Picking The Correct Date for Closing
As a full time Canadian real estate investor, we must take into consideration everything that may effect our bottom line. As an educated investor, we will continually increase our bottom line through a skills and techniques that allow us to make much more money in every transaction.
A real estate investor's career will see many types of deals. A vast number of these deals, as part of our training , will require zero money from the investor in order to make money. Another part of an investor's career will include purchasing a property with their own money, or a joint venture partner's money.
If we are purchasing a rental property, specifically that already is tenanted, picking a specific date for closing is of importance. We must close on the second, third, or fourth of the month.
Why is this so important?
There are a few key reasons:
1) When you first meet your "new" tenants, you want to create a good relationship from the get-go. On the first of the month, who gathers the rent? Well of course the owner (current landlord). If you close on the first of the month then immediately went to your tenants and said: “Hello! By the way I am your new owner/landlord… can you please pay me my rent?” This is obviously not the best way to start off a relationship.
A better way
Let the current landlord collect the rents, and by you closing on the 3rd of the month will receive the rents (minus 3 days) through the disbursements at closing. This way you have a month to begin to build a relationship with those existing tenants.
2) Closing on the third of the month enables you to gather the tenant's last months rent ( the previous landlord would have collected when the tenant first moved in), or damage deposit, security deposit, or whatever your province maintains. This way, you essentially have two months of rent you can use for perhaps your closing costs.
When a person rents, they pay prior to usage. When we have a mortgage, we pay it after we have used the money for the month. We are able to then position ourselves so that we don’t have to make our first full mortgage payment until we have essentially got three months of rent in our pockets: first and last months, and then the next months that occurs. This can lighten the burden considerably for us in dealing with our bottom line.
World Wealth Builders offers many unique, practical, "out of the box" real estate investor trainings which offers the student hands on, in the trenches style instruction to facilitate both a different mindset as well as a successful and lucrative real estate investment business. To find out more, please go to www.worldwealthbuilders.com.
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