This is the second part of a 4 part series. Stay tuned for links to the additional parts.
Underwriting
Underwriting is my favorite part. I love getting into the numbers. I’ve done a whole series on underwriting, so have a look. Today, will be shorter.
Underwriting means taking all the numbers, verifying them the best you can, and then coming up with a coherent document which tells the story of the property’s financial health. In it, you’ll have metrics like cash-on-cash return and capitalization rate. It will help you come up with a valuation and what you should offer.
Underwriting needs to be done before the offer, and again when you are in the diligence phase, as you are collecting real data on the property. The numbers will change and may cause you to have to change your offer, usually in the form of asking for repairs or a credit from the seller. Once done, you’ll have removed all your contingencies and can get to closing.
Closing
This is the next most-fun part. You finally get the keys to the place and can start. To get here, you have to have been working with the bank. A big issue is in having funds cleared for closing. Make sure the money you have for the down payment is sitting in the bank and cleared with a cashier’s check ready. Make sure you’ve contacted the title company often to see if there are any roadblocks, and to check about what you need to bring on the day of closing.
Closing is a very nervous time until you are done. Then you can celebrate. And then the real work begins. Next time we will talk about asset management.
