This post may contain affiliate links which means we may receive a commission if you purchase through our links. Please read our disclosure for more info.
A continuation from the First Post about our first real estate rental purchase!
Closing on our first real estate rental purchase
The final step in owning a new property is the closing itself. At closing is where you sign all the documents and funds are exchanged for the property. We happened to meet at the title office. In Illinois, this process involves a lawyer. If there you or the seller have a realtor, they are present as well.
During this process, we were verifying all of the lease documentation. The sellers’ attorney decided to inform us that the highest paying renter didn’t have a deposit on file. The investor decided not to bring this up prior to that day, and none of the documentation had lead us to believe otherwise. Even the final closing disclosure documents had credits for all of the lease deposits. A deposit is technically the property of the tenant. So, we had no choice other than to walk away from the deal or accept it as it was. Learn from our mistake here, and always ask in writing about deposits on file.
All the paperwork
Also, during the closing, we had signed documents stating that we would assume the current leases. The current tenants had all been month-to-month, but what do you think the seller did? He presented newly signed leases! Another thing to document in writing to a seller during the buying process is to not make any changes to the lease(s).
After a quick conversation with my lawyer outside the room, we opted to continue along with the purchase. It’s a surreal feeling when you sign the last document and the title company hands you the final copies. Walking out of that room, we were officially landlords! Being our first purchase, that’s when the fear sets in because you’re officially responsible for somebody else’s home.
Meeting the tenants from our first real estate rental purchase
There tends to be a debate about whether or not you should introduce yourself as the landlord or the owner of the property upon first meeting the tenants. Since we were self-managing, my wife and I set up meetings with each of the tenants and decided to introduce ourselves as the new owners. We informed the tenants that we would also be managing the properties.
New leases for our first real estate rental purchase
Upon our first meeting, each of the tenants were all very friendly. We met each of the tenants at a time convenient for them and made sure to schedule it inside their unit. To our surprise, we were successfully able to have them agree to discontinue their current leases and sign new ones with us. Our lease was much more thorough than the ones the tenants previously signed.
As mentioned in Part 1, during our first meeting with a tenant, they let us know about a cat recently acquired. Inside another unit, a puppy greeted us! Both tenants informed us that the property manager was fine with them getting the new pets and only had charged them a $25 pet deposit. Inside the leases was a $300 pet deposit, but that was obviously was not enforced by the manager.
Luckily, both in the original leases and in our newly signed lease, there we a monthly pet fee of $50. Both tenants were accepting of this fee and we added it to the current rent amounts. Without that clause, dealing with the new pets could’ve been much more difficult.
Introducing new processes
The tenants had previously been accustomed to the current property manager picking the checks up from the residence or sometimes mailing the checks. There was no way we’d be driving to collect checks, so we introduced the tenants to Cozy.
Cozy is an online website that allows you to list properties, screen tenants, and collect rent for free. I learned about Cozy by listening to Bigger Pockets and knew we had to use it for our future rental properties! Another benefit to Cozy is that it allows for maintenance requests to be submitted online for free as well!
When you make the decision to invest in real estate, take your time! There’s no need to rush into making a purchase. You want to make sure that you have properly saved up for your purchase and selected the correct location.
Maintenance is unpredictable, so it’s important to have a plan for how to handle issues as they arise. Remember that it’s not only a money commitment if you plan to self-manage. There’s also a time commitment. Be cognizant of how that time investment will affect your family.
We’ve learned much from our first purchase. Outside of asking a couple more detailed questions to the seller, I wouldn’t change a thing. This was a great first introduction into real estate renting for us and we plan to continue.
Please do ask your questions in the comments! Check out our Real Estate section to learn more!