Follow us in our five part series behind the scenes of our private equity real estate acquisition process.
In Part 1, we found the best cities, neighbourhoods and properties to invest in. In Part 2, we analyzed the properties and decided if we wanted to place offers. In Part 3, we submitted offers to sellers and conducted physical due diligence on a property.
We do a final walk-through of the property to make sure everything is in the same condition as it was when it was inspected by professionals in Part 3. We look for any new problems that may have sprung up such as new roof leaks, pipe bursts, and other major system failures.
Next, we waive inspection conditions, and financing conditions for our mortgage. To do this, we submit paperwork to the seller indicating we are satisfied with the physical condition of the property and have financing in place to move forward with the purchase. Once conditions are waived we are legally obligated to purchase the property. In a scenario where the final walk-through reveals new issues, we can choose not to purchase the property and instead forfeit our initial deposit/earnest money (typically around 1% of the purchase price).
Send Insurance Binder to Lender
Mortgage lenders require buyers to provide them with an Insurance Binder (proof of insurance) before they will release the funds necessary to close on a purchase. Our job is to have the insurance in place and provide the Insurance Binder to our lender before closing time.
At this stage in the process, there is some final paperwork to do, checks need to clear, and title needs to be transferred. Once that’s done we’re the owners! For us, closing is a smooth process because we prepare well in advance and have all the necessary documentation ready to go just in case it is needed at the last minute.
Get the Keys
The last step of the closing process is picking up the keys. If an apartment building is master keyed, one key can override and open all the locks. If a property isn’t master keyed, we ask sellers to clearly label each key for us. Finally we ask sellers to provide us with anything that’s relevant to the management of the building such as user manuals, warranties, key fobs, garage openers, codes etc.
Follow us to Part 5 of our series where we discuss the Management process.
Five Part Series on Our Acquisition Process