MIT 3.0: 2.3 Find the Deal Part 3

MIT 3.0
2.3 –  Find the Deal – Part 3
Cheat Sheet

1. Analyze Deals

1. Access the Deal Analyzer via the Sharehub.
2. Access the MLS site 
   • If you do not have access to the MLS site, continue to seek listings and pocket listings from agents
   • You do have the option to access multi-unit deals and agents by using CoStar; but be mindful this service is costly.
3. Select: search, multi-unit, active, highlight type of properties of interest, and areas.
4. Next, look at the list price, GAI, Insurance, Utilities, and rents.
5. Look for other important information: Size of Property (Single, Duplex, Triplex, etc), and Yearly taxes.
6. Take all the information you gathered and enter it into the Deal Analyzer.
7. Take the rents and multiply by 12 and this figure should be equal to or greater than 1% of the purchase price.
8. If any information that’s needed to analyze a deal such as rent amounts, property taxes, etc is missing on the listing, then reach out to the deal finder.
9. When looking at vacancies, maintenance, and utilities, use percentage rates
   • Vacancies = 3% – 5% of gross revenue
   • Maintenance = 10% of gross revenue or whatever maintenance costs were located on the listing – use the higher amount
10. Include all debt service when analyzing a deal.
11. Don’t get analysis paralysis when deals:
    • Have gross monthly rents equal to or greater than 1% of the purchase price to verify there’s enough income to cover operating expenses
    • Have rents that cash flow $100 per door
    • Have a Cash on Cash Return of 10% or higher
    • Have built in equity of 5% or greater
12. If deals do meet the criteria above, then submit an LOI asap. 
13. Once you submit the LOI, follow up with the agent and continue to look for other deals.
14. Within the LOI, you’ll fill out information regarding the property information, purchase price, and the terms.

2. AOS – Agreement of Sale

1. Review the  Purchase and Sales Agreement Audit Checklist  in the Sharehub once you negotiate terms with the seller and have one drawn up by an attorney in your state
2. Familiarize yourself with this checklist, in case agreed upon contingencies are not adhered to. That way, you’ll be able to back out of the contract if need be
3. The Earnest Money Deposit should not be more than $2,000
   • Send EMD to the closing attorney only
   • Only send the EMD to the closing attorney once the seller provides you with all documentation needed to complete Due Diligence within a 5-day period:
     1. Leases 
     2. Rent Roll (A snapshot of the tenant name, unit number, rent amount, security deposit recorded on a spreadsheet) 
     3. P&L Statements
     4. Trailing 12 (Last 12 months of utility bills paid by the owner)
4. You do have the option to use the AOS provided by the deal finder, but have your attorney review it or have your attorney to draft the AOS that suits your best interest
5. If you’re buying a property outside of your state and you have an LLC, you’ll need to do a foreign file
   • Go to the Secretary of State website for the state you plan to invest in and search for business “Foreign File”
   • Complete the necessary paperwork to file your company’s name domestically from your state, to foreign file it in the state of the property being purchased
   • Pay the filing fee (varies by state)
6. If you do not want to foreign file, then create a new LLC in the state you’re purchasing the property in. Either options is a good option, the only thing that really matters is to consult your attorney for foreign filing or creating a new entity such as an LLC
7. Once the contract is signed, get on a conference call with the deal finder and the seller 
   • Build rapport with deal finder and seller by using the script here
   • Follow up with other real estate professionals once a week for updates, and also share the signed AOS in PDF format electronically with them:
     1. Closing Attorney
     2. Mortgage Lender
     3. Deal Finders
     4. Partners

8. Begin liquidating your funds
   • Conventional Mortgage = 2 months prior to finding a deal
   • Commercial Mortgage = Same day the property got under contract  
9. Use the Deal Analyzer for continued practice on 15 deals
10. Send out 20 LOIs for every 100 deals that fit the criteria
11. Get deals under contract!

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