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It’s official – I’m the proud owner of my third rental property!

A mobile notary came over to my house last Friday with a huge stack of papers for me to sign. I’d heard about these types of mobile notary support services washington d.c. and those that are similar before, and they are all highly regarded in the eyes of law firms and others when important documents need to be signed as soon as possible. It tends to happen when lawyers find themselves under time pressure and they can’t get the job done themselves. Although, as long as it gets done, I don’t think it matters who does it. They’re all on the same side after all. That drew to an end a surprisingly long 95 days since my verbal commitment to the seller.

No, the slow part wasn’t the notary… The assumption is that the notary is what makes it a tedious process but as long as you go to a mobile notary in the Los Angeles area (or the one in Washington) like Rachel Mintz did, then the process shouldn’t take too long.

Recapping the Deets

It is a big 5 bed, 2 bath in a Memphis suburb. Purchased for $105k should rent for $1100.

Details on finding the property: How I Locked Up My Third Rental Property Investment

Here is the after rehab video:

What Took So Long?

The appraisal.

It started with a request from me in late July that the lender hold on ordering the appraisal. I wanted to make sure the rehab work was finalized, but I made a couple mistakes.

I thought I was delaying the appraisal and inspection, but the inspection had already been ordered. Ooops. The inspection and appraisal helped to value the house and ensure it was in good enough condition. Thankfully, we had sorted most of the problems. Before starting the job, we had checked for any signs of pests by contacting https://www.pestcontrolexperts.com/, so we knew the house was clean and hygienic.

The rehab was almost finished, so I just wanted to wait another few days. I thought there was still plenty of time before our original target closing date of mid-August.

I wasn’t exactly on top of things though. My wife and I went from a Flagstaff family reunion, to Chicago to celebrate my mom’s 60th birthday, to Bigfork Montana for a wedding. During the two week trip, real estate wasn’t always top of mind.

A week and a half went by before the bank reached out and said “can we order the appraisal?” I said “oops, go ahead”.

The Appraisal Process

Turns out I shouldn’t have delayed anyways because appraisals are slow going these days. I assumed it would have been like the last purchase I made in 2014. Given the tons of home sales in 2017, it wasn’t.

I should have read:Turnkey Rentals in 2017: Why You Need to Adjust Your Approach

One of the issues that led to the financial crisis was appraisers weren’t exactly independent. Banks could choose who they used, going with appraisers who would do whatever the banks wanted – essentially always quickly giving back a good valuation.

Now there is an intermediary. The lender puts in a request to a separate appraisal scheduling company (who I will refer to as “the appraisal desk”). This company has a pool of appraisers they use, and assign someone without the bank being involved.

That’s great and all, but boy did it slow things down! My lender’s communication with this outsourced appraisal desk was like a game of telephone: slow and unreliable.

Here’s what happened:

• I delayed the start 1.5 weeks accidentally
• Appraisal is ordered and it takes 1 week for appraiser #1 to call the seller to schedule
• The seller rejected the appraiser after he supposedly said he doesn’t use rentals as comps, so he requested it be reassigned to a new appraiser
• Another week goes by before appraiser #2 reaches out
• Appraiser #2 calls the seller and leaves a voicemail. Then he tells the appraisal desk he is too busy for the job, so turns it down.
• That same day the seller calls appraiser #2 back and he agrees to take the job. They schedule a date and just have to let the appraisal desk know it’s back on.
• The appraisal desk never gets back to him before the scheduled appraisal date, so appraiser #2 cancels the appointment
• Meanwhile it has been assigned to appraiser #3, but it took another week for him to call and schedule for a week out
• Appraiser #3 turns in the report to the appraisal desk, but there are unknown delays. Maybe they wanted to replace a comp or two?
• Two weeks after the initial appraisal was submitted, I get a copy
• Closing is scheduled for 1 week later

What a mess!

It would have been so much easier if the appraisal desk had simply kept with appraiser #2 and replied to his emails. It seems like there was a 1 week delay any time someone contacted the appraisal desk. Maybe emails are printed and delivered by pony express?

Throughout this I was talking to my two contacts (seller and lender), trying to facilitate communication between two other people (appraisal desk and appraiser).

When the mess with appraiser #2 was happening, my lender said: “You are way more involved at this point that 99% of buyers.”

To which I replied: “That’s because I’ve lost confidence in your chain of communication and ability to get this done.”

