As I’ve mentioned numerous times, one of the big goals of my business is to scale to the point where — despite only making $15-25K per house — we should be able to earn a significant annual income. To do this, I focus a lot of energy on creating systems and processes, and documenting those systems and processes so that anyone in the company can execute on them.
One of things I have tried to get more efficient at is the set of tasks required to purchase a property. Because the due diligence period for a typical purchase is only 5-7 days, there’s a lot to be accomplished in a small amount of time. If anything in the due diligence process is missed, it’s very easy to overlook key information that may ultimately hurt your project, and your profits. So, I’ve put together a detailed list of steps to follow from the time a house is put under contract until the time we close on the purchase.
If you’re planning to do an investment purchase, I would recommend reviewing the Acquisition Checklist below; your list may vary a bit, but for the most part, these are the things you should probably be focused on accomplishing in the days/weeks between contract and closing…
PROPERTY ACQUISITION CHECKLIST
Upon Contract Acceptance
Ensure Access to Property:
- Make Copy of Property Key(s)
- Purchase New Lockbox
- Place Key(s) in Lockbox and Install at Property
If Certified Funds are Required for EM:
- Get Certified Funds for EM from Bank
- Submit Certified Funds to Agent
If Financing the Purchase:
- Send Contract to Loan Officer
- Provide Loan Officer Property Info
- Connect Loan Officer with RE Agent
- Have Loan Officer Schedule Appraisal
- Make sure Loan Officer Knows Anticipated Closing Date
Due Diligence
Inspections:
- Turn On Utilities for Inspection (water, gas, electric)
- Schedule Termite Inspection
- Schedule Property Inspection
- Attend Inspection and Take Notes for “Scope of Workâ€
- Get Final Inspection Report and Review for “Scope of Workâ€
- Get Termite Letter/Pest Inspection Report
Contractor Prep:
- Create Scope of Work
- Create Materials List
- Determine Which Contractors Are Needed:
- GC
- HVAC
- Roofer
- Electrician
- Plumber
- Pest/Termite Control
- Painter
- Landscaper
- Other?
- Schedule GC Walk-Through(s)
- Get Contractor Quotes
Purchase Decision:
- Perform Final Financial Analysis Using Estimates/Quotes
- Perform Both Flip and Rental Analysis
- Make Go/No-Go Decision on Purchase
Upon Contingency Finalization
Final Purchase Prep:
- Get Closing Date from Lender/Agent
- Arrange Landlord Insurance Policy
- If Financing, Connect Insurance Agent with Loan Officer
- Follow-Up on Appraisal with Lender
- Get Pictures/Video
- Choose a General Contractor
- Choose Sub-Contractors (if no GC)
- Determine Exit Strategy
- Create Rehab Schedule (if no GC)
- Create Final Budget
Prior to Closing
Final Loan and Closing Prep:
- Obtain and Review HUD-1
- Obtain and Review GFE (if financing)
- Ensure Loan is Ready for Closing (if financing)
- Get Certified Funds for Closing
- Determine How to Hold Title
- Get Partnership Agreement Documents Signed (if partnering)
Upon Closing
Day of Closing:
- Get Keys
- Change Property Tax Records to Home Address
- Get GC and Sub Contracts/Docs Signed
- Arrange GC and Sub Start Dates
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I’m confused about the task of below.
Upon Contract Acceptance
Ensure Access to Property:
Make Copy of Property Key(s)
Purchase New Lockbox
Place Key(s) in Lockbox and Install at Property
Making a copy of the keys and installing the lockbox is the responsibility of the listing real estate agent. Why would this be included as a task under acquisition (buying)? Shouldn’t the listing agent have the lockbox in place? I can see this under the deposition (selling) task list because your wife is a license real estate agent.
I understand having your wife onboard as real estate agent makes it easier (convenient) to access properties during the acquisition phase. I guess most buyers would have to coordinate entry to the property with their real estate agent. This is another benefit to having a real estate license – which is why I have one.
Confused!
Oh! I forgot to tell you great job on the list. I can’t wait until you start looking at apartments again. Until then, I am learning a lot about SFH.
Good question, RM…
Before my wife was an agent, I relied on my agent to get me into and out of properties. Houses had one of two types of lockboxes — either the “Supra boxes” (that’s the brand name) that are used by agents and need an electronic key that only agents have, or a regular contractors lockbox.
With the Supra boxes, you can’t get in without an electronic key. So, even now, I would need my wife with me (or need to borrow her key every time I wanted into a house I had under contract). With the contractor box, there was always the risk that the listing agent would change the code or someone (another zealous potential buyer who didn’t know the property was under contract) would take the key.
Either way, there have been too many times I’ve been without access to a house I’ve had under contract.
This can be especially frustrating if I show up with an inspector or contractor, as their time is money, and if I can’t get into the house with them, they’re not very happy.
Lastly, once I have the property under contract, I’ll occasionally have contractors that need to come back multiple times (for example, a GC who needs to take more measurements or bring sub-contractors by for his estimates); in these cases, I’d like to be able for them to get in the house without me having to be there (for the contractors I’ve used before and trust), and as long as I have my own lockbox with an extra key there, I can just give them my code.
This way I can always change the code if I’m concerned about security, and don’t have to give out the listing agent’s lockbox code without her permission.
I hope that makes sense!
Oh, by the way, on two occasions, I’ve had the listing agent take the key and the lockbox off the door the day of closing, but not bring the key(s) to closing (many times the listing agent for REO properties doesn’t even come to closing). I had to break into the houses and then immediately get a locksmith out to re-key the locks. Making a copy of the key early-on makes this a lot less of a hassle.
I understand your desire to not have to rely on your real estate agent in order to gain access to the properties. Do you have to get permission from the seller to make a copy of the key? Has this gone smoothly in the past?
I’ve actually never asked permission to make a copy of the key or place my own lockbox on a property. If I were buying from an owner-occupant, or if the house were still occupied, I would certainly not let myself in without asking permission on each occasion, but given that all the houses I purchase are vacant and bank-owned, I’m fairly certain that the listing agent would not have an issue with it.
Actually, I imagine most listing agents are happy with the fact that they never have to speak with me once a property is under contract. I put the utilities in my name, so the seller/bank doesn’t need to make any phone calls. I don’t ever need to ask for access to a property, as I have both my wife and a copy of the key. And unless there are due diligence issues that warrant additional concessions from the seller, the only communication between my agent and the listing agent during the process is to coordinate closing details.
I’ve learned that most REO agents don’t like to be bothered any more than necessary (they don’t much very much per sale, so the less time they spend the better); therefore I have a feeling I’m considered a nice buyer to deal with.
Oh, and if I ever run into an agent where they think I’ve overstepped my bounds (making a key, installing a lockbox, putting utilities in my name, etc), I’m happy to apologize and just explain that I was trying to make their job easier…
And in all honesty, that’s what I’m trying to do…hopefully they’ll go out of their way to work with me again in the future…
🙂
I understand now. Having a real estate license, accessing a property is not a problem for me. However, scheduling time with contractors has been a problem. Your solution is great for dealing with contractors. Which lockbox do you use?
Thanks!
Ah, that’s right…forgot you had your license…
I use Supra S5 Pushbutton locks. I surface-mount them in a discrete place on the porch or front deck.
Good afternoon, J Scott. I couldn’t find an email address for you, but have a few questions I’d like to pose privately. Would you mind sending me an e-mail so that I may submit my questions? Thanks for your time.
David –
You can reach me at info@123flip.com