Your Step-by-Step Guide to Investing Through RealWealth

Hi. I’m Leah College, the Director of Real Wealth Realty. Investing in real estate can be kind of intimidating. I’ve said before, I think the reason more people aren’t doing this strategy is because there’s a huge learning curve and it can be kind of intimidating to get started.

At RealWealth we streamline the process of real estate investing, helping people through this process, and navigating what it’s like to buy property out of state for the very first time.

In today’s presentation, I’m going to break it down for you step by step and go over a great resource that RealWealth has put together to help you navigate the acquisition process and the due diligence process as you purchase an out-of-state investment through RealWealth. Thank you so much for joining us.

Our standard disclaimer, so we’re going to talk about some strategies in this presentation that might not be suitable for everyone. So as always, you want to consult with your own personal counsel, your own attorney, tax advisor, or financial planner to discuss your specific situation and make sure that the strategies we’re suggesting are suitable for you. Real estate comes with investing risks. You can do all the steps on this list and more and still run into some challenges or problems. So just keep that in mind.

There is no risk-free investment, including real estate, especially real estate, and including any of the investments that are offered through our property teams or affiliates. So I’m going to do my best to bring you guys accurate information today know that the possibility of errors exists but you’re going to get a lot out of this presentation. 

So these are our founders Rich and Kathy Fettke. They’re really responsible for the vision behind real wealth and their goal was really to simplify the real estate investing process for regular people like you and me. 

We want to help individuals create passive income so that they can live life on their own terms. That’s what we define as real wealth, having money is nice, but having the freedom and the money to live life on your own terms is really what we’re after. So everything we do here at RealWealth is to this goal to help you take next steps in your investing journey.

How do we do that? Well, we put together some processes and some great relationships to help you do it. First and foremost, we’re an education company teaching you where and how to acquire investment property. We have vetted experienced property teams nationwide that have single-family and multifamily inventory and that also have professional property management in place. 

That puts you in the driver’s seat of being able to choose, research, and invest in the investments that are best for you, and again, ultimately, live life on your own terms. Enjoy real wealth. So we’re here to help you do it, help you navigate the process. 

It’s a good time for me to insert a little bit of my own personal story. I am the director of RealWealth Realty, as I mentioned, but I also serve as an investment counselor here at RealWealth. 

I was actually a member of RealWealth for years before I came to work for the company and came on in 2019 as an investment counselor, teaching and coaching investors on how to build their own portfolios like I have out of state. 

I bought my first investment property about 15 years ago. My husband is actually an active-duty army officer and we were just smart enough to do some very basic math at our very first assignment and realize that we could buy this little townhome for a mortgage payment of $750 or we could rent the same exact townhome for $950.

And so we had this light bulb moment kind of early on, oh we should buy this thing, live here for less than the cost of our neighbor while we live here and then we’ll keep it and turn into a rental when we get reassigned. To this day we still own that little rental property and it’s been rented ever since. 

So, a couple of years after that little rental we were really looking at the other traditional investments that we had that we were kind of focusing on like our retirement accounts, IRAs, TSPs. We really thought doing everything right to prepare and plan for retirement. 

And then we kind of started realizing, okay, we’re securing retirement, but we’re securing it at the age of 59 and a half. What if we want to retire before that? Could we retire before that? We started looking at that first little rental property and realized, oh, well, that home is being paid off.

It’s cash flowing. It’s appreciating. Why don’t we do more of that and less of this traditional retirement planning so that we can remain in control and we can have options? And that idea really just lit a fire in us to educate, to learn. 

We had done a live and flip in North Carolina before we moved to Europe actually. And while living overseas, we were just determined to acquire additional investment property. And so we started off acquiring properties on our own and kind of doing the BRRR model from a long distance. And that was unnecessarily hard and took way too much time in addition to our full-time jobs at the time.

So we eventually came to RealWealth to help us find a more passive, streamlined way to continue to acquire investment property in markets that maybe we had never been to and that we were unfamiliar with.

And so we scaled our portfolio pretty aggressively with RealWealth over those years. Eventually, I came to work at the company a few years later, and my husband and I continued to build our own portfolio of passive investment properties, both through RealWealth teams and on our own. 

So, I have transacted many, many times from a long distance. I have bought or sold dozens of homes, sight unseen, doing everything from long distance. So, this is not my first rodeo. I can kind of guide you through the process as a fellow investor, as someone who’s been in your position. I can kind of share with you some tips that I’ve learned throughout the years of conducting due diligence and protecting myself as I’m transacting from a long distance. So that’s a little bit about me.

I am thrilled to go kind of in depth today on a great resource that we have at RealWealth, our investor checklist. If you’ve been around here for a while, you’ve probably heard us mention the investor checklist. We’ve mentioned it in every disclaimer at the beginning of every webinar.

This is a list that we’ve put together of absolute must-dos for investors as they’re purchasing a new property. It guides you along the process. I don’t know if you’re like me, but I love a checklist because I don’t have to be, it’s guesswork about what to do next. I can just follow the checklist step by step. 

