Congratulations, if you have have read through all of the other phases of getting started in real estate investing, you are now under way to your first PURPOSEFUL real estate investment.
You are now positioned more strongly than 97% of people who invest. Yes, I heard this stat at a Realtor conference, it is hard to believe but 97% of people just dive in and buy the property and wonder why they are not making tons of money.
In fact, I am working with a newer investor who I just got off the phone with (literally just 10 minutes ago). Upon speaking, he had thanked me for slowing them down. They had lots of vision and focus but now understood that that focus was not pointed in the right direction, it was pointed at the outcome, not at all the decisions that had to be made BEFORE the outcome. They now understand that because they wanted these great returns, they need to be very purposeful in each step of the process. They also know that once they have developed a plan and a process for each step, they will be strongly positioned to build their entire investing portfolio and will then be able to realize their desired outcome – great returns.
- With a great real estate investment plan in place
- With financing (if being used) in place
- With proper entity structure in place
- With understanding of the best real estate locations to accomplish your intended goals
- With a real estate power team in place
- With a great performing asset identified on a quality property
- With a great property manager identified
- With a great exit strategy (or maybe two) in place
Now that you are have all these pieces in place, you are ready to make a deposit. This is where you put your money where your mouth is. You will sign a contract to purchase the property and put down good faith money (also known as opening escrow). Escrow is where you put your deposit money in to a trust account (a third party trusted checking account, governed by law). This deposit shows you are serious about purchasing the property by making a deposit and the deposit is applied to the total amount owed when you close on the property. By making a deposit, you also are reserving the property for you so that it is taken off the open market.
Now you move into the inspection period discussed in my last post. After you are satisfied with the inspection report you can move on to finalizing any lending requirements (if applicable) and move on to close. Simultaneously (if not already completed), the management company will be procuring a tenant with a lease so that your new investment asset is truly a performing asset at time of acquisition.
With all aspects complete, you can move on to the closing process, also known as settlement. Closings in the US are often completed by a title company. Many locations throughout the world are accustomed to a lawyer, attorney or justice to perform the closing. There are even locations within the US where an attorney’s office may close the property. Closings are different in different areas of the country. The important thing you want to know is it is highly customary for either an attorney or title company to close on real estate, (you can probably tell this question comes up a lot!)
During the buying and closing process, you are going to be hearing about Title Insurance. Title Insurance is a great tool and I believe it is only used here in the United States. In essence, what title insurance does is to insure you always have clean and marketable title to the property that you purchase.
When you close on the property, the closing agent will do a title and lien search to make sure there are no encumbrances (clouds or challenges) on the property. If they find any of these, the title company will correct them before you close. This means that going into the closing, you are comforted in knowing the property you purchase has been scrubbed and is clean and marketable. Then you receive a title policy. This policy insures that should ever any encumbrances appear, the insurance company will guarantee that the property maintains clean and marketable title. The title policy will be responsible to correct any issues.
A note about title policies: rules over these policies vary by location.
In some locations, it is customary that the seller provides (at seller’s expense) this policy. In other areas the buyer provides this. In yet other areas there are two policies, one that the seller provides to the buyer and one that the buyer buys and provides the lender (if any). The important thing to know about title polices is, “who is the beneficiary of the policy”. In most cases it is you, the buyer. In some cases such as where I live in Florida, the seller provides to you (the buyer) a policy that names you, the buyer as the beneficiary, and then you in turn purchase a second policy that protects the lender and which the lender is the beneficiary. OK, if you read this a second time you will see it is not that terribly confusing, the thing to take away from it is this, a title insurance policy is a great tool and one that protects your interest, just ask to make sure you are the owner of a policy at the closing table and you will be protected.
At the closing (this may be done in person or by way of mail or even sometimes email) you will receive a settlement statement, also referred to as a H.U.D. (Housing and Urban development) as they are the governing body that oversees the closing processes. On the Settlement Statement, the left side is all itemized expenses related to the Buyers and the right side are all expenses related to the Sellers. You will sign the H.U.D. as well as all supporting documents. Your closing is now complete. Your closing agent will record your purchase in the county courthouse and will instruct you as to when you will receive a copy of the recorded deed. Congratulations the property is now yours!
Your first investment is now in your control. What happens from here is up to you! With the control of your first performing asset, you can be comforted in knowing that you were purposeful and the investment is positioned for massive success.
Now you can see the difference between you (who was diligent and purposeful) versus the majority of people who are quick to buy and quickly go into the freak out phase as they realize they do not even know what to do next.
Duplicating the Real Estate Investing Process
For you, the purposeful investor, the next step is to duplicate it. Because you were diligent in the process, you are ready to duplicate. It is easy to sound like a broken record here but as everyone will tell you, we now live in the perfect set of circumstances. As of the date of this writing (03-22-2012), the real estate investing stars are in the most perfect alignment we have ever seen or may ever see for many years, if ever again in our lifetimes.
In some locations, the stars are better aligned than in others. As time progresses these aligned stars will reposition to other areas. Rest assured I will be watching for these perfect alignments and I will keep you posted as to where is the best locations at any given point in time to invest. Go ahead, test and measure your progress. Life is a moving target and from time to time you may need to make slight changes to your process, but go forth and duplicate the process you worked so hard to create. And most importantly enjoy your successes!
If you would like to find out more about the services we provide to help new real estate investors succeed, give us a call today for a free 15 minute consultation! 941-718-7761