So Now That You’ve Closed on Your Investment, What’s Next?

You may already know the scenario. The momentum builds up, your paperwork is all in place after rushing for last minute signatures, etc., you overnight your package in and without you even having to be there, you are the proud owner of a new addition to your real estate portfolio. Now that the smoke clears and everyone goes home from the closing table, you may be left with the question, “Now What?”
After all the adrenaline and getting to the closing table which takes a lot of patience, attentiveness, organization, etc., you may feel a bit of a let down. Not to worry! Amongst all the excitement of now being the proud parent of a new born project (at least new for your portfolio), you should not forget that there are still items and tasks that need your attention.
IMMEDIATELY AFTER THE CLOSE
After you leave the closing table (if you were even there at all), one important thing that you should make sure that you have is a copy. A copy of what, you may ask? A copy of everything that crossed the table during closing, especially anything that you put your signature on. While this may be a common sense item, it is amazing when I talk with clients and members of our group who say that they did not get a copy. If you did not get it right after closing, then make sure that you request a copy from the group that coordinated the closing, whether it is the attorney, title company, etc. This is something that could save a lot of headaches in the future.
A PARTICULARLY important part that you will need is the HUD; the long legal form that shows all of the closing costs and other money transfers. The reason this is so important is that you will need to provide a copy to your accountant at tax time, or if you do you own taxes, you will need the facts and figures. If you did a long distance closing, this would have been given to you with your closing package.
Hopefully this next step should have already been started during the initial letter of interest (LOI) stage. Again, this is a common sense item but still very important. Make sure that you have a separate file or folder that you keep for this new project whether this is in a file cabinet or a file folder on your computer. Keep it identified so that you can easily go back and find the project that you are looking for. However you do it is up to you and I am sure that everyone has different ways to organize their files (by State or location of project, address, date of acquisition, type, etc.).
You may even want to have a file for the project and subfolders for individual items such as initial deposit (copy of completed reservation form, check, unit selection criteria, etc.), loan application, closing papers, and folder for post-closing events (such as loan payoff, insurance, taxes, etc.)
The good thing is that you have time; time to get things straightened out and prepared whether you started this back at the LOI stage or even if you are just getting to it now after the closing.
DON’T FORGET THE ESSENTIALS
Whether or not you are running your real estate projects through a company (i.e. you have set up an LLC or other company for the transaction(s)), or you are doing this individually, these next items are essential in having a successful real estate project/experience.
Accounting – While the extent to which the following applies will vary according the number of projects you have or the complexity of your business, etc., doing it now will save a lot of headaches, especially during tax time and when you go to sell your project. If feasible:
1. Set up separate bank accounts for the project. Alternately, you may want to lump several projects under one account. One way to group these projects is by project type (i.e. rental units, land-only, etc.). It may be best to check with your financial advisor for their suggestions and advise in this area.
2. If you use a financial Software package, where applicable set-up different sub-accounts for each project. For example, if your receive Rent on several projects you would have Rent-Project 1, Rent-Project 2, and so forth. This will help track income and expenses on a per-project basis.
3. Keep your financial advisor aware of your recent acquisition. Hopefully already discussed before the purchase, etc.
4. Keep your financial (and other) advisor(s) aware of planned purchases and acquisitions. They may be interested in purchasing for themselves as well and if it is a great deal, they will be thankful for your passing on the information.
Legal – One of the common issues that comes up with every new purchase is the following. Has the purchase of your new property changed any liability issues that you may have? You should discuss the new acquisition with your legal advisor (once again, if you have not already done so).
One of the main topics for that discussion should be if there are any necessary changes to you coverage or liability protection that may be needed resulting from the new project. Here is another instance of where you hopefully are just continuing discussions with your team of advisor that were started before the purchase.
Property Management – Typically, you should already have the property manager or property management company lined up before you close on the property. If you are getting into a project through a wholesale buying group, there may already be a property manager lined up who is already very familiar with the property, already has tenants in other units in the project, etc. If the management company has not already been identifies, get some references of different Property Management groups that are in the area and do some digging around yourself.
If the project is new construction and there is a build out period, you may want to start ironing out the details ~ 60 days before the certificate of occupancy (i.e. before you can put a tenant in place, etc.). With wholesale buying groups, typically discounts can be negotiated if a large enough representation of that group goes with the same Property Manager.
Expenses – now for the fun part. Usually, there are bills associated with any real estate project (i.e. Mortgage, Insurance (investor policy), etc.). Check to make sure that all bills are being sent to your correct address; make sure that the mortgage payments are being sent to your home/office address and not to some PO Box, for example, where the project is located.
As a helpful hint, if you need to do an address change, the US Postal Service offers a free service to have your mail routed from the incorrect address to the correct address; you need to go to your local post office and fill out the form Vs doing the on-line submission. This will help get any mail that is “sitting in the wrong mail box” over to you directly while the vendor is correcting the address in their system.
Another thing for you to verify are the numbers. As expenses start rolling in, you may want to verify that the actual expenses are what you had planned for during your initial analysis. If there is a large discrepancy, find out why and also take the actual values into consideration in any of your spreadsheets or project evaluation forms.
PLAN FOR THE FUTURE
Phew! Ok, so now the smoke has cleared (or at least, thinned out a bit). You have done all that you can do for the time being with respect to the closing of this project. Do you just sit back and then wait until it is time to exit the project? The answer, as you may have expected, is NO! Based on your own investment strategy (or at least the initial strategy which prompted you to get involved in this project in the first place), plan regular evaluations of the property to make sure that it fits your portfolio and your initial investment strategy. It may be a good idea to have in your planning folder a file with the rules and thoughts written down as to why you first got into the property, and your initial thoughts for the exit strategy as well. This way, you can revisit these items and re-evaluate the property and or your strategy as well.
As an example, you may have purchased in the tax-advantaged Mississippi GO Zone where you qualified to get 50% bonus depreciation from the IRS. One strategy may be to rent out to a regular tenant, hold for 3 years, and then either sell to another investor or 1031 exchange it for another property. Another strategy may be to start off with a rent-to-own tenant in place initially (which can command higher rents along with an initial down payment), and then sell directly to the tenant after 2 years (or whatever terms have been agreed upon).
As I mentioned, you can review your exit strategies on a regular basis after you close. Once you do your review, plan on meeting with your advisory team to share ideas with them and to see what their inputs are as well
SUMMARY
Real Estate investing is a lot like investing in the stock market. More importantly, successful real estate investing is a lot like successful investing in the stock market. There is a lot planning/discipline that is required on the part of the investor. For the Real estate investor, this does not end with the purchase of the real estate property. Based on some simple planning and organization, the post-purchase essential tasks will become second nature and help you be successful in all you real estate investing ventures.

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