We’ve packed it with tons of useful information for you and today we are going to go through this investor checklist line by line and kind of talk anecdotally about these steps and how they look in real life as you’re going through this. 

Members can find a copy of this investor checklist on the Realty Portal. If you’re logged in, go to the Education tab up at the top and then you will see there’s a section called investor downloads. And, I’ve got a little loop video here to show you exactly where you can find it. 

So again, up at the top of the Realty Portal, select Education, and then down in the bottom left here, you’ll see investor downloads, investor checklist. It’s a PDF format, so you can print this off and truly use it as a checklist.

There are two pages. We’ll go in depth on both pages, but this is a great resource for you and we encourage all of our investors to reference this regularly throughout the process. Definitely through your first transaction, but I’ve talked to many investors who reference this over and over again.

What I have done for this presentation is I have broken down the investor checklist into three primary phases to the acquisition process. Phase one is all about preparedness and getting yourself ready to take action.

It leads us into phase two, which is all about actual acquisition, getting a property under contract, conducting due diligence, everything you need to do before you sign the contract. This is really where the bulk of the investor checklist focuses and where you’re going to feel the most pressure in your investing journey is in phase two. So I’m going to spend the majority of our time today really diving into the steps in phase two.

Phase two leads us hopefully to phase three, which is signing on the dotted line, closing on that property, throwing it into our passive investment bucket and what we need to do as responsible landlords and long-distance landlords to collect the rent checks and monitor the investment for the lifetime of the investment. So this is the life cycle we’re going to go with starting with phase one.

If you want to pull open the investor checklist and follow along with me, phase one really encompasses step one through five. So step number one, some investors need to spend more time on step one than others. You have got to spend some time really, really delving into your specific strategy and dissecting what your goals are.

This is one of the things I love about real estate investing is that there is no one size fits all approach. There’s lots of different ways to create wealth in real estate. What’s important is that you kind of explore all those different strategies and really come into an understanding of which strategy makes the most sense for you. 

We’ve put together a ton of education to help kind of guide you through this process of exploring your own strategy and defining what your investment goals are. We have a new investor curriculum series. If you haven’t watched that yet, that’s a great place to start, especially for all of our new members.

It’s a three-part series that starts with a high-level, big picture, like what does real wealth do. In the second section, we go into how to select a market, what are some of the attributes of the different market types and which one maybe makes more sense for one investor over another.

And then in number three, we talk tactics, kind of like we’re doing today. How do you do this from a long distance and what does the acquisition process actually look like? We have two excellent podcasts that are very highly ranked in our industry. Kathy Fettke, our founder, has The Real Wealth Show. She’s a podcast pioneer. We were doing podcasts before they were podcasts on iTunes. On The Real Wealth Show, we release an episode every week. And, then Real Estate News for Investors, also hosted by Kathy Fettke. Great shorter podcast, but hitting all the headline news that impacts our industry.

But both of these podcasts together are a great way for you to start defining your own strategy and really understanding your goals. I highly recommend if you’re not already subscribed and listening to these two podcasts regularly that you do that. Side note, our founder Kathy Fettke is also a co-host on a BiggerPockets podcast On the Market. Hopefully, you’ve heard of that one. It’s breaking all kinds of records for the most listened-to podcasts in our space. You’ll see Kathy Fettke on that show regularly as well.

Our founders have also written two books. Kathy wrote Retire Rich with Rentals, which is a great introductory book, and a very easy read. You could sit down and read it in a weekend for sure, but very basic, you know, entry level information.

Then Rich Fettke wrote a book called The Wise Investor, which is actually a story told in the form of a parable about an investor who began this journey of pursuing passive investments. This is a great anecdote for you and a lot of people can see themselves in the main character of this book. Both are fantastic books for you to start with.

We host weekly webinars every Thursday. We do a live webinar that you are invited to as a member. We alternate between market overviews and education topics like this one so we would love for you to join us on those weekly webinars of course the replays to those webinars are always posted on the website as well so you have access to all of that.

We host live events a couple of times a year and property tours. We regularly get together groups of investors to visit the markets where we have established property teams and relationships so that you can meet each other, meet the team in person, and get familiar with the market. These are all of the best ways for you to really be educated and be a part of the investing process.

When you become a member of RealWealth, you’re automatically assigned an investment counselor. Myself, Joe and Aristotle are all investment counselors here at RealWealth. We are all building our own portfolios passively out of state. We’ve all done many dozens of transactions, again, long distance. So we can coach you through this process.

We can share insider tips with you. Things that we’re hearing from other investors who are investing in these markets and, of course, get feedback from you on your experience with these teams. This is really your personal intersection, your personal touch with RealWealth. If you haven’t already connected with your investment counselor, I strongly encourage you to do that.

We love to have calls. Each of us takes one-on-one strategy session calls, monday through Friday. Aristotle does some weekend times as well. You can find out who your investment counselor is by logging into your account and then going to the top right corner. If you click on my account, you’ll see my investment counselor. That’ll show you who your investment counselor is and pull up their calendar so that you can schedule a call with them.

