to actually hook us up with the bank so
that we can set up direct deposit. Make sure you've got access to the bank account
information. And basically, we're off to the races. We'll continue monitoring the
property, will continue managing the property and then we've got to get
together and figure out the strategy on buying our next home. Now, if you're
watching this because you want to set up partnerships with other people, I'm
sharing with you exactly how I do this. Verbatim, with my partners and this
system that I developed 15 years ago hasn't changed a whole lot because it's
good, it's worked and it's been tweaked out really well. So, my friends, that's
what we want you to understand today when it comes to the expectation from
being under contract to closing on the property.