Real Estate Closing Checklist: Fill & Download for Free

If you’re getting a mortgage for real estate investing purposes, this is what you need to watch out for to get approved:Your Credit ScoreIn the eyes of a mortgage lender, your credit score is the first thing on the checklist of eligibility for a mortgage. That three-digit number lets mortgage lenders know if you are the kind of real estate investor that can pay their debts.The lower your credit score, the higher of a risk you pose for mortgage lenders, and the lower your chances of getting approved for an investment property loan. If by chance a real estate investor with a credit score on the low side is approved, he/she will have higher interest rates and possibly a shorter amortization schedule.The minimum credit score when it comes to investment property loans is 620. Some mortgage lenders might accept a credit score lower than 600, but for a good rental property mortgage plan, a credit score of 660 and higher is preferable.For the best financing, a credit score of 740 and over is required for a 20% down payment. If a real estate investor wishes to pay a lower down payment, a credit score of 760 will be needed.Your Debt-to-Income RatioDebt-to-income ratio (DTI) is not often talked about, not nearly as much as credit score. However, it is just as important to a real estate investor looking to get a mortgage. Debt-to-income ratio is the percentage of your income that is used to pay off your debts. The debts include things like car loans, student loans, credit card debt, and any current property loans.Opposite of the credit score, a lower debt-to-income ratio is actually better. The lower it is, the more likely mortgage lenders will approve you for a mortgage. A good debt-to-income ratio is 36% or less.Cash ReserveMost mortgage lenders will want to see that you have a 6-month cash reserve for each real estate property you own and wish to own (primary residence and rental properties). This means that if you have a current mortgage on your primary residence with a monthly payment of $700 and a first estimate from the mortgage lender puts your rental property mortgage payments at $500 a month, you’ll need to have saved up $7,200.The Down Payment and Closing CostsA typical down payment for a rental property mortgage is 20-25% of the price of the property. Certain mortgage plans allow for a lower down payment, like an owner-occupied mortgage or if you pay private mortgage insurance. It ultimately depends on your real estate investment strategy .The down payment is not all a real estate investor has to plan for. When financing an investment property, you’ll be hit with a bunch of closing costs as well. On top of the recommended repair/renovation budget for real estate investing for beginners and the down payment, you’ll need at least 30-35% ready to go.The Type of Investment PropertyYou need a property that mortgage lenders will love. Find a property that:Is in a real estate market with potential for a high return on investmentHas a good cash on cash return and cap rate for your real estate investment strategy of choiceProvides enough rental income to pay off mortgage paymentsBrings a good return on investmentHope these help!

Here are some tips on how to start a real estate business;1. Start an idea file.It’s never too early to start planning. Once you set your goal to open a real estate company, begin talking to other business owners — not just in real estate — to gather ideas you can use for your business.Unless they feel that you’re going to become their competition, people are usually happy to share their stories. Ask detailed questions, such as: What has been your biggest challenge? What surprised you most about being a business owner? What advice would you give to someone who is starting her own business?Before starting her business, Kimyatta Anderson, ABR®, CRS®, kept a folder of ideas, attained designations, and tried to learn from every experience she had and person she met.As a result, she was brimming with ideas two years ago when she opened her business, Custom Realty Solutions LLC in Indianapolis, which is affiliated with RE/MAX. One effective tip she offers for those who want to keep a new business running smoothly: use checklists to manage clients and transactions from the initial contact to the closing. That way, nothing falls through the cracks.2. Make sure your idea will fly.Once you have a targeted idea for your business, your next job is to do the research. You have to make sure that your great idea will thrive in your market. If it doesn’t, you may need to fine-tune your plan. And that’s something you want to do before you start spending money on the business.The U.S. Small Business Administration says you should be able to answer all of these questions before starting a company:Is my idea practical and will it fill a need?Who and what is my competition?What is my business advantage over existing companies?Who are my potential customers and why will they purchase services from me?How will I reach potential customers?Where will I get the financial resources to start my business?How will I compensate myself?3. Create a business plan that takes everything into account.After you’ve thoroughly researched each of those questions and decided to move forward, you have to develop a business plan. This is where you closely examine your start-up costs, business model, overhead, and the other fine details of running a business.4. Don’t try to do it all on your own.Whenever necessary, hire outside gurus to get the job done. Focus on the areas of business that you do best, and seek help from the experts in other areas, such as Web design, marketing, graphic design, risk management, and accounting.“Trying to wear all hats is too overwhelming,” says Anderson.If you try to do too much on your own, you put yourself and your business at risk. For example, you can come off as unprofessional if your Web site doesn’t look polished, and you could end up in legal trouble if you make tax mistakes.“You don’t want to come off as a cheap, fly-by-night operation,” Johnson adds.5. Invest in your image.There are many areas where you can cut costs when you run a business, but marketing materials shouldn’t be one of them, owners say. Effective marketing materials — including your Web site, mailings, and ads — should project a professional, unified image.Randall Green, CCIM, broker-owner of Green & Green Realty Associates, Helena, Mont., hired a graphic design firm to create a distinctive logo that helps him stand out in the marketplace.6. Recruit the best salespeople for your company.Focus on the main benefits that you can deliver to your sales force, and communicate those benefits as you seek top talent. As the owner of a small independent company, Fall appealed to real estate practitioners who bristled under the rigidity of large companies.“People choose real estate because they’re true entrepreneurs and love independence,” says Fall. She recruited two salespeople since her company’s 2003 launch by showing them that they will be able to operate very independently while still benefiting from top-flight technology and marketing services.7. Reward hard workers.Once you’ve recruited a strong sales staff, keep them motivated and happy by rewarding their hard work. Last year Johnson spent $10,000 on holiday gifts for her salespeople.However, rewards don’t always have to be pricey. And they should come a lot more frequently than once a year. When someone closes a tricky deal or a customer calls with a compliment, that’s reason enough for reward.The most important thing is that you say thanks in a sincere, creative way, Johnson says. One salesperson represented a client on both a purchase and a sale. Johnson left an ice-cream scooper and cones on his desk with a note that read, “Congratulations on double-dipping with the Jones.”8. When you need advice, ask for it.As the owner and the boss, it’s easy to feel isolated. Form alliances with other business owners, attend networking events, and keep in touch with past mentors. When you’re in need of some advice during a tough situation, you’ll be able to pick up the phone and ask.Lisa Graziano, of Lisa Graziano Real Estate in Denver, maintains a relationship with a former broker, who provides guidance. Graziano is a home-based solo practitioner and her mentor also covers Graziano’s listings when she’s on vacation.

