186: Rookie Reply: How to Close on Off-Market Properties

This is Real estate rookie, episode 186.

My name is Ashley Kerr and I am here with my co host, Tony Robinson.

And welcome to the Real Estate Rookie podcast where every week, twice a week, we bring you the stories, the lessons, the information and inspiration you need to kickstart your real estate investing journey. Ashley Care. What's going on? What's new in your neck of the woods? How are things on the east coast today?

Well, I think I'm going to head over to a property that I recently purchased and just kind of wander around a little bit. It's 30 acres, it's got three ponds, and it's finally like a nice day. I'm finally walking kind of.

I was going to say, how are you going to. Are you going to wander around? You mean hobble or bear crawl your way through those 30 acres?

I. My son actually hurt himself on a trampoline last night, my youngest one, and he decided last night that he needed to use my crutches. So we put them as low as they could go. Obviously still not compatible for him, and he's just basically dragging them around the house that he needs crutches. So at least they're. They're still getting good use, I guess.

There you go. Like mother, like son. I love it.

Yeah. What about you, Tony?

Actually, today my big focus is working on. Working on like, the presentation for our, our Big Bear Resort. So, you know, whenever you do these big syndications. So I'm learning a lot as I go through this process. Yeah, whenever you do these big deals, typically you and like, you have like one big meeting where you invite all the potential investors and they, you know, they kind of see what the deal looks like. So, yeah, we're just working on that. So that way all of the, the accredited investors that are interested can kind of learn the ins and outs of what we're doing. So we're, we're super excited about this project.

And like, that a pitch deck you're putting together?

Yeah, it's. Yeah, it's a pitch deck.

Yeah.

I can't wait to read the pitch deck.

Yeah.

Yeah. You know, like, there's so much upside here, so we're really excited. So it'll be a fun, fun day for us.

Um, are you using a software yet to manage the syndication?

Um, so like the actual, like, investors portal and all that stuff. So what's been recommended to us is called InvestNext.

Did you sign up for them yet? Because I have an affiliate link. That's what I was getting at.

You do have an affiliate link? Well, there's a, there's some guy that does. It's called fund administration. So he helps you make sure that you're like your distributions match what your PM says.

Yeah.

Um, so I guess this guy has some kind of relationship with Invest Next. He's actually creating the account for us.

Yeah. Cool.

That'll be exciting.

Yeah, InvestNext recently just sent me a super nice north face zip up. So make sure you get one of those.

Okay? Yeah, I gotta grab one. Are you using ENV for one of the. One of the campgrounds?

No, I'm gonna. Actually I'm setting it up as just like a portal to collect names to create like a list of accredited investors so that when I am ready I have that list set up. So.

So.

Oh, cool. Yeah, that's awesome. Yeah. So if you guys haven't heard of InvestNext, they're just like a. They're like a software tool that a lot of syndicators use to help manage their accredited investors that come into. Into the syndication. Well, I guess tech, you know, I guess technically they don't all have to be accredited investors because some syndications you can allow for non accredited. But anyway, when you're doing like a big fundraise like this, it's a platform that kind of helps you manage other people that are investing. So if you're doing that kind of thing, be sure to check it out.

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All right, so today's question comes from Aaron Nygaard. And quick side note, if you guys haven't watched the show, Fargo, the main character, his name is Lester Nygaard. So anytime I see the last name Nygaard, that's what I think of. So anyway, Aaron Nygaard is today's lucky guest. So Aaron's question is, what paperwork do I need to close on an off market deal? And why, if there are cash offers, can it all be done between me and the seller? Do you typically ask for an inspection period? Any help with those questions would be great. So I've done a few off market deals so I can kind of share my, my experience. Typically what we do first, Aaron, is that we'll get a, a purchase contract set up and then once we have that purchase agreement signed between both parties, we'll take that. Here in California, I usually take it to an escrow company and then escrow is the one that kind of facilitates that transaction between me, the seller and title. And then they'll draft up pretty much all the other documentation you need to make it a legally binding agreement. You can still ask for everything you would ask for in an on market deal. So like you still maybe put an earnest money deposit, you still have your inspection period. You know, if you are buying this with, with a loan, you can have a loan contingency. So all of the things that go into a regular on market transaction from a purchase agreement standpoint can also go into this off market transaction. The only difference is that the property was never listed. And typically there's no real estate agent kind of, you know, playing the role of middleman between the buyer and the seller. So you guys make an agreement ticket, title and escrow, they facilitate that transaction. So how has it been for you, Ash?

