Dallas Contract Revisions

I just wanted to add in a quick update on the progress of the property in Dallas that we are under contract for. When we had the inspection done, it turned up more than we expected. The seller had already told us that the exterior siding and stucco needed to be replaced and that he would be giving us a credit for it at closing. It turns out that the roof also needed to be replaced. There were a number of other minor things that could be fixed also. So, we wrote up an amendment to the contract asking for these minor repairs and for the credit at closing to also include replacing the roof. I had a nervous couple of days. and then the seller agreed to everything that we had asked for. I expected a little bit more of a debate, but I am pleased with the way things turned out. The seller is now getting more estimates for repairs, so we do not yet know how much the credit will be for.

I have also been busy trying to find a good mortgage. At first I went to a broker, but I have not been please with the lack of information and the amount of points and fees. There have to be better deals out there and I am trying to find them. Loans are expensive enough already without all of the additional fees that are added on. What is the purpose of points anyway?

This week I will also be securing insurance for the property. The company that we currently use for our home and automobiles also covers Texas. Someone recently recommended an umbrella policy as a extra method of protection from litigation, so I will be inquiring about the detaisl for that.

Lots of work, so little time.

To Become Wealthy: Contract Details Part VII

Closing: I would expect this to be the final part of the contract, but it is only on page 7 out of 13. Lawyers do not make anything that is short and simple. That way you are guaranteed to need them for anything involving any contracts. Please do not misinterpret my statements as anti-lawyer. I am glad to use them and welcome their expertise and assistance. I am really anti-contracts. Anyway, our closing date was initially set for Feb 2nd, but we have extended it out three weeks simply because both sides need more time to prepare everything, especially since the Xmas and New Years holidays were thrown in the mix.

There is a long list of what both the Seller and the Buyer need to have at closing. Some of these things are restated from earlier in the contact so I will not go thru them again.

When we closed on our personal residence last year, the closing almost seemed like a formality. All of the work had already been done and reviewed before the closing. We basically sat at a large table in front of a big stack of papers and signed our names until our fingers cramped up. Then we had to sing some more. The lawyer gave the seller’s lawyer a check and we got the keys to the house. Except for the finger cramping, it was a painless procedure. I expect that this time the only difference will be that we will receive a FedEx package containing a large stack of papers that will require our signatures that we will then have to mail back before the closing date. We will probably never have the keys to this place, but the property manager will.

To Become Wealthy: Contract Details Part VI

I am going to become wealthy. I have a plan and I am going to show the world how I make money as I make money. My main objective is to make passive income thru the acquisition of real estate all over the country. All of my failures and all of my triumphs are going to be out in the open for everyone to see.

Leases: This item is sort of obvious also. It simple states that all leases must be in full effect t while under contract and that the seller can not enter into new contracts without our consent. It is a little bit of protection from mean and vindictive types of sellers. The seller also must disclose any conditions that may lead a tenent to be able to terminate their lease, or any concessions, bonuses or free rents. Any advance payments also need to be disclosed.

Estoppel Certificates: I went over this briefly before, because we received several of these certificates from the seller. I have figured it out, and basically these certificates are from the tenents to certify the basics of the lease, amount owed, amount of security deposit, any offsets and the expiration date of the lease.

The next section of the contract names the different brokers involved in the sale, and the amounts that they wish to receive at the time of closing. Our realtor wants 3%. Ultimately it is up to the seller to negotiate this fee because they end up paying it out of the purchase price. I think our realtor deserves the 3%. She has been working very hard for us.

To Become Wealthy: Contract Details Part V

HAPPY NEW YEAR!!!!!! I want to wish everyone out there a healthy and prosperous new year. Let this be the best year of investing for us all!


Property Information: Under this contract the seller has 10 days to provide us with a:

rent roll
copies of the leases, including any amendments
inventory of all personal property included in the sale
copies of notes and deeds of trust that will not be paid by closing
copies of any current maintenance contracts or managements agreements
copies of utility statements
copies of any warranties or guaranties
copies of any insurance policies related to the property
copies of any leases related to the property
copy of the “as-built” plans and specs and plat of the property (?????)
copies of invoices for repairs in the previous 24 months
copy of property income and expense statement for the state period
copies of all previous environments assessments
real and personal property tax statements for the past 2 years

This is a lot of information. I am going to need to double check to make sure that we received all of these items. There are several that I already have, and a few might not be relevant, but I really need to double check it all.

