Do Your Due Diligence before Purchasing

You think you found the property you are going to make some money on but once you close on a property, responsibility for this asset becomes all yours, good and bad. In order to be a successful real estate investor you need to make sure you don't make any mistakes. If you do, it will be small one and easily forgotten when you cash your first check.

Below is a list of items you should be checking before you make an offer.

Due Diligence on Your First Deal

Wynwood Duplex Kitchen before Rehab

• Inspection
  • Upon Entering the property look for visual clues that indicate the current condition of the house.
  • Look for things that should be there but are not.
    • A bedroom without a closest. HUD would not consider this a bedroom.
  • Look for things that are there but shouldn't be.
    • A window inside the house that isn't an exterior window. Could be a porch that was closed in years ago.
  • Looks for points of failure
    • Connections: bathroom fixtures, underneath sinks....
    • Intersections: roof, ceilings and walls, walls and windows, floors and walls, water stains...
    • Windows and Doors: water leaks, holes, broken or cracked pains of glass, widows and doors open and close properly...
  • Black Mold - Indication of moisture buildup.
  • Termites - Big problems for us in Florida and Puerto Rico.
  • Asbestos - Probably present in older homes. Need to check for this.
  • Environmental Hazards - Underground oil tanks for heating, septic systems. Check the property history.
• Comparables or Appraisal - Before purchasing the property see if you can get your hands on:
  • Recent property appraisal less than 90 days old. Ask the seller if he/she has a copy.
    Dania Beach Duplex Rehab
  • Try to determine the After Repair Value ARV by getting three property comparables within a 1 mile radius and less than 90 days old.
  • Use the Maximum Allowable Offer MAO Calculation to help determine your purchase price.
• Title Search - Make sure you use a Title Company that understands how investors think and work. Every Real Estate Investment Club can recommend one. You assume Tile companies know what they are doing but I have gotten burned many times due to Title Company mistakes. Make sure they check for:
  • Open Permits - This has caused us more problems when we go to SELL an asset in our portfolio. It is usually the BUYERS Title company that finds the mistake and causes delays with the closing. MAKE sure they check for Open Permits!
  • Liens and Violations - Make sure they check for pet violations (Pit Bull), water, city and county liens. Check:
    • The City where the property is located: City of Miami, etc.
    • The County: Dade, Broward, etc.
• Taxes - Check to see if back taxes are owed. Usually the Seller pays the back taxes but it is good to know while you are negotiating terms and price before you make an offer.
  • Most tax records will indicate if the structure is legal or not.
    • If you see on the tax rolls the structure is listed as a 2 bedrooms and 1 bathroom and on the MLS it is listed as a 3 bedrooms and 2 bathrooms there maybe a problem with the investment property as being legal or not.
• History - Most counties will have a history of the property since it was built. It will contain information about the property that can be used to determine what has been done legally with permits, liens, violations, former owners, etc.
  • City of Miami – Micro Film Department, 4th Floor.
• Zoning - You must know the current zoning for the individual parcel of land and its existing structure. You need to know what is the permitted use and current usage. Knowing this information can help you with your rehabbing plans and exit strategy.
• Survey - You may want to order a survey before purchasing to see if the investment property has any encroachment issues.

These are some of the items we look at before making any decision to BUY. As you gain experience a lot of these items will become second nature and you will be able to apply this knowledge to tweak your success as a real estate investor.

Do you have any tactics you apply before you purchase a property? We would love to hear from you. Write your comments in the comment field below.

Related Links, Tips, Blog Postings, Presentations or Articles:

• Miami-Dade Municipal City Codes web page.
• Florida's Public Housing Authority PHA Contact Data web page.
• Real Estate Tip: Make sure you have the mail forwarded to your business address after you purchase a new investment property....Why?
• Hash and Profile Plus Tags
  • #MAO #HUD #ARV
  • +MAO +HUD +ARV

Written by +Bob Burns.

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Bringing It to the Beach Baby! +Real Estate Investor about.me/RobertKBurns Telephone #: 305-586-5280 email: sec8@planocho.com

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Building Your Foundation before starting Real Estate Investing

Before You Start…

  While holding monthly meetings and giving presentations to the attending audience, one of the more common questions we receive is: “How do I start?”

