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Uncategorized May 13, 2022

Hello guys, and welcome to my blog! 

My name is Lili, and I’ve decided to document my real estate investing journey and bring you guys along with me. What you see here will include all of my experiences from house hacking to wholesaling, as well as my experiences in purchasing properties that I want to keep for myself, which entails using hard money loans to BRRRR them. 

The acronym BRRRR is a strategy description that stands for Buy, Rehab, Refinance, Rent, and Repeat. The steps include buying a distressed property using either a hard money loan, or your own cash, then renovating the property, renting it out, and finally doing a cash-out refinance that allows you to repay your hard money lender, and then have yourself a rental property in your portfolio. 

One of the best parts of sharing content with you guys is showing you the successes that I experience, but also in sharing my setbacks and the resulting lessons that I learn. Not everything goes perfectly on every deal, and the story I’m about to tell you describes some of the hurdles that you may encounter too, if you stay in this game long enough. 

Not long ago I received a bit of alarming news. One of the deals I was most excited about hit a speed bump and I encountered a huge delay. 

I was literally one day away from closing on the property when I received a call from the listing agent informing me that the property’s title had not yet cleared, and as a result I was not going to be able to purchase it the next day as I had planned. 

The agent asked if I was willing to extend the contract by sixty days to give the clearing process more time, and I truly did not know what to do. Immediately I started stressing out, wondering if this was one of those signs from above trying to tell me that this deal just wasn’t for me. I was seriously second guessing myself. Was this a sign? Was some divine power trying to warn me to back out of the deal while I still had a chance? I wondered whether I’d be able to get my earnest money back from the seller, or if there would be some hefty consequences for falling out of the deal at the last minute. I also considered whether the delay in clearing the title might actually be a blessing, as it would give me quite a bit more time and space to better prepare for the rehab. You might be wondering what “earnest money” or “clearing a title” even means, so let’s just dive in.  

A quick Google search of the term “clear title” gives me the following explanation.
“A clear title is a property without any type of lien or levy from creditors or other parties that would pose questions as to legal ownership. For example, an owner of a home with a clear title is the sole, undisputed owner, and no other party can make any kind of legal claim to its ownership.” 

There are a several reasons why a property might not have a clear title. For example, it might not be obvious who actually has the right to own and sell a property. This is why real estate transactions are usually processed through a title company, because their job is to do all of the research and make sure the title is free and clear so the property can be legally sold and transferred to you on your closing day. 

One resource that greatly assists the title company when they’re conducting their research is called a property abstract. This is a document that summarizes the ownership record of a plot of land. 

Apparently, this document is typically in the possession of the homeowner, who is then responsible for giving it to the title company when they enter an agreement to sell their house. Unfortunately, the buyer that I was under contract with had acquired their house way back in the 80s, and since they were now unable to locate the abstract, the title company needed additional time to develop and produce a new one. 

I knew that this delay in paperwork was going to push us pretty close to our 30 day closing requirement because the title company would need ample time to research and confirm all the ownership trends of the property, and then even more time to produce a new abstract. 

In the days leading up to the closing, the title company let us know that the new abstract was scheduled to be completed literally the day before closing, and that meant if everything on it was clear, then we would be able to close and I would own a new property. 

I’ll admit I was quite a bit nervous, but I was also very hopeful. Unfortunately, closing day brought a little more chaos and anxiety into my life. The agent explained that while the abstract had been completed and was indeed back, there was another issue that needed to be addressed. It seemed the property owner had purchased the home from a tax auction, and thus an additional set of legal documents and even more research was required before the property could be sold. The research and the additional set of documents would mean another 60-day delay. 

Now it’s time to seriously consider my options. I can either cancel the contract and have my earnest money returned to me in full, or, I can wait the full 60 days for the additional documents, and then complete the purchase the property at that time. 

If everything goes according to plan and I buy the property on the day of closing, then my $500 earnest money will be applied towards my purchase. However, if things don’t go according to plan due to an additional delay or an error on my part, or, if I decide to back out of the deal after my safe period is up, then the seller has the right to keep my earnest money deposit and I will have to take a loss. 

On the other hand, if the seller messes something up, or if they decide to back out of the deal, then I get my earnest money back. In this case it’s the seller’s fault that they didn’t have possession of the abstract, and thus their title was not clear and available to me on the day of closing. If this happens, then I would be free to cancel the contract and receive my earnest money back in full. 

But I’m not sure I want to do that. A part of me feels as though I should walk away from this deal and move on to the next property. But I know this anxiety is coming from a place of fear, and the last thing I want to do is to make a decision based on a negative emotion. So, what I’m going to do is take a look at the numbers again, and if they still work in my favor, even if I have to push the deal back 60 days, then fine. I will wait the 60 days, risk losing the earnest money, and hope things work out well. But if the numbers don’t make sense, or if they don’t add up to give me the margins and profit that I require, then I will take everything I learned as a valuable lesson, and move on to the next property, the next deal, the next opportunity. 

In closing, I honestly believe that this is a very good deal. I went live on Instagram several times while visiting this property, and I’ve even asked you guys to help me strategize on some of the renovation issues and some of the weird design layout challenges. 

At its core, this property is a two bedroom, two bathroom in a neighborhood where most of the other houses are only two bedrooms and one bath, so that gives it a lot of extra value. Plus, I negotiated a really good purchase price on it, getting the deal at more than $30,000 less than the listing price. It’s also a very light rehab, and I’m pretty confident in it because I’ve already lined up purchase approval with some help from a hard-money lender. 

In addition, the 60 days wait time gives me additional leeway to get my contractors in order, learn more about the process of renovating a house, and hopefully while I continue documenting this process, it’ll be beneficial and helpful for you guys too as you learn right along with me.


 Lili

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