In the end, the appraisal came back as expected ($105k) and everything was a go.

What Did I Learn?

Sometimes things don’t go as planned…

Just like working with a property manager, I found myself working the lender to instill a sense of urgency. If they had a task to take care of, I was making daily phone calls.

One of my take-aways is that the lender isn’t the only person I needed to worry about – whoever they outsource the appraisals to is important as well. I’m not sure I could have known this ahead of time, but I sure didn’t feel there was a good enough channel of communication between them. Or that the lender was on my side and hustling enough. When it comes to selling a property, I may prefer a buyer who can buy my property as fast as possible (click https://webuyhousesinatlanta.com/ for more information) rather than putting it out on any website and waiting for homebuyers to reach out to me.

So next time I’ll probably go back to the lender (#1) I used on my first two properties (the refi was also through lender #2). It was a tiny more expensive, but worth it.

I also learned that I shouldn’t assume I know everything just because this is my 3rd rental property. It wasn’t exactly the same as last time and I made a small mistake because of it (while distracted with my personal life).

Fresh eyes with a beginner’s mindset next time.

All Good Now

The seller could have backed out and found another buyer since it was beyond our initially agreed upon window. Or the appraisal could have finally come back too low.

Even though it took a while, everything worked out in the end. So all things considered, waiting a bit longer is no big deal!

I want to hear from you – have you had any surprises during a rental property closing process? Did it work out in the end?

After a short and not so hard search, I have my third rental property under contract.

It is located in a Memphis suburb, currently being rehabbed by a top-notch turnkey company. Check it out!

The curb appeal isn’t great but the numbers are. The purchase price of $105k will rent for $1150+ a month. That should make for a pretty good profit margin. Of course, the home needs some work doing before I can consider putting it on the rental market, but there isn’t that much to do. One of the first things that will probably need changing is the front door. It’s a bit worn and it isn’t very modern. When you’re putting a home on the market, it’s important to consider what most people will look for. For many potential buyers, they’re looking for more modern homes. This is why it’s important that I consider getting in contact with a professional provia door installations company to see if they can update the door and make the home look a little more modern. Hopefully, that will be a pretty good place to start with the curb appeal.

The curb appeal should be easily fixed, so I locked this house up!

Let’s take a closer look at the property and my decision-making process.

The Before Rehab Video

The turnkey company posts walk through videos on YouTube. Here is the property before rehab has started.

Often the before pictures are pretty horrendous. That’s what these turnkey flippers specialize in – take an ugly house and improve it.

A property that will eventually be flipped to an investor at $105k might cost around $60k pre-rehab. With $25k of work put into it, including financing and other expenses, they can turn a profit of $20k. That is if everything goes according to plan. They have the risk and have to execute quickly.

As you can see, this property is in pretty good shape. It was built in the 1960s, but fixed up about 10 years ago. Most of it will be improved again.

What will the inside look like after rehab? Take a look at this video of a finished property by the same company.

The Search

This is me searching for rental properties.

I do my best work in a cowboy hat…

My actual process is to first decide the city, then decide a couple of turnkey companies I like in that city.

See: Starting the Search for My Next Rental Property Investment

All my properties so far have been through Jason Hartman’s investment network to make this a little easier. They currently work with 6 of the best turnkey companies in Memphis.

Don’t make the mistake of stopping there and waiting for properties to get posted to the website. In 2017 things move fast.

See: Turnkey Rentals in 2017: Why You Need to Adjust Your Approach

You also probably want to filter those 6 providers down even further. Not all of them fit my criteria.

Some had numbers that were consistently not all that impressive. A couple were too big (100+ flips a year) which makes me worry about their quality and my voice being heard. Others weren’t strong communicators.

I found 2 that I liked out of the 4 or 5 companies I researched. So that narrowed my search scope of potential properties considerably.

Both of those companies do around 60 turnkey flips a year, selling 5 rental properties a month to investors. It might take them roughly 1 month to buy the property and 1 month to do the rehab.

In 2017 most properties are put under contract before the rehab is finished. This means to get first dibs, you are committing to a property before it is rehabbed.

That’s why it is so important to focus on individual turnkey companies. That is the product you are buying, not the house.

You are essentially buying the ability for the turnkey company to deliver an impressive property that appraises as expected. Someone with integrity who will fix anything uncovered by the inspection report.