So usually what I do is I'll do a letter of intent first. So it's just usually comes out to one or two pages and basically it's just stating your intent is to purchase this property located at the buyer is the seller is it's going to be a cash offer at this amount, the deposit is going to be this. And then if there are any contingencies, so I always put contingent on attorney approval, contingent on if there's going to be financing, financing contingent. Or you sell your own house or something like that, always put that in there and Then there's just a couple other things. If you Google letter of intent, you can kind of get a bunch of ideas, a bunch of samples of what it could look like. It's really not meant to be a contract. It's really just to get them to agree to the terms. And then I take that letter of intent. In New York State, you have to use an attorney for closing. So I take that letter of intent and I send it to my attorney who actually fills, takes that information and puts it into a real estate contract for the property. And then my attorney takes it from there and the seller, you know, I'll recommend them an attorney to use. Or if they have their own attorney, I'll give them a copy of the contract once it's executed for them to give their attorney. And then our attorneys communicate from there and basically it's out of my hands after that. And they take care of everything, such as the title work. So definitely the letter of intent is nice because if they don't accept your offer, you didn't waste a ton of time going through a real estate contract at first. And then I also like to do multiple letter of intents, like maybe one seller financing and then one conventional financing or a cash offer. And then I present, present them to the purchaser or the buyer that way. So, and then as far as an inspection, it depends what type of house I'm buying or what property. So I'm buying, trying to buy a campground right now. I am doing an inspection on that property because if the water lines are bad, that could be a huge expense to me. But if I'm buying a $20,000 dumpy little cabin that I'm gutting anyways, I do not do an inspection. But as Tony said, anything that if you were buying a property off the mls, you can put any of the same contingencies or, you know, things in the contract as you would if you were buying on market, including furnishings, if you want furnishings included or the lawnmower or things like that too.

Yeah, so I guess the last piece, the last piece of advice, Aaron, would be, you know, just go out and find like a local either attorney, escrow company, title company, in whatever market you're in, let them know that you have this off market transaction. And, you know, most should be able to kind of guide you through that process because that's how we got started the first time we did an off market deal.

Yeah, Tony, that's great advice. And even contacting them before you even start looking for those off market deals too. So that you have them ready and they can kind of guide you. This is what we would need from you in order to put together contracts. So you know what you could put into your own initial contract or your own letter of intent, too. So. Okay, well, we have to get out of here. And Tony is actually doing something exciting today. He's got interviews for a personal assistant finally.

So if you've ever sent me an email or a text message and it took me days or weeks to respond, hopefully that will all change after we finish recording.

Well, I'm exciting, Tony, and I hope the interviews go well. Thank you guys for listening. And if you missed out on applying for the position as Tony's administrative assistant, make sure you follow him @tonyj.robinson on Instagram to find out about any more new hires he has. And then you can follow me at wealth from Rentals. And I have no idea what I need. So if you listen to this podcast and are a loyal listener and you know something that I need and that you can help with, please message me, DMV slide into idea and tell me what I need and how you can do that for me. Thank you guys so much for listening. My name is Ashley and he's Tony. And we will be back on Wednesday with a guest.

Hey, rookies, if you're watching this, we want you to apply to be a guest on the Real Estate Rookie Podcast. That's right. Ashley and I are looking for amazing stories just like yours to be a part of our Real Estate Rookie Podcast. Now, look, you don't need to be an expert. You don't need to have done thousands of deals. Even if you've done one deal, your story could help inspire the next listener.

As a rookie investor, especially if you just got your first deal. It is all fresh in your minds and you are the best person to tell your story. Give your experience on how you got it done to help someone else get their first deal.

So head over to biggerpockets.com guest if you want to be a part of our show again, that's biggerpockets.com guest and we'd love to have you on.