Hi There. My short personal story is I worked for a boutique (a.k.a. 3 people in the office including myself) real estate developer for about 7.5 years specializing in low-income housing for seniors (large multifamily projects, typically 100+ units, total development cost between $10MM - $40MM per project). We worked on new construction projects and tenant-in-place renovations. Two years ago I went off on my own because I love development and wanted to call my own shots. I was at a point in my life where I felt that I could take some risk without suffering major losses (28 and single). I also made sure to keep my overhead as low as possible. At this point personal expenses = business expenses. So! My journey began as a development consultant.In order to be a developer, you absolutely have to have a source of capital. Whether it's debt financing or equity, you've gotta have some money to contribute to a potential project. Even if you leverage up your development deal, you will most likely have to contribute at least 5% of the total development cost.There are many approaches to development and it helps to have a specialty that is related to the industry in some way (attorney, accountant, "finance guy" like myself, contractor, real estate agent). I will go through the basic phases of real estate development to illustrate the process of development. This applies to new construction and renovation projects. I'm essentially copying and pasting this from my company brochure, but please do not take this as a solicitation. Please forgive the crappy formatting as well.Phase I - Concept stage· Establish client needs and project goals· Initial site assessment· Perform financial feasibility and zoning analysis· Prepare the preliminary development budget· Development team selection – includes architect, project attorney, surveyor· Community acceptance – liaison with local community leaders, community board, local stakeholders and elected officials· Review the preliminary architectural drawings as part of the community review processPhase II - Pre-development· Review of various financing programs that are best suited to achieve the project’s mission and goals· Development of financing alternatives and preliminary budgets including:o sources and uses of financingo development budgeto operating budgeto mortgage analysiso cash flow projections· Procure third party services and negotiate contracts and fees· Prepare and submit financing applications· Negotiate investment terms with equity partners, syndicators and investors· Secure financing commitments from funding agencies, lenders and investors· Manage the development of architectural drawings· Supervise the bid process and selection of the general contractor· Manage due diligence and third party reviews· Assist the legal team with preparation and review of partnership and financing documents· Supervise the filings of Dept. of Buildings applications and building permitsPrepare the project for the initial closingPhase III - Construction· Set up a requisition and funding tracking system· Prepare monthly requisitions and submit to lender for processing and funding· Represent project owner and developer at construction progress meeting· Prepare and submit funding requests to tax credit syndicator for capital contributions based on negotiated benchmarks· Supervise the rent-up of new construction projects and any vacant units of renovation projects· Assist project owners with hiring of permanent building staff· Manage final inspections and sign-offs from the Department of Buildings, Fire Department and City Agencies· Prepare project for final (permanent) closingPhase IV - Operations· For tax credit projects, supervise the submission of the 8609 Financial Update and receipt of final capital contributions from tax credit syndicator· Review and negotiate maintenance, vendor, and service contracts· Prepare financial assessments of building operations· Review rent roll· Review operating policies and proceduresTo answer question #2 about securing funding, you need to have relationships with bankers or private equity firms or private investors. They need to believe that you're going to get the job done well and on time. Development takes a reaaaaaally long time from start to finish. On a new multifamily building in New York, for example, let's say 100 units, you can be in concept stage for 3-6 months, pre-development for 6-12 months and construction is typically at least 18 months, after which you have to lease-up (if rental) or sell out (if condo), which can take an additional 6 months. So at the shortest, you're looking at about 3 years, at the longest......well, let's not go there. There are many things that can go wrong along the way that can ruin your budget, schedule and emotional well-being.When you're beginning, it's critical to surround yourself with experts who know what they are doing, are well-respected and who like you. Having a strong contractor and architect will save you many headaches and will help you in obtaining financing because the credibility of the development team is enhanced by the other professionals' strengths. Selecting the team is not easy and is based on relationships and referrals from your close contacts. I definitely don't recommend going to the yellow pages (if anyone still uses them) and picking a contractor or architect out of a hat.Being on my own for almost two years has been an absolute roller coaster ride. It has been harrowing and rewarding at the same time. There are always problems. People never do what they're supposed to. It's your job as a developer to manage them and make sure things get done on time, or at least as close to the deadlines as possible. Checklists are critical. Whiteboarding helps in keep track of active and potential projects.Feel free to give me a shout if you want to know more about development. This has just scratched the surface of this complex and wonderful field.Cheers and best of luck!