You still have the ability to back out later if you can’t agree on what should be fixed on the inspection report. It’s less than ideal though because you are out the price of the inspection (maybe $250) and a lot of time invested, including getting your financing in place.

The Location

My original Memphis property is in the Raleigh-Bartlett area, northwest of the city. It is a 20-25 minute drive to downtown.

I liked the area three years ago when I researched more thoroughly. The other area with a lot of turnkey investments to compare it to is south of downtown, by the airport.

Both have very solid job opportunities, but I liked the long term prospects of the northwestern suburbs a little more. More opportunity for growth to the north, touching on a very nice suburb of Bartlett, and not as old.

I did a little research comparing the suburbs again but largely trusted what I decided three years ago. Of course, I was open to the right deal elsewhere if necessary.

Wouldn’t you know it, one of the two providers had a property in that area they were in the process of purchasing.

The Details

I thought I wasn’t interested when I first saw the property.

Built in 1968, it is way older than my other two rental properties that were built in the 1990s.

Plus the curb appeal sucked. First, the fact that it was an older property, but also the front yard is mostly dirt because of a huge tree that provides a little too much shade for healthy low-maintenance grass.

That’s a lot of dirt! But it is also before rehab… a little work can go a long way, but I don’t think it will ever be that impressive on the curb appeal. It would take a lot of work, and would probably be too much for me to take on. One of my friends was recently telling me about https://www.lawncare.net/. She said they’d probably be able to improve the curb appeal of this house. This house would require a lot of jobs doing, from trying to plant a new lawn to cutting that tree slightly. It would probably need a professional landscaper to give it a good go!

Even with a freshened up lawn, the curb appeal could be increased by altering the exterior of the house; the windows, door, and roof combined make the home look very plain and dated. New windows could be installed to freshen up the house, as well as a more modern door, and inspiration could be taken from kansas city roofs to perhaps replace it in a bid to make the building look more lively. These are all additions that’ll give the house some much-needed curb appeal. When replacing windows, it’s so important to consider looking into fiberglass windows. These are believed to be stronger than average windows, giving homeowners more protection from weather events. Perhaps this window replacement company denver could be useful to contact if anyone else has purchased an investment property in that area. If not, just search for window replacement companies local to you. They should be able to recommend the best windows to improve curb appeal.

The numbers met my requirements though. With a purchase price of $105k and a rent of $1150 per month, which gives a 1.1% ratio. Great!

One of the things you have to consider – is the rent projection believable? In this case, I believe it is. We might even be able to get more the first year!

The property is huge at 2200 square feet – 5 bedrooms plus an office or walk-in closet, 2 bathrooms. It looks like a freshly rehabbed 4/2 might be around $1150 a month, so a 5+/2 might draw a little bit of a premium. I’m also intrigued by the idea that a large family or someone with a lot of stuff to store is less likely to move. Keeping tenants for a long time is a huge factor for cash flow.

I also liked the location. On the east side of Raleigh, it is just 2 miles from the nice Bartlett suburb.

It is 2 miles south of my other property, which helps if I want to switch to a local mom-and-pop sized property manager (which I think I prefer but haven’t done yet).

But the real kicker – it is walking distance to the major thoroughfare with a grocery store, restaurants, and shopping.

That can’t hurt!

The Decision

I asked myself – should I put this property under contract or wait and see what else comes available?

The property checks a lot of the boxes and I lean towards taking action…

See: What If I’m Not Picky Enough? Next Rental Property Update

Last week I signed on the dotted line and mailed in my $2500 earnest money deposit. Wahoo! My rental property empire is officially growing!

As soon as the ink was dry, my investment counselor (through Jason Hartman’s network) emailed a property for sale in the same ZIP code by a different provider. Even though the provider hadn’t gone through my personal vetting process, the curb appeal alone made my knees weak.

Built in 2001. Purchase price of $133k. Meets the 1% rent-to-income rule. I don’t know where exactly it is though and it has a Jacuzzi, which sounds like maintenance hell.

I’m pretty good at looking forward and not second-guessing decisions. This picture really tested that ability.

How Did I Do?

I’m excited to soon have rental property number three join the portfolio!

In the first sentence of this article I said the process was short and not so hard. This is because I previously invested in my education, have been through this before, and already have some contacts.

In calendar time it took about a month. Hours invested? Approximately 10 – mainly phone calls and online research.

What do you think – how did I do on this property?

Did I show investing in rental properties doesn’t have to be hard?