Step Six: Closing
There’s dedicated people whose entire job is facilitating closing, so take this with a grain of salt! In fact, finding someone who handles your closings might be your best choice. If not, here’s what I do for closing for your frame of reference.
1. Make sure the financing is going to go through. Do this by securing either a letter of approval from your lender or a terms sheet that says, Yes, we’ll finance this deal, these are the terms, and it’s going to work with the original numbers.
2. Check the title again. Have an attorney check the title and do a title search. The reason you need to do this is because the title shows any encumbrances or claims against the property that may be adverse to your interests, you’ll have to get title insurance on it to guard against any future claims on the property.
3. Make sure your down payment is already in escrow or on its way. I move the down payment into the closing agent’s account. If you don’t have the down payment or a way to transfer it, you’ll need to find a way to get it there beforehand! There's nothing worse than showing up to closing without all the money you need to close the deal.
4. Review all closing documents. Humans are historically prone to making errors, and there's quite a few ways to misappropriated funds or leave out items like personal property that may be critical in the operation of the business.
5. Always do a final site inspection. Always, always, always do a final site inspection. This will help you make sure that any additional personal items and equipment (e.g., air conditions or anything critical to operations of that property) is still there. The reason I say this is because I’ve had a seller remove certain items right before closing (e.g., pool pumps or air conditioners). Make sure everything that you intended to buy is still there.
6. Set up your entity. Never take ownership of property in your own name. Ask your attorney, “How do I take title or ownership of this property?” They will usually tell you to take ownership under a new company or entity. That way you can insulate yourself if the asset blows up! It’s an always-wear-protection kind of deal ;)
7. Set up a bank account. This helps you manage the income and expenses of an asset. Keep everything separate from your other businesses and personal accounts.
8. Get into the operation, renovation, and potential resell of the asset. This depends on your desire and goals. Review other chapters in this book for more on how to do these tasks.
How do you manage acquisitions with systems exactly?
Even until recently, I was doing all of this myself. But in terms of systems, my staff does a lot of this now (my systems are young and amateur, but I’m expanding what I have my team do). For example, my team does some of the initial desktop analysis before I even take a look at it. I’m continuing to expand my systems for this. Here’s the tools I use and will continue to use to scale the acquisitions aspect of my investment efforts.