Step number two is to identify a market and view recent webinars. This is really the meat and potatoes of the RealWealth network and connecting with the property teams. We have teed up all of the baseline get to know you information about all of the different teams that we work with in the select markets that we’re in.

If you want to speed date who we work with and get up to speed on details about the market, understand what the economic drivers are, know kind of what the buy box is in that market, see sample inventory, learn about their property management company, find out how to get access to their inventory and how to invest with them. You need to log into the portal to help you narrow the scope and zoom in on the market that is best for you.

This is a screenshot here of the Realty Portal. It defaults to the About the Team section. Oh no, excuse me. It defaults to a landing page for each team, which are some high level bullet points about the market. Then you can click on the About the Team section on the left there and see the most recent webinar that we’ve done with that team. This is the best place to start in my opinion.

If you haven’t seen these already, you’re gonna be surprised at how much information we share in these webinars. They’re very informative, and very educational. Even if you’re not interested in a specific market, I think you would get something out of just the education aspect alone by watching a market webinar.

Step number three is getting pre-approved with a preferred lender. I’ve said this before. The financing strategy is the gas in the tank for your investing journey. If you want to go somewhere, you have to make sure you have gas in the tank. You have to have a financing strategy and you can click on the left-hand side on a team page. There’s a get pre-approved link there. 

There’s a little explanation of the different types of the most common financing that investors are using. And then there are subsequent preferred lenders that we recommend you work with. All of the preferred lenders that we have on our site. They specialize uniquely in working with real estate investors. And they’re licensed in all the different states where we have property teams.

There are one or two exceptions in one or two markets, but these lenders are the best overall, and they can work with you in any market that you choose. So you can also find a full list of the lenders on the menu at the top. If you hover over Resources here, you’ll see there’s conventional lenders, non-conventional lenders, and non-recourse lenders. If you’re wanting to invest with a self-directed IRA or a self-directed 401k, you can get no recourse lenders here. 

Most investors are starting with these conventional lenders here. So I strongly encourage you to, when you get to this step, reach out to one of our preferred lenders, get yourself pre-approved and start having a conversation about your borrowing potential. That’ll give some confines to your search.

 There’s no sense in looking at half a million dollar duplexes if you can’t get approved for a half a million dollar loan. So find that out in advance so that you don’t waste any of your time looking at inventory that you can’t buy. Okay, step number four.

This is for those of you who might be doing a 1031 exchange. This step might not be applicable to you. A 1031 exchange is a deferment strategy that allows you to sell a rental property and defer the capital gain tax so long as you replace that property with new rental property. If this applies to you, we strongly encourage you to do a lot of your market research in advance of listing your property for sale, the property you plan to do a 1031 exchange on. You are going to be bound by some pretty tight time constraints. And that can be very stressful.

And if you’re in selling a property in a really hot market, you want to have in advance lined up, or at least have an idea of where you might want to be purchasing those replacement properties and starting to kind of establish those relationships. Because of those constrained time limits, we recommend that you avoid new construction that isn’t already completed or that isn’t very near completion. You definitely don’t want to be identifying replacement property that is brand new and is just in the permitting process. So construction hasn’t even started yet. 

You have to close on your replacement property within 180 days of the closing of the relinquished property. Construction these days just is rarely happening faster than six months. So identify property that’s already done. Nationwide, low inventory can make 1031 exchanges trickier. Interest rates are high, so inventory is moving a little bit slower, but inventory is still extremely low. You don’t want to feel like you’re purchasing property that maybe you otherwise wouldn’t because you feel the pressure of the timeline. So again, being as proactive as you can about connecting with teams and looking at inventory before you list the property for sale. 

We also have a list of several preferred 1031 exchange facilitators on our website who can help you. So once again, at the top of the menu bar, hover over resources. You’ll see there’s a 1031 exchange section with a couple of great facilitators who specialize in working with out-of-state investors like us.

Okay, so once you have spent some time researching, educating on the markets, and you feel pretty certain you have a pre-approval letter with a lender so you know you’ve got gas in the tank, really the next step is to make contact with the property team.

You have to take this step if you are wanting to start seeing the inventory and engaging in specific detailed conversation about product, about the property. The next step is to contact the property team in the markets you’re most interested in. You can click on the connect with the team tab there and you’ll see the contact information of the team.

If the team has public inventory, which not all of them do, but if they do share their inventory publicly, you can click on the link here and it will take you to their inventory page. But connecting with the property team is where the magic happens. That’s where you start getting really detailed insight into specific deals and inventory that you can contract today. 

Okay, so that ends it for phase one. Phase one is all about readiness and getting yourself really familiar and getting yourself really prepared to take action. 

Once we enter phase two, now we are really in the market. We’re in the property selection phase. We are looking very closely at a specific inventory and beginning to do our due diligence on the property, doing our due diligence on the property manager and the due diligence on our contract.

I’m gonna spend a little bit more time on these steps because this is kind of the core focus that I get the most questions about when somebody is starting to pull the trigger on a deal. Number six, you want to first verify the property types that are being offered by the teams. Every team that we work with has a pretty narrow buy box of specific inventory that they’ve identified in their respective area. And this is based on their investing experience in the market.

