Smooth Closing: Stay on Top of it All

OK - I finally got insurance for the condo. I had to go all the way to Lloyd's of London for God's sake via my broker! The cost was $590 per year.

One thing I am realizing is that in order to have any hope of a smooth closing, it is critical to stay on top of EVERYONE! It seemed that nothing got done, nor communicated, this week unless I took control. I suppose that since it is really me that benefits most from all of this it is only fair that I do it.

I close Monday on my first investment property!

Here is what I had to do in the last 2 days:

Thursday

• Call the insurance broker to hustle along the quote
• Receive a faxed application from the broker, sign it, write a check and RUN to staples to Fed Ex the package back to her
• Call my lawyer to make sure we were still on for Monday - the secretary said she wasn't aware of my closing (what !!!!???)
• Call all utilities to ensure smooth transition to my name after closing

Friday

• Get closing schedule from attorney (still Monday)
• Call RE broker to inform her of closing (she already knew)
• Call insurance agent to make sure she got the check
• Call attorney back to get the closing amount I will need
• RUN to bank to get certified check

Lesson Learned -
Rarely will anyone call you...Take the bull by the horns and watch out for the stuff that comes out the other end of the bull :-)

No Insurance!

After 4 weeks of requesting a quote from my home insurance provider they told me they would not give me a policy for my rental because it was too close to the water (!!!). "It takes 20 minutes to drive to the beach!," I yelled. Their reply was: "Yes but it is within 2500 feet from the ocean as the crow flies." I then responded (really): "Are you expecting any 2500 foot tidal waves?"

While the woman appreciated my sense of humor, I still did not get my policy. So I told her I would have to cancel my home owner's policy so that I can get a landlord policy under another insurer. I haven't really liked any of the new rules that have come out with this carrier anyway.

So now I have about a week before I close, and I need to find new insurance. It's always something.

Another Way to Screen Tenants

Here's a free one that can occasionlly reap some interesting information.

Check applicant's name on Google to see what you can find out. I have occasionally seen references to law suits, arrests, and other pertinent info...of course, if they have a common name then you need to make sure it is really the same person.

Also Google now offers a local version of it's search engine at: http://local.google.com/
So if you search for say pizza, you get hits from pizza places near you versus the whole world.
Try the name, address, and employer searches here to get more info online.

Tenant Red Flags

Many long-time landlords will tell you that evaluating new potential tenants is more art than science. While the same criteria and process for evaluating tenants must be followed for each applicant, there are some things that should be seen as possible warning signs. Any one of these red flags does not necessarily mean that the person is a "bad" tenant, but simply means that even more thorough scrutiny and attention should be paid.

Here are some actions and/or questions that you should put you on alert:

-They needed to move in "right away"
-Low credit scores
-They lied about having a pet
-Questioning/arguing over lines in the lease
-Not caring what is in the lease
-Self-employed
-Paying the move in costs in payments instead of all at once.
-If you don't allow pets and they have one but say they'll get rid of it.
-Bring their parents with them and the parents do all the talking.
-Leave ANYTHING blank on the application
-Caller I.D. says, Payphone.
-They say,"We're packed and ready and we'll take it"-- but they haven't seen it yet.
-They ride with someone else.
-Carry a cigarette in the house without asking.
-More interested in storage than the house.
-"Do you do credit checks?"
-Can you change this and that because I don't like the color
-They say they "only smoke outside".
-They "forgot" to bring their driver's license.
-Offering to pay a full year of rent upfront. (possible illegal activity)
-People living with relatives or friends.
-Our landlord is selling the house we are in right now
-Show up late for the appointment to see the apartment.
-Only reference is their parole officer.
-Last address is a vacant lot.
-Show up to see unit intoxicated.
-Complaining too much about the previous landlord.
-Too complimentary
-Complain about a application/screening fee
-Walk in and don't really look at the place
-A gap in dates which showed no residence/job for a period of several months.
-Can the family room be used as another bedroom?
-Did you get your deposit back at your prior rentals? No, the Landlord used it for the last months rent.