This also gives me an idea of the types of records that I will need to keep on the property so that I will have an east time being compliant when I chose to sell the property.

To Become Wealthy: Contract Details Part IV

Feasibility Period: This is a very important section. This is where it simply states that we can terminate the contact for any reason within 28 days of signing. Our realtor is currently extending this date by an extra 14 days due to the holidays holding things up. This will probably also extend our closing date, but I am not entirely sure about that. If we do decide to back out of the contract within this time frame, we will have to pay the seller $360 and we will get back our earnest money deposit.I was very pleased when I learned about this part of the contact. No such thing was included in the contract when we purchased our current home. I believe that it is reserved for commercial properties only and I do not know if that is true in all states.

Inspections, Studies or Assessments: This part simply states that we need to have an inspection done within this feasibility period, and that we are required to pay for it. The seller just needs to make sure that we have access to the property and that all of the utilities are turned on. There is also a nice point about the buyer being responsible for any damages cause by the inspection process.

To Become Wealthy: Contract Details Part III

UCC Search: This stands for the Uniform Commercial Code. I was not familiar with this and had to look it up on my own. All that the contract says is that the seller has 10 days to provide documents that are on file with the state and county to show where the property is located that relates to all the personal property on the property, and to list all the owners of the personal property in the last 5 years. Then it further states that we would then have 7 days to object if there is something that may encumber the title or if any portion of the property is in a flood zone.

This is one definition that I was able to find. “In plain language, the Uniform Commercial Code allows a creditor to notify other creditors about a debtor’s assets used as collateral for a secured transaction by filing a public notice (financing statement) with a particular filing office.” This really does not tell me too much more. Basically I am going to double check with my realtor that this was done and review all documents that are involved to see if anything looks questionable.

To Become Wealthy: Details of the Contract Part II

Title Policy: “Seller, at Seller’s expense, will furbish Buyer an Owner’s Policy of Title Insurance from state company, in the amount of the sales price, dated at or after closing, insuring Buyer against loss under the title policy, subject to:” blah, blah, blah

This sounds to me like the seller is responsible for getting title insurance for us. However, I do not believe that this is correct because when we purchased our current residence we were responsible as buyers to have out own title insurance. I believe that this section means that they seller must prove that he had title insurance from the initial purchase of the property to prove that he has legal rights to the title, and if something occurs the title is insured. I am going to check this out with my lawyer just in case.


Survey: This is simply stated also. Within 10 days the seller needs to provide us with a survey of the property, that was done after the date of the contract, by professional surveyors.

To Become Wealthy: Details About the Contract Part I

Contracts are very difficult for anyone who has not spent years studying law to read. We live in a very litigious society that has lead to an increased wordiness of any legal document. Once more lawyers get involved, the amount of paper increases geometrically. It can sometimes be terrifying to witness.



However, I am going to attempt to explain our contact to the best of my understanding. Please feel free to jump in if I have made any errors in my interpretations.



It starts out simply enough identifying the sellers and the buyers, and the location of the property that is being sold and bought. Then it even goes as far as to list all of the things connected with the property such as the rights to the leases, and warranties, trade names, or anything else associated with the ownership of the property. And of course the most important portion of the entire document also appears on the front page. The Sales Price complete with the amount that we are to put down in cash at closing.



Page two includes a contingency that allows us out of the contract if we cannot secure financing. This seems kind of obvious to me, but I guess it needs to be there. But in order to actually get to this point we needed a pre-approval letter from a bank to prove that at least one bank is willing to give us financing. So, this item seems a little redundant to me.



