Real Estate 037: Home buying checklist

As I continue to scale my rental portfolio from one to over 20 units, I realized that having a system and process to perform all duties involved in a deal is crucial. Below is a home buying checklist that I personally using during the purchase of my rental properties. This is by no means an all exhaustive list, and some of these tasks may be done by other members of your team such as your agent or property manager, so please use it as a guide than a rule.

  • Get signed purchase & sale agreement from all parties.

  • Create physical and digital file folders for all documents.  

  • Contact title company to “open up escrow.” Our escrow agent’s name is: _________

  • Preliminary online tax research to verify tax amounts.

  • Check for hidden liens on the property at the courthouse.

  • Determine what names will be on title (LLC, partners, etc.)

  • Create lender presentation packet.

  • Talk to private lender about funding the deal. Present lender packet to them.

  • Get promissory note from private lender or prepare note and give to lender to review.

  • Send promissory note to title company.

  • Open new bookkeeping file in online bookkeeping software.

  • Call insurance agent and get quote. If it looks good – order insurance and get to Title/Escrow.

  • If tenanted, have all tenants sign Estoppel Agreement to verify rent & deposit amounts.

  • Hire 3rd party home inspector and schedule a time for them to inspect the home.  

  • Review home inspection report.

  • Call Title Company and verify we are set to close on the proposed closing date.

  • Call seller (if private seller) and reassure that we are still set to close on the proposed date.

  • Open bank account (if needed), order checks and debit card for that account.

  • Get Title Report from Lender, review (look for problems) and place in Property File.

  • Get wiring instructions from Title company and send to the private lender.

  • After wire was sent, verify wire was received by the Title Company.

  • If we are bringing cash to closing, call Title Company and get an exact amount.

  • Go to Bank and get any funds needed to close if we are bringing cash to closing.

  • Call Water, Garbage, and Electric company to get utilities turned on in our name.

  • Schedule time to sign papers at the Title Company. Sign papers at the Title Company.

  • Get keys for the property from Agent or homeowner.

  • If we are getting cash back at closing, pick up the check from Title Company.

  • Deposit repairs check into the checking account for this property.

  • Send handwritten thank-you notes to all parties involved (agents, escrow, seller, etc.).

As always, please make sure you do your due diligence and talk to your CPA/Attorney/Financial Adviser before making any investment decision.

Good luck!


Book Review 013: Think and Grow Rich by Napoleon Hill

One of the most foundational books of personal financing and creating wealth is the book called "Think and Grow Rich" by Napoleon Hill. Authored in the 1920s, this classic book is a collection of wisdom that is based on ideas from the author's mentor, Andrew Carnegie. 

Main Ideas:

  • Wealth creation happens in three steps: 1) visualize; 2) believe; and 3) walk into success.

  • Don't let your early failures define your success. Continue to persist and push on.

  • Create vivid mental portraits of your success. Visualization is key.

  • Passion and discipline are what will guide you on your journey to success. 

  • Avoid negative friends, well-meaning relatives and others who place restrictions on your dreams.

1. Have a burning desire

Hill tells us that if your goal is to becoming rich, you need more than just "wishes." You need to commit yourself to creating and executing on a plan to reach your objectives. Hill shares a six-step plan for achieving this: 

  1. Take a mental snapshot of the amount of money you seek. Name a number.

  2. Name your price. What are you willing to do for the money?

  3. Create a deadline. Fix a date by which you will achieve your goals.

  4. Start a task sheet with a definite strategy. Start now.

  5. Write a brief mission statement.

  6. Make a declaration: Twice a day, read your mission statement aloud.

Dreams are not just floating ideas. When looking at the worlds greatest inventors and leaders, they failed numerous times before they reached their goals. Edison had over a thousand prototypes for his electrical lamps. The Wright brothers envisioned a flying airplane before anyone else dreamt it. Beethoven was a brilliant composer despite him being deaf. 

2. Faith

Hill tells us that faith is the next step in visualizing our beliefs and pushing forward in our attainment of that desire. By telling ourselves that we will succeed, you start to plant the seed of triumph in your mind. This is applicable also with self-doubt and negative emotions, so feed your mind with the right, positive thoughts you need to reach success.

