How to Close on Off-Market Properties

Ashley:
This is Real Estate Rookie, episode 186. My name is Ashley Kehr, and I am here with my co-host, Tony Robinson.

Tony:
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 Kehr, what’s going on? What’s what’s new in your neck of the woods? How are things on the east coast today?

Ashley:
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 a nice day. I’m finally walking kind of [crosstalk 00:00:42].

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

Ashley:
Yeah. 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 and, obviously, still not compatible for him. And he just basically drags them around the house that he needs crutches. So at least they’re still getting good use, I guess.

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

Ashley:
Yeah. What about you, Tony?

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

Ashley:
Is there a pitch deck you’re putting together?

Tony:
Yeah. Yeah, it’s a pitch deck. Yeah.

Ashley:
Cool. Yeah. I can’t wait to see it.

Tony:
It’s going to be the pitch deck. Yeah. There’s so much upside here, so we’re really excited. So it’ll be a fun day for us.

Ashley:
Are you using a software yet to manage the syndication?

Tony:
So the actual investor’s portal and all that stuff? So what’s been recommended to us is called InvestNext. We [crosstalk 00:02:06].

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

Tony:
You do have an affiliate link? Well, there’s some guy that does, it’s called fund administration. So he helps you make sure that your distributions match what your PPM says. So I guess this guy has some kind of relationship with InvestNext. He’s actually creating the account for us.

Ashley:
Yeah. Cool. Well, nice.

Tony:
Yeah. So it’ll be exciting.

Ashley:
Yeah. InvestNext recently just sent me a super nice North Face zip-up, so make sure you get one of those, too.

Tony:
Oh, okay. Yeah, I got to grab one. Are you using InvestNext for one of the campgrounds?

Ashley:
No, I’m setting it up as just a portal to collect names, to create a list of accredited investors, so that when I am ready, I have that list set up, so.

Tony:
Oh, cool. That’s awesome. Yeah. So if you guys haven’t heard of InvestNext, they’re a software tool that a lot of syndicators use to help manage their accredited investors that come into the syndication. Well, 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 a big fundraise like this, it’s a platform that kind of helps you manage all the people that are investing. So if you’re doing that kind of thing, be sure to check it out. All right. So today’s question comes from Aaron Nygaard, and a 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 experience. Typically, what we do first, Aaron, is that we’ll get 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 on an on-market deal. So you still maybe put an earnest money deposit, you still have your inspection period. If you are buying this 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 playing the role of middle man between the buyer and the seller. So you guys make an agreement, take it to title and escrow, they facilitate that transaction. So how has it been for you, Ash?

Ashley:
So usually what I do is I’ll do a letter of intent first. So usually it 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, or you sell your own house or something like that. I 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 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, 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, maybe one seller financing, and then one conventional financing, or a cash offer. And then I present them to the purchaser, or the buyer, that way. And then as far as an inspection, it depends what type of house I’m buying or what property. So I’m 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 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.

Tony:
Yeah. So I guess the last piece of advice to Aaron would be just go out and find 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 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.

Ashley:
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 a contract, 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.

Tony:
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 [crosstalk 00:08:25].

Ashley:
Yeah. Well, 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 at Tonyjrobinson on Instagram to find out about any more new hires he has, and then you can follow me at wealthfromrentals. 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 a DM, slide into my DMs 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.