All of the inventory that they’re offering falls into one of two categories. We use this terminology, but you should know that since these teams are independent companies from us, they may or may not use the same terminology that we do. You being a RealWealth member, it’s important for you to understand the definition of these different product types so that you can kind of tailor your expectations accordingly.

All inventory offered by our teams falls into one of these two categories. First, real income properties. You’ve probably heard the term turnkey out there, turnkey real estate. We’ve never loved the term turnkey because it gets misused. Some people think turnkey investments are just cosmetic improvements. We think that a true turnkey property should be far more in-depth than just cosmetic.

We have a defined standard that we call our real income property standards. If you’re buying a turnkey home from one of our teams, it should adhere to our real income property standards.

I’ve got those on the next slide for us to take a look at. So real income properties are properties that have either just been fully rehabbed to this real income property standard or they are brand new construction.

Real income properties are sold just at market value or in some cases slightly below market value. The second category of properties is what we call rental resales. This category is a little more broad. What you should know is that this category comes with a little more risks. 

There might be some potential for more upside for you, but there’s a trade-off there. You’re going to be taking a little more risk in exchange for that upside. What you need to know about rental resales is that these are properties that have not been rehabbed within the last 12 months. They are not brand new. You are not the first owner of this property. So they could have some deferred maintenance. 

So you need to, one, discover what that deferred maintenance might be, and then negotiate accordingly or plan accordingly. Rental resales can also include some deals that are on the MLS. Maybe the team that we work with is willing to kind of do a search for you for properties, or perhaps they have some wholesalers who bring deals to them.

In some cases, the property team has properties that they renovated a couple of years ago that are currently under property management and that the investor wants to sell for whatever reason. And so they’re simply finding a new investor who wants to step into the place of ownership on that existing rental property that’s already under their management.

Again, the most important thing for you to know is when you’re buying a real income property or a quote unquote turnkey property. If you’re one of our providers, there are some standards. You can have some expectations about newness about the condition of the home. But if you’re purchasing a rental resale, those expectations are not there.

If you’re buying a home on the MLS or you’re buying a home that was owned by another investor previously and hasn’t just been renovated, you are taking more risks. So definitely, you got to do a lot of good due diligence to find out to quantify those risks and see if they’re worth taking. 

Okay, so here’s where you can find the real income property standards. Again, this is a screenshot from the Realty Portal. I’m logged in. You hover over resources. And then under investor downloads, same place where you found that investor checklist, there’s the real income property standards. This is what it looks like.

So you can see we’ve given some specific improvements that we would expect to see certain lifespans remaining on some of the major components, certain cosmetic improvements that we expect to see certain maintenance that we want to verify has been done. So these are the defined real income property standards.

All of the teams that we work with, again, that offer a real income property, new or rehabbed, they’re familiar with these standards and they should be adhering to them, but it’s your job to verify and make sure that they have adhered to these standards.

For new construction, we have a supplemental checklist on page two of the investor checklist. This specifically adds some some items that you want to be looking at when you’re when you’re doing new construction.

First, this goes with any property but we want to reiterate it with new construction just because the property is new does not mean that it is without problems. So you still need to order a full home inspection and make sure that everything was done properly and completely. You need to verify what is included in the new construction property. Some builders vary in what their standard is to include. This includes window coverings, landscaping, fencing, appliances, garage door openers, etc.

In your due diligence, you have got to dig into anything that might not be included in the final sales price so that you know and you aren’t surprised by something that you may have to do after closing on the property. New buy investment property in neighborhoods where only 30% of the houses are rentals, preferably no more than 20%. You generally have better upkeep of neighborhoods that are predominantly owner-occupied.

 However, there are some cases where it makes sense to buy in a new construction development that’s all rentals. One of the ways that we see to kind of manage the risk of doing that is to buy in developments where everybody’s working with the same property manager, because that property manager can enforce some standards and make sure that investors aren’t getting desperate and slashing their rent prices to undercut each other and therefore driving down the value of the properties and of course upkeep of the neighborhood as well.

Infill lot locations is generally our preference for new construction. This is properties that have been built in existing neighborhoods. There was a vacant lot. The builder bought that vacant lot and they’re building that brand new construction home in the infill lot. What you need to verify in your due diligence is that the quality of this neighborhood is acceptable in comparison to your property. 

Generally, the rule in real estate is that you don’t want to have the nicest house on the block. Because the home values of the street may be below what you would want yours to be. But you also don’t want to be the worst house in the neighborhood because you want to attract tenants.

I look for neighborhoods that are really balanced where there’s a good spread of homes that are new and improved. I look for areas that show pride of ownership where the lawns are being maintained to some degree. There are no boarded-up windows on the street. I mean you want to verify just the quality of the neighborhood if that new home is being built in that neighborhood. Make sure that it’s not just desirable to a tenant but it’ll be desirable for resale in the future too.

Number seven, if you can visit the area, we strongly encourage our investors to invest in a plane ticket and spend a weekend touring the area and meeting with the team in person. All of our teams are happy to host you for one-on-one visits. But as I mentioned at the beginning of the presentation, we also schedule group tours.