That is a great question!

When we started, we jumped right in. We purchased 15 distressed condominiums, each 2 bedroom/1 bath, in Miami, Florida. The units were controlled by a private investor who held the note on the individual units. Every unit stopped paying their mortgage and was living rent free. The existing owner was burned out and wanted to quit being a landlord. He asked for $30K for the note. We bought the note at a substantial discount and closed the deal.

That was the easy part!

Talk about being over our heads. We had no idea how to proceed. Suddenly, we had to learn the following:

Landlording	Real Estate Financing
Rehabbing	Foreclosure Law
Evictions	Termites
Liens and Violations	Water Liens
Sales and Marketing	On and On and On…

We had nothing in place to proceed. We had to learn the hard way. It took time and time is the enemy to investors. The longer it takes the more money you are losing in the real estate investment business.

So before you get your feet wet with your first deal, make sure you have the following items setup and running.

Starting Your Investment Strategy

• Before you Start Looking for Deals:
  • Make sure EVERYTHING IS IN WRITING. Need I say more? This is the beginning of your business plan that can be show to investors, bankers, partners, private money lenders, etc.
  • Go to a Real Estate Investor Associations, REIA meetings to Network:
    • Our REIA Club: Miami Real Estate Investor Association MREIA
    • Additional Florida Clubs - Don’t just to one meeting a month. Go three times a week to different clubs and venues. Tonight we are going to a Google Developer’s meeting.
      • http://www.creonline.com/fl.html - This is a link that lists all the real estate investment clubs in the United States.
  • Open a Florida Corporation
    • For Florida go to http://www.sunbiz.org to open your own corporation.
    • Create Articles of Incorporation:
      • Identify corporate Officers: President, Treasurer, Secretary, etc.
      • Need to declare number of outstanding shares and price per share.
  • Buy/Sell Agreement or Share Ownership Agreement.
    • Want the ability to move shares when boards of directors change.
    • Make sure you have a Shotgun Clause or clause in agreement.
      • Dictates that if you are in a partnership and the partners want to get rid of you, you have to be bought out.
  • Company Seal – This is old school but some attorneys still use them.
  • Meeting Book – Corporate meeting notebook.
  • TAX ID # or EIN # - Uncle Sam wants their share.
  • Print up Your Business Cards – Got to let everyone know what you are all about.
  • Get creative – Don’t make your business card boring. Make people remember you through your card.
  • Business Bank Account
    • Documents Needed to Open an Account
      • Drivers License with Photo
      • Articles of Incorporation
      • Certificate of Status
      • EIN #
      • Signatures of Corporate Officers
      • Order Checks
      • Order Credit and Debit Cards
    • Make sure all the documents you order have the proper information. No delays due to typing mistakes.
    • Bank Stamp for Deposits - Cashing one of our $40K checks was delayed due to an improper bank stamp. We didn’t have one!
  • Build Your Team
    • Real Estate Accountant – Someone who understands real estate investing.
    • Real Estate Attorney
      • Paul B. Woods – Florida Land Trusts
      • Bruce Jacobs - Attorney at Law
    • Business Plan – You wouldn’t go into the woods without a map or a GPS. Your business plan is your map or GPS.
      • Eduardo Paz – Straglobus, Inc.
  • Attend Conventions – Network big time and get ideas.
  • Develop A System – Streamline your processes, save time, make money.
    • Outsource your weaknesses and work on your strengths.
      • I hate paper work and accounting. I get someone else to do these processes for me.

Like building a house or anything else you must lay the proper foundation to support what you are trying to build. We give a copy of this outline to all of our mentoring students who are just starting real estate investing.

Next Step - Finding the Deal

Related Links, Blog Postings, Presentations or Articles:

• MREIA's Mentor Program
• Florida's Public Housing Authorities PHA
• Section 8 Miami Blog

Written by +Bob Burns.

####

Building Our Foundation. +Real Estate Investor about.me/RobertKBurns Telephone #: 305-586-5280 email: sec8@planocho.com

Follow US Baby!