Earnest Money: This is the amount of money that you need to present to the seller along with the bid. It is being held by the listed Escrow company and the seller will receive it at closing as part of the down payment, or it will be return to us if the purchase falls through. I have absolutely no idea why this needs to be done. What is the point? We have already proved that we are not penniless delinquents before we placed the bid, why do we also have to show that we can write a check for a few thousand dollars. What is this supposed to prove? Does the seller feel some sort of security knowing that a portion of our money is in an escrow account? It is fully refundable to us if we back out of the deal or if the seller does. But it is one of the things that we had to do, so it is stated in the contract.

To Become Wealthy: The Next Step

Our closing is not until Feb 2nd. Of course this is dependent on everything working out between now and then. There are all sorts of details in the contract that give both parties an out. But I have no doubts at this time that we will purchase this property.

I have a lot of work to do to prepare for the purchase of this property, but my mind keeps wandering to the time after we purchase this property and are looking for the next one. I think back to a previous blog where I mentioned that the profoundly successful people are the ones that did not diversify but rather took big risks in one area that paid off. So, do we continue to look in Dallas or concentrate in other areas? Should we look at non-residential real estate investments? The difficult thing is realizing that there are no answers to these questions. So, I will just continue to look at everything until something, somewhere looks good to me.

Until then, I need to review the details of our current contract better to see what I can learn from it.

To Become Wealthy: Under Contract

As of yesterday we are officially under contract for our first real estate investment purchase. I could not be more excited and nervous at the same time. It is an entirely different feeling from when we were purchasing our first home for our primary residences, and that was a more expensive purchase.

To make an odd point about why we are not investing close to where we live. The cost of our 3 bedroom, 1.5 bath house here on the east coast is more than the cost of a 15 unit apartment complex in Dallas. Crazy but true. You need to already be wealthy in order to invest anywhere within driving distance of where I am now.

The next step for us is to find a property inspector. I spoke to two of them today, and it is going to cost us between $1200 to $1800. I just need to coordinate the times with the realtor and property managers. According to the contract, we have 28 days to back out of the contract for any reason that we find upon further inspection of the property and the paperwork associated with the deal. So we are trying to get it all done soon.

I also spent the day on the phone with a few mortgage people starting to rate shop. The mortgage is going to be the largest expense so I want to make sure that we get a good deal.

So much work, so little time.

To Become Wealthy: The Counter Offer

Today we received a counter offer. It was simply stated. They will sell for our offered price of $360,000 but then will not give us a credit to re-do the exterior. If we want the credit, we will have to pay $385,000. Does anything think it will cost $25,000 to redo siding and stucco for 2 buildings? I honestly have no idea.

So, now I am going to desperately call several siding businesses in Dallas tomorrow to try to get a rough idea of how much this is really going to cost us. Hopefully I can convince someone to give me a free estimate and actually drive over to the property to tell me how much work it really needs.

I am thinking of countering with $370- $375 including the credit. But what I an not believe is that this property was first listed at $450,000 and here he is willing to take $90,000 less. That is a 20% mark down. From now on I am going to grossly underbid all properties.

To Become Wealthy: We Placed a Bid

On Friday we placed a bid on the 15 unit property in Dallas. Having looked over all of the property info several times, we decided to bid $360,000. To place the bid was an entirely daunting process itself.

First, the realtor required us to have a pre-approval letter from a lender. This was a quick and easy process that took all of 5 minutes to complete when we were going to purchase the house that we currently live in. The process for buying a commercial property is completely different. It took most of the week, with several back and forth phone calls for more information. Basically the bank wants to make sure that the property will make money and does not care too much about our personal info outside of our credit scores.

They finally approved us and we were sent the letter off to our realtor. In turn she sent us a 17 page legal document that would serve as our bid. We wanted to get the bid in by Friday as a nice way to round off the week. Of course now that we were sure that we really wanted to place the fear of someone beating us to the bid grew and grew. I am still working on getting a lawyer, although I did play a bit of phone tag with one on Thursday and Friday.

We spent one very late night reviewing the bid documents and we only added one part about a credit amount that was yet to be determined for work to be done on the exterior. And off to FedEx I went with signed documents and a 1% earnest money check.

Then we waited…..