How to Increase Cash Flow By Using Closing Dates StrategicallySep 19, 2017
Does knowledge really equal money? As cliche as it sounds, it really does, and I’ll prove it.
In real estate, what you don't know can hurt you.
I’ve seen a lot of people lose a lot of money in real estate because they were uneducated with some intricacies of the game. For example, some people hear that a particular market is “hot” and they rush over to scoop properties up as if they are at a bargain discount store because values of homes are lower there than in their geographic location, ignoring the cardinal rule: know your market.
The “so called” “hot” market - where prices can be inflated might not represent the greatest long term value for an investor. These particular investors didn't bother to research average rental rates in the area, nor did they research how the market differed from their own. As you can probably tell, these stories didn't have happy endings. The investors willingness to skip education and due diligence led to their investing in properties that looked good on the surface but ended up costing a lot of money in the end.
Profitable Investors Seek Expert Advice
The moral of the story here is that as an investor, you need to be an expert or seek expert advice before you jump in on any real estate deal. These people are already able to recognize great opportunities and are there to help you spot deals and more importantly, help you avoid major catastrophes.
How Closing Dates Can Maximize Your Cash Flow
The specific topic of this article is to show you how closing dates impact your cash flow and then USE that information to give your portfolio a welcome cash infusion. Understand the strategy differs if the property is currently rented or if it is or will be vacant when you take possession.
If it is Currently Rented:
Pick the fifth day of the month for your closing date. This gives current owners time to collect the entire rent for the month. It also means you receive the prorated rent for that month as a discount on your final cash to close statement from your real estate lawyer. This approach equals a reduction in the cash to close funds that come out of your pocket. It also standardizes all mortgage payments to the same day, the first of the month, and let's you collect almost three months rent before paying your first full mortgage payment.
If the Property is Vacant:
You want to choose the last Thursday of the month, 4 to 6 weeks after your condition removal date. The key to this strategy is to negotiate ‘right of access’ prior to closing, after all of your conditions are removed. This can be as simple as including the following condition on your offer:
The seller to allow access to the buyer upon condition removal and 24 hours notice to show prospective tenants and or contractors.
Once this condition is accepted and after you have removed all conditions, you or your property manager can start marketing this property to potential tenants. You will have 4 to 6 weeks to find tenants now. Renters typically move in the last weekend of the month. So if you take possession on the last Thursday of the month, your new tenants will move in almost as soon as you take possession. This eliminates any vacancy issues.
Savvy investors use information to make money.
As this one tip proves, savvy investors use information to make money. This strategy could give you five weeks to market vacant property to find great tenants. These tenants move in almost as soon as you take possession, and you will have almost 3 months of rent in your bank account before your first mortgage payment is due.
To quote Benjamin Franklin’s famous words:
An investment in knowledge pays the best interest.
If you want to learn more about creating serious wealth and securing your financial freedom through investing in real estate click here to see how I can help you on your path.
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