The First Time Real Estate Investor: A Chronology — Part ‘Closed’

Posted @ 1:05 am - Filed under Real Estate Investing, Purposeful Planning, Retirement, Buying Income Property, Investment Lessons, Communication, BawldGuy Axiom, RE Investment Practice

We’ve found the right property(s) for you. You’ve successfully entered into escrow, and have navigated all the hurdles and potholes encountered on the way. It’s time to transfer ownership to you. Let’s look at what happens now.

Note: For those who haven’t read the series from the start, and would like to do so, here on some links for you. Here’s Part I, Part II, and Part III

I’m gonna simplify this as much as I can. It’s not my job to make things as difficult and/or complex as possible, right? Right.

How do we know when we’ve arrived at our off ramp? There are as many answers as there are brokers and investors. For me it’s when lender says to get ready for loan docs. Don’t get me wrong, Murphy still has arrows left in his quiver. They’re just harder for him to reach now. At least that’s my story, and I’m stickin’ to it.

BawldGuy Axiom: The escrow ain’t closed ’till someone tells you it’s closed and even then not ’till you’ve confirmed with the title company. You can be fairly sure when you’ve received the payment info from the lender. Probably.

Think I’m pouring it on do ya? One time I had a title company, (I pinky swear) that recorded the grant deed in a a buyer’s name from another transaction. The other transaction wasn’t even mine. If I’m lyin’ I’m dyin’. You can’t make something that stoopid up.

Back to closing.

The loan docs are ready. They’re most often delivered via email, though at times they’re FedExed. They must be signed in front of a notary. Brown and Brown clients living in the San Diego area have it made in the shade. A local lady who’s very partial to yours truly goes to their home and notarizes the loan docs right there. We have local clients with properties in several states who’ve never left their living rooms during the process.

If you’re not local you need to locate a notary near home or work, or if logistics rule your life as they do for most of us, you may wanna find a mobile notary and have them come to you. Your choice. The notary does their thing, then ASAP puts the signed/notarized docs in a FedEx envelop and sends it back.

What about the money? You know, the rest of the down payment and closing costs.

There are generally two choices. You can get cashier’s checks from your bank for the amount asked for on the pre-closing statement. The other way, which is slightly more popular, is to wire the money directly to the title company. We have no real preference. The wire is usually more reliable. ‘Course as I write those words, a wire failed this week, ‘cuz the bank punched in the wrong wiring instructions. It happens. Nothing in a real estate transaction is ever a sure thing. Understanding that one fact of life will make the process bunches easier.

So now the title company has everything it needs, Murphy’s in the corner, bound to a chair and gagged, and closing is an inch away. Title then orchestrates the funding of the loan, the recording of the new deeds, (yours and the lender’s) and the fat lady sings. (You can pick the song for a small fee.)

Again, as mentioned before, I’ve simplified this quite a bit. Josh and I are more or less behind the scene making sure any mistakes in charged expenses are corrected before closing. If there’s still a mistake, and there will be occasionally ‘cuz we’re dealing with humans, we get it rectified. Mistakes are relatively easily fixed at this point ‘cuz they’re pretty much nakedly obvious. Title/Escrow folks hate mistakes, and go out of their way to make them right. Again, mistakes aren’t the rule, but they happen every now and then.

Wait a sec, yer not done yet. Oh, you thought a successful close of escrow accompanied by the fat lady serenade signaled the end of the buying road? There’s still more to do, but it’s a cakewalk, relatively speaking.

Remember, this property is not local to you, and requires professional management. Before closing we’ve already introduced you to the folks with whom you’ll be dealing. They’ll explain each step to you before the escrow closes so you’ll be up to speed, more or less. Here’s the outline of what you might hear.

You’ll need to send them a small amount of money to fund your account with them. It’ll act as a pad for when rent begins coming in, and you they start paying some of your operating expenses. Also, they’ll ask you to establish what I’ve always called a ‘pain threshold’ as it relates to paying expenses. Once an expense exceeds that threshold, you’re contacted for approval before the work or service is performed. For most investors with smallish income property, this amount usually falls in the $200-500 range. It’s definitely a comfort zone thing, and there’s literally no right answer. It’s what keeps you feelin’ well, comfortable.

Each month you’ll receive a statement and a check reflecting rent minus any expenses. You’ll keep these for your CPA at tax time. If you have a tenant move, you can leave it to the pros to find a new one, or you can opt to be in the loop. Your call. Most clients prefer to let the mangers do their thing, but I never discourage those who wish to get into the fray a bit themselves. Management does not pay loan payments or property taxes. They don’t want that responsibility.

Again, all this has been boiled down quite a bit, but you get the gist.

Let’s get together and find out what you need to do to get started. Remember, the older you are now, the less chance time is your friend when it comes to your retirement. At least the retirement you’d prefer to call ‘yours’. You can get on the horn, or send me a note by clicking the Contacting BawldGuy thingy. Either way, you’ll end up having an encouraging and relaxing talk about your new and improved retirement. A Purposeful Plan is a must. Doing things on Purpose isn’t an option, it’s what makes things happen.

This entry was posted on Thursday, June 26th, 2008 at 1:05 am and is filed under Real Estate Investing, Purposeful Planning, Retirement, Buying Income Property, Investment Lessons, Communication, BawldGuy Axiom, RE Investment Practice. 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.