Finding a Good RE Attorney

First generate a list of potentials from referals (best method), or go to yellow pages and look in the Real Estate sub-heading if your phone book categorizes attorneys. I found about 6 that looked promising and then made sure they also were not advertising in any of the following sections as well: personal injury, family law/divorce, bankruptcy. You want to avoid a big comapny with lawyers who do everything, and a jack-of-all trades type attorney -- because frankly they will spend their time on cases that lend themselves to the 'big bucks', like personal injury; the real estate stuff will be their short-term cash flow deals (i.e. a side hobby).

My attorney is essentially 100% in real estate; although I would imagine that anything around 3/4 or more is good. Also, I insist that they own investment property or do a lot of other REI deals such as rehab and sell.

Once you get your list, you should interview each one. Here are the questions I ask:

• What percentage of your business is based on real estate?
• Do you own investment property yourself?
• How often do you represent landlords in landlord-tenant law disputes?
• What is your familiarity with Lease/Option contracts?
• What is your familiarity with purchase money mortgage/notes?
• Do you know how to title properties into Land Trusts?

Good Luck!

About My First Caller

OK - after talking with this woman who called my toll free number and went through the questionnaire, she seemed borderline motivated...but I figured I needed th practice in meeting with sellers (and she lived only a few blocks away!) so I agreed to come over and take a look at the house. I was really nervous about making an offer. I prepared some legal forms before I left which consisted of: Option to Purchase, Offer Sheet, Lease Option Form. I also ran some numbers to see what kind of seller financing offer I could give her and still have positive cash flow. Since it was an expensive area with high-taxes the numbers looked like this: $70,000 upfront, $600/month for 10 years, and about $127,000 balloon later. Then I dashed off to the meeting --

So, her daughter had moved out of the house and she wanted to buy a real nice place she found in PA with her daughter...but she hadn't sold a house in 15 years. After looking at the home, I realized it was a great house for a starting family and had a big (1 acre) back yard. Everything was well taken care of...If I had to pick something potentially bad, it was the underground oil tank.

Anyway - we talked for a while and I presented a few different offers to her: First I tried to do a seller finance where I told her I can get her that right away (about 7 days); she said even though she didnt have much of a mortgage left (about $50K) she needed a lot more money upfront to get the new house, but we couldn't seem to get a combo that worked for me and her; so I tried an 80% offer using an option. I figured that she loses nothing if I can get her souse sold fast, plus she could still list with a realtor (whom she was about to contact) and just exclude me. She didnt like that either.

So the moral of the story is like they said; make sure the caller is really motivated before you meet with them. Granted, I dont feel that I wasted my time here because it got me infront of a seller for 'practice', but I certainly wouldn't want to continue to do this if I had a lot of calls.

I left her my name and number and told her about the lease/option idea and said that if she got in a position of double payments to give me a call.

Inspections - A great education - Always a surprise!

INSPECTIONS! You gotta have one when you're buying a piece of property. I have yet to go to an inspection without getting some sort of surprise along the way. In the case of the condo, there were a couple of minor things that were found: a GFCI outlet that didn't work, an attic fan that was seized, a bathroom fan that didnt work, etc. Nothing that would stop me from buying it. Then the inspector asked if I was getting a termite report. I said 'No', since the HOA is responsible for taking care of pests. He told me that I might want to and showed me spackled over lines or tubes in the sheetrock of the living room where previous termite activity created them. Termites! So, I got the inspection (another $79) and he found evidence of treatment but wrote it up anyway so I can present it to the HOA.

Overall though - not a bad inspection...assuming the termites are really dead.

I'll tell you though - this guy was very good (Eastern Home Inspections). He had all the right equipment, put everything into his laptop, took digital photos, and printed a laser copy right out the back of his truck. It was a great education following him around...I learned about all kinds of multi-family housing codes, and the investigative techniques they use to find hidden problems. It was worth the 90 minutes of time it took to go through the place.

Anyway - a lady left me a message on my 800 number from an I BUY HOUSES busines card. I need to go call her back.

Attorneys All Around

I am going to see an attorney on Thursday about forming an LLC for my property. It seems simple enough to do it myself, but I think the first time around I will use legal counsel (it's about $800).

Also, my lender called yesterday asking me to see if I can get the attorney to quickly order the title work, so I can get a committment faster. Lo and behold, I found out something new -- attorneys go on vacation without telling anyone! Also, the admin at the office said he wouldn't order a title search until the inspection is done (this Friday). So we hurry up and wait again.

At least no major hurdles thus far.