The Real Estate Closing Process Explained For Rental Properties. | Nexus Property Management® Franchise
Why Does It Take So Long To Close On A Rental Property?
The world is spinning faster than ever these days as evidenced by more and more 80 year olds being able to purchase things on their phones and receive them on their front porch the very next day! But when it comes to buying rental property, it still takes forever. What’s with the delay and why hasn’t technology been able to help you turn your investment into profit more quickly? Although you’re eager to collect those first rent checks there are just so many moving parts to the process. Nexus Property Management® VP of Franchise Sales, Greg Rice, is happy to break down the steps for us:
STEPS IN THE PROPERTY PURCHASING PROCESS:
- LOCATE THE PROPERTY: First and foremost, you need to find a property that will be worth your investment. There are so many variables that should go into your initial analysis. You can use Nexus’ free Real Estate Investment Cost Calculator or contact us to inquire about Nvest® buyer’s agency services.
[ Learn More: The Advantages of Hiring a Buyers’ Agent ]
- OFFER NEED TO GET ACCEPTED: In today’s market, this can be tricky. Prospective buyers are offering much more than asking price and sellers are looking to expedite the process, often by accepting advantageous language (although occasionally this brings more headaches to the process).
[ Learn More: Inspections For Informational Purposes Only ]
- PURCHASE AND SALES AGREEMENT: Your P&S needs to be in place to solidify the commitment from both sides. Your closing attorney will review this later on, but you want to make sure you fill this out accurately and completely. Check out the video below for more info:
[ Learn More: Important: Understanding Your P&S Agreement ]
- SEND DEPOSIT CHECK: You will need to send your deposit check to a neutral third party, often a closing attorney.
[Learn More: Trusted Real Estate Professionals in Southern New England ]
- HOME INSPECTION: Average time and state mandates vary by location, but more often than not you can expect a home inspection to be performed within 10 days of your agreement to purchase. Typically, the home inspection will not be scheduled until you provide your lender a check for the cost of the inspection. Then allow additional time on the backend for the report to be written, filed, and shared.
[ Learn More: Tips To Get The Most Out Of Your Inspection ]
- NEGOTIATION: Now that both parties have seen the inspection report you’ll need to agree on any contingencies or compromises. Are there things that need to be repaired? Will the seller take care of these? Will they instead offer credits at closing so you can handle these issues? Are there any deal-breakers?
[ Learn More: How To Negotiate After A Home Inspection ]
- LOCATE INSURANCE FOR THE PROPERTY: You’ll need a trustworthy insurer. Your closing agent, lender, or local property management expert might have some recommendations in mind.
[Learn More: Trusted Real Estate Professionals in Southern New England ]
- TITLE CHECK: You want to make sure you have an issue free, insurable, marketable property title when you buy the property. It might not seem like a big deal but we’ve seen the tiniest of issues blow up and as inconvenient and unlikely the hangup might be, it would’ve been so easy to avoid by checking the title initially.
[ Learn More: What Is A Property Title Search? ]
- LOAN COMMITMENT LETTER FROM LENDER: Along the same line of thinking from above, you want t make sure you have a written promise from your lender that they will provide the loan you’ve requested as long as you meet the contingencies that have been outlined and agreed upon.
[ Learn More: Pre-Qualification vs. Pre-Approval vs. Loan Commitment ]
- MEET CONTINGENCIES: Communicate and solidify and reserve requirements, asset requirements, or income requirements that may need to be ironed out.
[ Learn More: Asset and Reserve Requirements ]
- SET CLOSING DATE: Pretty straight forward but important to find a date that works for all parties, which oftentimes (especially in this market) can take quite a bit of planning.
[ Learn More: Does Your Closing Date Really Matter? ]
- SHOW UP FOR CLOSING: Be there, be on time, and be prepared to ask questions to ensure you understand the mountain of paperwork you’re signing.
[ Learn More: The Buyer Missed The Closing Date, Now What? ]
- GET TENANTS/PROPERTIES SET UP: If you’re managing the property right, you’re then going to introduce your style and culture to the property you so patiently waited to own. Start by taking care of the lock and key situation and have tenants read over and sign your tenant estoppels. You’ll need to create and have tenants sign new lease agreements. Soon enough you’ll be in good shape to start getting those returns you’ve been waiting for.
[Free Nexus Tool: Tenant Estoppel Agreement ]
[Free Nexus Tool: Lease Agreement Generator ]
NEXT STEPS:
As is clearly evident, there are multiple parties and multiple steps involved in buying and ultimately closing on a property. With so many people involved it just can’t be rushed. And when you’re investing thousands of dollars, you really want to make sure everything is smooth and taken care of correctly along the way. Maybe someday Greg’s dream of being able to just click a button to buy a property digitally will come true, but unfortunately it won’t be anytime soon.
Still have questions? If you want to know more about the closing process or what steps to take when you’re buying a rental property, just let us know. Contact our team today! You can also find more of Greg’s informative videos about all things real estate investment by visiting our Youtube page.
[ Learn More: Last Month’s Property Management Articles ]
Mick Lefort is the Vice President of Operations for Nexus Property Management®. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
Your Property, MANAGED®
The Real Estate Investing Authority®
Connecting You To Better Living®
You Could Own A Nexus Property Management® Office For Less Than You Think!
Fall River MA Property Management Office
Worcester MA Property Management Office