You can find our group tours that are currently scheduled on the Realty portal up there at the top. You’ll see there’s an events and tours section, and you can find the upcoming tours and go with a group of investors. It’s really a good idea for you to understand the feel of the areas where the team is investing, and walk some property that they’ve rehabbed or that they’ve built so you can gauge the quality of the renovation or construction.

Most people are not going on these tours to go and pick out the home they want, but rather this is a reconnaissance tour. You are going to kind of understand and get a feel for the area so that then when you go back home and you’re receiving the inventory that the team has, you’re familiar with those specific areas and you kind of know generally what condition the property would be in after the renovation is complete. But seeing these areas is a great, great step. 

I would have told you before COVID that 50% of our investors were traveling to the markets first before they were buying. COVID obviously made us all more comfortable with doing things virtually. So I would say now that maybe 25% of real wealth investors are traveling to the areas first and meeting with the teams before they’re contracting a property. It’s not required, but we do encourage it if you can do it.

Number eight. So again, we haven’t contracted anything yet. Keep this in mind. We’re getting there. But this step gets missed sometimes. Number eight is to speak with the property management company.

Request a copy of the property management agreement so you can start reviewing the terms of that agreement, understanding what they’re committed to doing and what they’re expecting you to do, their fee structure, the duration of the management agreement, etc. Make sure that you understand all of the terms that are there and that you agree to them.

This is your time to have a conversation if you don’t agree with something on their management agreement to see if they’re negotiable to some of those terms. Some property managers aren’t negotiable with certain terms, but if there’s something on there that’s a hill you want to die on, find it out before you buy the property and start working with them.

Ask questions to help you better understand how they screen and place their tenants because you are going to be employing them to execute that strategy on your behalf. You’re not going to be involved in the tenant selection process to any great extent. And you need to be sure that you agree with their process on how they find these qualified applicants.

Verify, most importantly, that you feel comfortable with this property management company and that you intend to hire the property management company before you commit to a property in that market. I just can’t overstate this enough. I feel like it’s really tempting to put all the emphasis on the asset, which is the most important thing, the asset itself because at the end of the day you can change property managers. But what you have to know is you’re going to close on this property and then immediately you want to get it working, right? So you want to know in advance who this person is that’s going to be receiving you and receiving your property after closing and getting it marketed and leased up. 

Number nine. Okay, so everything’s checking out. You’ve got a deal that you like. You’ve confirmed with the property manager that you’re ready to move forward with them. Now maybe you’ve requested a contract on a specific property or the team has sent you a contract. You want to review that purchase agreement very thoroughly again read it in detail. Make sure you understand everything about it. 

If you have any questions about the contract ask the team the questions or come back to your investment counselor and ask us. We’re happy to. We’re not lawyers so we can’t interpret a contract for you, but we can help you if you have any specific questions about any of the terms in the agreement. We can get you pointed in the right direction. 

Most importantly, we want you to verify the contingencies included in your contract. We want you to ensure that your contract includes the following contingency clauses. First, a third-party appraisal contingency. What this is? It’s essentially stating that if your appraisal were to come back low on this property, so below the agreed-upon purchase price, this contingency allows you to be able to terminate this agreement have your earnest money deposit returned to you in the event that you and the seller cannot agree on a way forward. So this is really important.

If someone isn’t willing to include the third-party appraisal, what you need to know is that if that appraisal comes back low, your lender is going to require that you, the buyer, come to closing with the cash to make up for the difference. If you’re not prepared to do that, know that you could be forfeiting your earnest money deposit if you have an appraisal issue and you don’t have this contingency clause in there. So verify that it’s there.

Second, verify that there is an inspection contingency. You want your contract to give you a way out if you order an inspection and discover something that is an absolute deal breaker for you.

Say your home inspector discovers some major issue with a property. Maybe it’s a huge sewage or a foundation issue, something that’s very costly and maybe the team didn’t know about it and it doesn’t matter for you in your opinion what they would do to to fix it you’re just no longer interested. Having an inspection contingency allows you a way out in the event that you discover something that can’t be remedied between you and the seller without forfeiting that earnest money deposit.

Keep in mind there might be specific timelines that you have to have that inspection done within in order to be able to exercise that inspection contingency, but verify that it’s there. Keep in mind that some new construction contracts do not include inspection contingencies because the homes are brand new and because the builder is saying, hey, we’re gonna fix whatever needs to be fixed to close the property. So if you can’t get them to agree to put an inspection contingency into their contract, just make sure that you’re okay with that and that you have accepted the ramifications. Without this clause, you would forfeit earnest money if you wanted to terminate due to an inspection issue.

And then third, a financing contingency. So if for any reason you’re unable to get the financing together to purchase this property, say you lose a job and you can no longer qualify, say you have some catastrophic family emergency and you no longer have the funds required for reserves or the down payment, a financing contingency again, would allow you to terminate this agreement within a specified period of time without having to forfeit your earnest money deposit.

