Common Investing Mistakes: My Two Cents

No matter how good you are at the real estate game; none if it matters if you can’t close the deal. Here are some basic tips to get you to the finish line with a paycheck in hand without causing your title agents to pull their hair out and without risking the loss of a return client due to irritating and unprofessional mistakes.

Fill out your contract completely and correctly:

Don’t roll your eyes at this one or skim over it because it’s soooo obvious. When working with corporate entities make sure the entity is in existence and the person signing has authority to act on behalf of that entity. This also applies to anyone using a POA or any other directive to act on behalf of another party.

Also, when buying or selling in a trust naming the proper party is a common mistake. Remember, a trust is just a piece of paper. A piece of paper cannot hold title. You must designate a legal entity to hold title on behalf of the trust - the trustee. Therefore, an example of the proper name would be “Investor Trustee Services, LLC as Trustee of the 123 Main Street Land Trust” – yes, the WHOLE THING. Man, if I had a dollar for every time I have explained this to clients, underwriters, other attorneys…

Tell the title company if there is financing or an attorney involved:

It’s the afternoon of closing and you send the terms of the loan to the title company. Wait. What? Who? When? These are the thoughts running through your closers head. Believe or not, all those docs you sign at closing don’t just spit out of the printer with one click of a button.  Each one is dependent upon the other which means that adding a loan at the last minute changes EVERYTHING. Get your ducks in a row early and make your plans known.

It’s a favorite past time at my office for closers to stand right outside my door and make jokes about how attorneys kill their closings. The (not so) funny thing is… it’s totally true. Attorneys Kill Deals!!  If the attorney is not familiar with investment real estate and the uniqueness involved in those deals they WILL kill your deal.  A prime example is just yesterday I had an attorney from a very well established title underwriter inform me that a corporate entity may not act as Trustee for land trusts. Well, that was of course news to me since I hold title to hundreds of properties with an LLC acting as Trustee of a land trust. He eventually came to his senses, but not before everyone involved wasted more than an hour of time and the deal funded a day late. Let your closer know there is an attorney involved so they can get a package out early and the attorney can go ahead and send all the superfluous emails to justify his/her billable hours.

While we are on the topic of title companies:

Pick the right one. Don’t use a title company who closes a bunch of retail dealsto handle your simo closing for a rental property taken subject to an existing mortgage.  This also applies to everyone else on your team – your realtor, roof guy, attorney, lender, etc.

Stop going to seminars:

It’s one thing to go to some introductory seminars to get a basic understanding of real estate and to “learn the lingo”. Don’t become a professional seminar attendee. They’re expensive and usually offer nothing new.  Let’s face it – investing in real estate is not a new concept. With the exception of some real estate crisis like we had a few years ago there is nothing that hasn’t been done. Even considering that last crisis, it’s all been figured out. If someone is telling you they have the new and improved way to invest – BEWARE.

Instead, heed my last comment. Get the right team of people and you will learn far more than any seminar is going to teach you. Also, you can save all that money you would have spent on seminars to actually buy a piece of investment property.