Your brain is a unique “broadcasting and receiving station for thought,” like a radio station that transmits and receives signals. Hill encourages us to listen to the “intangible forces” in our life. These forces – gravity, electricity, thunder and other elements – surround you. Use faith to stimulate your mind and reach your goals. Believe in the power of thought and belief.

3. Organized Planning

Moving from desire, to faith, to action requires strategic planning. To develop the right framework for success, you need the right team. Hill shares these following steps for organized planning: 

  • Surround yourself with "like-minded" individual who support your goals and provide additional resources in achievement of your goals. 

  • Conduct regular meetings and fine-tune your plan. Keep yourself accountable

  • Make sure you are aligned with other members of your support group

During this process, Hill reminds us not to accept failure during our initial phases. Be fluid and open to try different strategies, but most importantly, persist through the difficult times. Study the industry,  opportunities, and players on the field. Formulate a detailed strategy that will help you move the needle in the direction you want to go, even if it means one step at a time. 

Procrastination is a leading cause of failure in successful entrepreneurs, business owners, and investors. To be successful, you must be able to make quick, meaningful decisions and avoid people who undercuts your drive to succeed. Hill reminds us to dodge the trap of public opinion by revealing your plans only to your small circle of advisers. When you indiscriminately broadcast your strategies, ideas and goals, you lessen your chances of success. Keep quiet and keep the faith.

Hope you enjoy this book!

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Real Estate 036: "Subject to" creative financing

In most of my previous blog posts, I have discussed traditional ways of purchasing real estate whether it be through the MLS, buyers agents, wholesalers, turnkey providers, and for sale by owners (FSBO). I wanted to discuss a new creative financing strategy that I have recently discussed with an investor friend of mine called "Subject To". They are lessor known to newer investors, but nevertheless are powerful strategies to scale your portfolio and maximize returns.

"Subject To" is a shortened form of the phrase "subject to the existing finance" of a property. At first, this may seem too good to be true. Many times than not, this strategy allows you to buy real estate without cash or credit, and also take advantage of good terms (lower interest rate through owner occupant sellers). You may be asking yourself, "why would a seller allow someone to take title (deed transfer) of a property and still leave the original financing in place?"

This is where investors need to realize the difference between sellers who "want" to sell vs those who "need" to sell. Those who "need" to sell already have the motivation, whether it be financial distress, health issues, a death in the family, divorce, or a myriad of other reasons that is not our business. However, by working with a seller who is in distress, investors are able to apply these creative strategies for effectively (Refer to my post on negotiating real estate/seller financing for more tips on talking with a motivated seller).

There are two key concepts we must remember when applying this strategy:

  1. Full transparency: We need to disclose to the seller what we are trying to do (e.g. purchase the property through seller financing, rehab the property and sell it retail/or hold long term for cash flow, refinance with another lender, etc.)

  2. Due on sale clause: Most loan documents (if not all) have a clause that specifically states that the lender is able to accelerate the due date of the loan if there is transfer of title. Regardless of whether or not the lender decides to call the loan due, it is important to understand the risk involved. 

I recently attended a 3-day seminar hosted by Protect Wealth Academy, where Clint Coons and Anderson Advisors spoke about a loophole to bypass the "due on sale clause" for asset protection, which also happen to be applicable to this strategy.

Clint mentioned that the Garn-St. Germain Act of 1982 allows anyone to put real estate in their own "trust" without triggering the "due on sale clause". This appeared to be intended for the wealthy to be able to transfer their real estate assets down to future generations, however, savvy real estate investors quickly started using this for creative financing strategies.

In a nutshell, a land trust is simply an agreement where the trustee holds ownership of the belongings of the trust for the benefit of a third party (beneficiary). In this case, an investor wishing to use the Subject To strategy would create a trust whereby the buyer is the trustee and the seller is the beneficiary. The seller would transfer title to the buyer/trustee and further assign their beneficial interest to you. The assignment of interest is not publicly recorded and now you have control of the trust and its benefits. As long as you continue to make payments, the lender should not have issues with receiving payments from a newly formed trust.

As always, please make sure you do your due diligence and talk to your CPA/Attorney/Financial Adviser before making any investment decision.

Good luck!