At RealWealth, what we want you to know is these are the things that we, as experienced investors, are looking for in our contracts when we are purchasing property. It does not guarantee that the teams we work with are including these things in their contracts. We have encouraged them to, and we have told them all that we coach you guys to look for these things, but at the end of the day, they’re independent, so they can write whatever they want in the contracts. You just need to be looking for them and make sure that you’re okay if they’re not in your contract.

Number 10, so now you’ve signed the contract, you’re officially in escrow, and so now we’re to really try to interrogate the property and find out, like, what is the status of this home, what’s it worth, and do we want to proceed? Step number 10 is about ordering these inspections and appraisals, so start first with home inspections. When it comes to ordering a home inspection, the property team will give you a list a couple local home inspectors that they recommend.

I recommend when I was a RealWealth member and I was first provided inspectors by the team my negativity bias told me that there was a conflict of interest there, like what if this inspector is their buddy. I’ve since learned that’s not the case, but if you’re feeling that way and you have some concerns about inspectors that they might know I would go to Google and do some Google review searching of local home inspectors in that area. 

I actually interview my inspectors before I hire them, and send them out to the house to ask them some questions about their process. I usually ask to view a sample report so I can see what their reports look like and how detailed they are. I ask them if I’m getting pictures of the things that they’re seeing, and timelines. I interview them before I hire them to go and do an inspection of my property.

If you are purchasing a renovated property, I encourage you to send the inspector a copy of the scope of work that the team gave you, which explains everything that they rehabbed, everything that they worked on. Two things, for two reasons. One, so they can verify everything they said they were going to do was done, but two, that they did it correctly. So I always do that if I have a scope of work, providing it to that home inspector before they go out and specifically asking them to verify these things.

And then, this next point, make sure that you aren’t ordering an inspection until all of the renovation and all of this construction is complete. So you’re waiting for the team to give you the green light and say, okay, construction is done. Utilities are on. We have the certificate of occupancy. We are ready for a home inspection. Or if it’s rehab. Rehab is 100% complete, we’ve addressed the punch list, and it’s all done. It’s ready for a home inspector. Once you’ve verified that it’s 100% complete, then you send your home inspector out. This will help you avoid additional fees if you’ve got to send your inspector back out because the property wasn’t totally done.

There are some additional supplemental inspections that you might want to consider. Again, we’ve included these additional inspections on page 2 of the investor checklist along with our recommendation for when you should do these. 

A standard home inspection you know usually costs somewhere between 400 to 650 dollars. If you want some of these additional inspections sometimes they’re completely separate companies. Sometimes they can be done by the inspector that you’re sending out. But we don’t generally recommend that you do all of these. 

We recommend a sewer inspection on all homes that are 50 years or older to just make sure that sewer lines are not filled with roots or caving in because those can be very expensive to remedy. Lead paint we only recommend if you feel like there’s a reason to. You’re going to get some seller’s disclosures about lead paint. This is typically only an issue on homes that were built before 1978. Again, our recommendation is generally you don’t need to order a lead paint inspection. 

Mold and radon. Mold and radon are present in most homes. The degree to which it’s present is what you need to be concerned about. Our recommendation is that you only order the mold and radon inspections if the general inspection reveals some question marks or some indication that these things might be an issue. Radon is more common in homes that have basements. If it’s an older home and has a basement, you might consider doing the additional radon inspection.

Termites we generally only recommend doing a termite inspection if it’s required by your lender or if the general home inspection reveals some termite infestation or termite damage just to make sure that there’s not an active issue. So again, all these are optional in the grand scheme of things. These don’t cost that much. The more you can know about the property the better 

Appraisals. If you are financing a property, your lender is going to order the appraisal for you. They’re going to hire a third-party appraiser to come to the house and give an estimate on what they think the home is worth based on other comparables in the area. If you are purchasing a home in cash, an appraisal is going to be optional, but we recommend it to protect yourself. Make sure that you’re not overpaying for a property. 

If an appraisal comes back low, or if it comes back below your contract price, again, as I mentioned, your lender is going to require that you come to close with additional cash. They’re not gonna lend more than what the home is worth in their loan-to-value guidelines. So if it comes in low, you’re gonna have to pay the difference. 

What I recommend, if you get an appraisal that comes back low, it’s not the end of the world. It happens sometimes rarely, but it does happen. The first thing you should be doing is reading the appraisal, but the second thing you should be doing is contacting the team and letting them know that the appraisal came back low. You can ask them what their suggestion is for remedying that. When you talk to them about the appraisal coming in low, some of the teams are very willing to reduce the purchase price, the contract price. If it’s very close, oftentimes a seller will want to meet you somewhere in the middle. And then it’s totally up to you if you want to lose the deal over $1,000. 

Typically for me, I have kind of a threshold, you know, $5,000 here or there. Again, in the grand scheme of things of what I’m trying to do, it matters less. But that’s up to you and you can negotiate that directly with the seller. Again, it’s rare, but if it happens. Communicating directly with the team about how you want to move forward is the next step.

Okay, number 11, post-inspection repairs. So you just got the inspection report back from your home inspector. First, again, always read the entire inspection report. Look at all the pictures, read all the details, read all the notes the inspector wrote for you. 

