Beware — Time Is Not Always Your Friend — Tick Tock

Posted @ 11:47 pm - Filed under 1031 Exchanges, Real Estate Investing, Purposeful Planning, Retirement, Financing, Builders, Investment Lessons

While real estate investment offers plenty of benefits, sometimes it also provides, uh, time challenges. There are situations when time is your best friend. Sometimes it’s not much of a factor. Most often it’s a minor irritation requiring small tasks accomplished during transactions. It’s all part of what I’ve called Document Dictatorship. Sign this, initial that, scan, copy, email, FedEx, blah blah blah.

You’ll know it when Time with a capital T ceases being your best bud.

The following list isn’t all inclusive, but will give you a peak into time critical scenarios.

The Inspection Period When Buying

It’s different in each state but generally the buyer is allowed 10-17 days to do all of his inspections. In Texas our contracts allow for 10 days. Texas also has a clause for an additional amount of money to pay for the inspection period. The money goes towards the purchase price if you close the sale, but to the seller if not. (This money is separate from your deposit.) Our contracts charge a courtesy $200 for this. I like this approach. Make sure your ducks are in a row, so when your time starts running you’re not wasting 2-3 days scheduling various inspections. Remember, you’re interested in the reports generated by the inspections. Reports take time. Going over them takes time. Writing requests for repairs takes time. Tick tock. If the seller is particularly cold blooded your deal could go south as well as your money.

Your Lender

Here’s where time is an assassin. Since investors are used to contractual timelines they tend to slow play their lenders. This is just plain dumb on so many levels. Seriously? You should time how long it takes for you to respond to anything your lender wants with a stopwatch.

Your delay can cause you to lose out on lower rates — move it or lose it.

When your lender emails or calls — get to them NOW! They’re your best friend.

When asked to FedEx info — don’t use snail mail. The lender needed it yesterday.

Murphy lives with lenders — act accordingly and expect underwriting silliness.

The Delayed Tax Deferred Exchange (1031)

Thankfully there are only two ‘drop dead’ dates for this one. (normally) Even better, they both begin on the same date — which is the close of escrow of the property you’re selling. The IRC refers to it often as the Relinquished Property. Think they’ll believe your excuse about the dog eating your homework? When it comes to these deadlines yer the nail and the IRS is the hammer. There will be no debate if you dawdle. How serious are they? They count Christmas regardless. ‘Nuff said.

1. You have 45 days in which to Identify the property(s) you are to Acquire. This is easily documented. They don’t take prisoners when it comes to this deadline.
These properties are often referred to by guys like me as Uplegs. (slang)

2. You have 180 days in which to close the property(s) you Identified. (Your uplegs)

Fail to meet either one of these two deadlines and your exchange is steam in the air. You either identified on or before the 45th day or you didn’t. Same with closing on or before the 180th day. Again — both time periods begin counting on the day you close the sale of the property you’re relinquishing.

The Current Market

The window is closing as I write this. There are those who will disagree. My frequent flyer miles say differently. Everywhere we go, inventory is becoming more scarce. We’re already feeling shut out of certain regions because some of those sitting on the fence have begun their swan dives into the pool. Once builder inventory is decreased past a certain point, the really cool deals will mostly be history. Those who get in before that happens will brag about it years from now when their relatives are over for Thanksgiving. Don’t cost yourself that opportunity.

Starting Your Purposeful Plan Past 50

This is where it can get tricky. The problem is this — if you’re retiring at 65, you have 15 years to make it happen. Sounds like a long time. Trust me, 15 years can fly by — but you already know that since you’re already 50. Most folks that age begin to edge over to the financially conservative side. It’s a natural tendency. But if ever there was a scenario in which time isn’t your friend — it’s now. At this point time can get downright mean spirited.

I’m not saying you should swing from the chandeliers — just don’t go all Grandpa on yourself. Here’s the real punch line. If you don’t heed the clock ticking away, getting louder each birthday, you’ll find yourself one morning, 59 years old and having to accomplish 10-12 years worth of investing in just six years. Tick Tock.

Don’t do that to yourself. Be your own best friend. Once you do that, sometimes time sidles over and smiles on you.

This entry was posted on Wednesday, February 20th, 2008 at 11:47 pm and is filed under 1031 Exchanges, Real Estate Investing, Purposeful Planning, Retirement, Financing, Builders, Investment Lessons. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.