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The video outlines the step-by-step process for acquiring an investment property or commercial property, as it is different than the process for acquiring a residential property.
1. MARKET RESEARCH: The period prior to making an offer where the client determines how much real estate they can afford and begins to examine the market, engaging professionals and preparing to identify at target and make an offer on a property.
- Determine what type of property is best for their strategy
- Speak to their tax advisor or accountant
- Engage real estate agent that specializes in that type of real estate
- Evaluate different types of properties
- Identify a property to acquire.
2. OFFER & ACCEPTANCE: Craft the offer, to write it up, deliver it to the seller, have them have time to review it perhaps by legal counsel and then respond.
- Letter of intent (LOI) or Purchase and Sale Agreement
- Price
- Terms
- Timeframe
- Earnest money
3. DUE DILIGENCE: This is where the buyer goes and researches the property, the income and expenses, the bundle of rights or chain of title that's being conveyed, and make sure that what they're buying is what they want to buy at the price in terms of their offering.
- Title
- Legal description
- Undisclosed liens or other issues
- Books and records (income & expenses)
- Rent roll
- Physical Inspection
At the end of the due diligence period, the buyer has three options:
1. Reject the results of the due diligence, withdraw from the transaction
2. Accept the results of the due diligence, but go back to the seller for further negotiations
3. Accept the results of the due diligence, waive the contingencies, and move to closing
4. FINANCING & CLOSING
- Procuring loan quotes
- Pay the formal application fee
- Lender underwrites the property
- Appraisal
- Loan commitment
- Lender submits their loan documents to the escrow company,
- Seller signs over the deed
- Buyer signs their loan docs, brings the additional down payment
- Escrow company reconciliation of numbers - settlement statement
- Escrow company distribute the funds to the seller, conveys the signed deed to the buyer, and records the transaction with the county
- Deal is closed
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