And then, this is a pro tip, I always do this with properties that I purchase, I call the home inspector to discuss any questions that I have about the report. I specifically ask them about any of the major issues that they pointed out because sometimes they’ll tell you, I have to put it on the report because it’s there, but the reality is this is not really a huge issue, it’s pretty cheap to fix. Then I know that this is probably not a hill I wanna die on with this particular house.

After I have a phone call with the inspector, and again, I recommend you do this very soon after closing so as to get the inspector on the phone while this home is still fresh on his mind. Some of them are doing multiple inspections every day. If you wait two or three weeks to talk to them, you’re gonna get less insight. But then based on that conversation and based on the report, make a list of what you think are your absolute must-fix items. And order them in priority.

This is most important for me to least important. Don’t expect them to fix everything, they won’t. 

Every inspection report is gonna come back with something and a seller isn’t going to get you a clean inspection report with absolutely nothing. You want to come to them with the items that you think are absolute must-fixes before closing and see if they are willing to fix them. Again, most teams are very reasonable and willing to fix the major issues. 

After all of the inspection items have been addressed, that the agreed upon inspection items have been addressed, you can consider sending your home inspector back out to the property to re-inspect. They charge you to do this. Again, I think this is money well spent to make sure that the item was addressed to make sure that it was addressed fully. So you do have that option. Sometimes some property managers are willing to go out and verify the repairs for you before closing. It’s totally up to you, but I tend to just pay my home inspector to go back out.

Number 12, shop and secure your homeowner’s insurance. We recommend that you obtain a couple of quotes from our preferred national lenders. We have some lenders that specialize in working with landlords and writing landlord policies. Insurance companies can sometimes offer, excuse me, local insurance companies can sometimes offer the most competitive rates.

We found this to be especially true in Florida, so if you’re having trouble or not getting good quotes from national lenders on property in Florida, the property team always has a couple of local insurance recommendations that they can connect you with.

Again, you need to make sure that you understand the policy, understand your coverages, understand what your deductible is in the event of a claim, understand what your liability coverage and protection is, and how you might be able to adjust some of those coverages to fit your risk tolerance. Most importantly, ensure that your policy starts immediately after closing so that you are never uninsured on that property. Your lender is going to be pretty picky about that because they’re paying for 75% of the property in those cases, so having homeowners insurance is usually non-negotiable for your lender.

And number 13, purchase an owner’s title insurance. Most lenders are going to require that you pay for a lender’s title policy. That’s going to protect them, but they will tell you that the owner’s title policy is optional. What this does is this policy protects you from financial loss if there’s any title issues that are discovered after closing. If there are liens that are discovered, if there’s a dispute that’s discovered between prior owners over wills, clerical problems and courthouse documents or fraudulent claims against the property, anything that might be discovered after closing that could have some serious consequence to you, this insurance policy protects you.

This is relatively inexpensive. Again, it costs roughly $1,000. A lot of landlords, tend to just say, because this is optional, I’m not going to pay for it because they’re cheap and wanna save some money. It’s fine if you feel that way, but you just gotta understand the risks you’re taking by not purchasing owner’s title policy. So our suggestion is that you do purchase an owner’s title insurance policy.

Number 14, notify your property manager of the closing date. So you’re pretty well into your escrow now. You’ve got a satisfactory inspection. You may or may not have the appraisal back. You’re moving everything towards closing at this point. You want to be re-engaging and having more current communication with the property manager, letting them know the exact date that the property is closing and starting to have conversations about when they can begin marketing the property.

Keep in mind that some new construction homes cannot be marketed for rent at all until after they receive a certificate of occupancy or after closing. So they might not be able to say coming soon or get the property listed until you’ve actually closed. But you want to have already signed a management agreement, again, so that you’re not having any dead time after closing before they can start marketing the property. The day that you own it, you want them to be able to start their work and start screening and advertising and placing a tenant.

You should get information from your property manager on how to access your owner’s portal. Many property managers are willing to set up a tutorial call where they can show you how the owner’s portal works, what statements you can pull and generate on your own, where you can go to find work orders and vendor invoices, etc. Start getting familiar with your owner’s portal, getting logged in and getting familiar with your account.

Okay, phase three, we’re about to be property owners. This phase is all about closing on the property and then beginning some of your personal systems for monitoring rent collection and interacting with your property manager. When it comes to signing your closing documents, closing documents do have to be signed in front of a notary. Some people, though I would say probably very few, are traveling to the market and closing in person in the market where the property is. Most people are not doing that. They are closing via a notary in a remote notary in their home.

I like using a mobile notary as they literally come to my home and we sit at my kitchen table and sign all the closing documents here. That just makes it very, very easy. What you should expect is that last-minute delays with closing can be pretty common. There’s a lot of different parts that all have to come together.

Your insurance, your manager, all these things have to come together with the title company at the exact same moment to close on the deal so last-minute snags and challenges are very very common. You’ve got a roll with it. The most important thing is that you’ve got to communicate very clearly with all the parties who are involved letting them know as soon as you see a possible issue or error or something that might delay the closing. Communicate with everybody seller, the lender, the title company, and your property management company. You can be the one to kind of help everybody stay on the same page with where the closing is.

