Here’s entrepreneur Rob Rowsell, discussing real estate deal acquisition from a 30 Thousand Foot view. Examine the big picture of a rental property deal with Rob, a proven multifamily investor and business coach.
What Does Real Estate Deal Acquisition from 30,000 Feet Look Like?
In the first segment of this deal flow talk, Rob lists a few real estate websites he frequents, specifically Loopnet and Crexi. He does not search these sites in order to find property deals. Rather, he uses them to build relationships with brokers who are selling properties in specific locations he is interested in. Rob requests that they put him on their email list and offers to meet them for lunch to talk business when he is in their town. Eventually, these often lead to property deals that fill Rob’s buy box.
Once you’re ready to make an offer, it’s time to underwrite it. This can be a tedious process, but it is necessary. Next, you make the offer, moving into the LOI (letter of intent) phase. This phase also includes the back and forth negotiation between the buyer and seller. After that, it’s time for the lawyers to get involved. Each party’s attorneys work to draft the PSA, or Purchase and Sale Agreement. Once the PSA is complete, the buyer works with a Transaction Coordinator to open an Escrow account. A Critical Dates Document outlines when specific payments would be due for the property.
Ready to close yet? Nope! Next, your lawyer has to do financial due diligence, proving the property’s value and income are correct, and making sure all accounts are current. Nobody wants to buy a run down property that owes a bundle in utility bills. Pro tip from Rob: No income statement from a seller matches up 100%. As long at it’s close, you’re good. Your broker and attorney should have access to all the records you requested in your spreadsheet.
Physical Inspections
Often, your chosen property management company will want to walk the doors and physically inspect everything with you before the sale. Expect to pay them a reasonable fee for that service, because you get what you pay for. Hire third party specialists to inspect the roof, plumbing, and HVAC. Many times, the property seller is unaware of problems in these areas.
Rob usually purchases properties that require some renovations. Part of his business plan includes setting a schedule for these renovations to take place. When the property is renovated, it can command a higher amount in rent. Potential new tenants need to know that these improvements are worth the extra charge.
The Final Steps of Real Estate Deal Acquisition – Engaging Your Power Team and Investors
If everything checks out, you need to make sure you’re engaging regularly with your Power Team. This includes your lawyers, lender, property management company, and insurance company. You also likely have a team if investors who have pledged capital to your venture. Keep them in the loop every step of the way to ensure good faith.
Take over the property and celebrate! That was a lot of work! There’s plenty more yet to come, so take a break and reward yourself now!
Join Our Community
Do you own multifamily properties? If not, do you aspire to one day? Then you should consider joining our online discussion group, the ATL Community! Each month, Rob Rowsell will teach you what you must do in order to build wealth in the real estate business. It’s not as easy as it looks! Property taxes, liens, and legal fees can all be hard to navigate, so having a successful guide in your corner like Rob is a must! Enroll today!