Do know that delays and closing could impact your rate lock, so you again need to be communicating very closely with your lender and the seller as soon as you feel like you’re coming up on a deadline that might be problematic for you. Missing your rate lock deadlines can require you to pay additional fees. It can sometimes require you to go back into underwriting, which can further delay the closing. So, again, some of this is very typical and normal for transacting. I’ve had some big snafus right before closing. Just got to roll with it and over-communicate with all parties involved. 

Okay, so now the property’s yours. Step number 16 is about ongoing maintenance and ongoing review of your monthly statements. Now you’re entering the fun part. This is truly the work of owning an investment property. You’re beginning the process now of managing your manager.

Another point to make is there are also inevitable startup kinks. Anytime I’ve started working with a new property manager, anytime I’m onboarding, it’s very typical that there can be some just rough communication upfront, maybe a missed handoff or maybe a slow reply. So again, be expecting there to be some possible startup kinks, especially as they’re getting your portal going and getting everything together. So just, again, roll with it. Be patient. Be communicative.

You’re both new to this working relationship, but you need to start getting yourself into a practice of reviewing all of your monthly statements, and you need to establish your own system for staying organized. There’s some great apps that people recommend. The most common one is called STESSA. STESA is an app for organizing your rental properties. I feel like it’s geared a little bit more towards people who are self-managing. So download the app and see if it’s an app that you would like to organize your rental properties. 

I built my own Excel spreadsheet that we use to track all of the most important information for our rental properties and of course, track the disbursements that are received each month from the property team. That helps us stay organized and it helps us know that we’ve received every rent check every month from the property manager. 

Also, reinforce early on your touch points. Know who your correct points of contact are for maintenance, billing issues, and leasing. Some property management companies, they are vertically integrated and they have one point of contact and they go and coordinate the services internally without you knowing it, so you’re only reaching out to one person for everything.

But some property management companies are integrated the opposite way, where you have a separate point of contact for each service. There’s different preferences and different reasons for why they structure it that way, but you need to know who are my touch points and have those written down. Again, my Excel tracker has a tab for each property where I keep updated who my current points of contact are for that property and for the various various reasonings.

Okay, number 17, provide feedback to RealWealth. This is really the strength of the network. We are always refining our network by what our investors are experiencing and how the process is going. So keep us in the loop. Remember, we’re not licensed brokers in these states. We can’t legally give property-specific advice. We can’t necessarily force outcomes in your favor, but we can always be a sounding board. We can always speak to you as another investor who’s seen a lot of different circumstances and challenges and help coach you through it. Give you some pointers for how you might be able to move forward or move things in a more productive manner for you. 

Your feedback as a RealWealth member is really what solidifies the strength of our network. If we continue to get good feedback about a team, we will continue to recommend them. As soon as we start noticing a trend of negative feedback with teams, alarms are going off for us too. We start investigating and asking questions and making sure that we still feel comfortable referring our investors to those property teams.

If you don’t close that loop with us good or bad, the strength of the network suffers so stay connected with us. When you close on a property, you’re going to receive a post-purchase survey, which asks you some questions about your transaction and your feedback on the team and the property manager. Fill that out for us. We do read all of those, and again, they’re very much informing our decisions. And then, of course, you have access to your investment counselor for the lifetime of the investment.

Number 18, plan to check in with RealWealth before reinvesting. So once you become a client of these teams, they might approach you with other investment opportunities that haven’t been fully vetted by us. And, the status of a team may change over time. We have some teams come and go. We might be aware of an issue that has us pausing and on sending any new references to a team. So in order to stay connected with the status of teams and the status of the investments that have been vetted by us, you’ve got to stay connected.

So please check in with your investment counselor before you purchase any new investments with a team, just to make sure that everything is still looking good and that we can coach you through any questions that you might have on other investment opportunities.

These are the RealWealth investment counselors here, Aristotle, myself, and Joe. We are really, really committed to having a relationship with you for the duration of this investment. So don’t feel like it ends after acquisition. The hard part is owning and navigating these properties for the long term. And all of us are doing that, so we’re happy to help. 

Most importantly, I hope you guys all know this. Real estate comes with some challenges.

It can be a tough asset class. I was literally on a call with an investor last night talking through a very serious challenge that she’s facing with a property. It can be very frustrating. It can keep you up at night. It’s just inevitable.This is a business where we’re buying real property that’s aging, that’s subject to weather, and we’re renting it to real people who are certainly subject to all kinds of problems. So there is a lot of opportunity for friction in this investment class. You’ve got to be prepared for that financially, but also mentally and emotionally. We’re here. We’ve done this before. We can be your guides. We can be your coach through this.

That first deal, purchasing a property, getting the first one under contract, and getting it closed, can feel really daunting and overwhelming, but know that you don’t have to do it alone. We’re here to help, and we’re here to coach you along the way. So definitely download the investor checklist and reference it as you’re going through our process and stay connected with us so we can help.

Thank you so much for joining me today for this presentation. I look forward to connecting with you.