How does it increase the time of the project?

Obviously this depends on the circumstances.

When we make assumptions - without doing our homework or 'spot checks' - frequently those assumptions are incorrect.

Little things that should be handled by staff or vendors or subs, can cost a great deal of time when they are overlooked.

Most of these situations can be overcome easily once we have our operating systems in place and are very familiar with the people with whom we are working. It's harder without a fully developed network in place.

That is to say once we develop system 'checklists' in our projects we can quickly scan the checklists and hold the responsible people accountable today - not tomorrow or four days from now.

The lag time of not requiring accountability in a timely manner compounds the time impact easily.

Many of these problems are a function of the lack of experience. There is definitely a learning curve in each new segment of real estate investing we embark upon.

There are simple solutions to many common problems that are all a function of keeping the project on time track.

A Helpful Tool

Here is a tool I developed (and am developing others on a consistent basis).

Problem:
Opening a file on a transaction and either spilling the contents on to the desk or spending 2-3 minutes looking for the right document.

My Solution:

1) I started writing contact names, phone numbers and addresses on the front of each file and the street address of the subject property on the file folder tab (including zip code). I use legal size file folders for every property and file them by address. The same thing applies to the computer files where we create the docs in the first place.
2) Get a 2 hole punch and punch two holes at the top of each side of the folder and install 2 piece prong paper fasteners on each side.
3) We created a checklist of all the documents you use on a regular basis. One copy of the list goes on each side of the file. I use the left side as the 'buy side' and the right side of the file as the 'sell side'.

Examples of items on my checklist template (created in Word) is as follows:

Title: Checklist of Documents, Signatures, Notary, Recording

Subject Property:___________________________ (address)

We put a check mark in blue in the 'yes' check box if it is complete and a red check in the 'no' check box if it is not done and the completion date goes in the last space.

1) Purchase and Sale Agreement ___ Y ___ N __________
7) Limited Power Of Attorney
Correct County ___ Y ___ N __________
Notarized ___ Y ___ N __________
Recorded ___ Y ___ N __________
Recording # ____________________
8) Deed
Type
Warranty ___ Y ___ N __________
Deed into Land Trust ___ Y ___ N __________
Quit Claim ___ Y ___ N __________
Notarized ___ Y ___ N __________
Recorded ___ Y ___ N __________
Recording # ____________________

Currently, there are 19 documents on the standard template and it is still in transition. The way I use the list is to mark the Yes in blue and the No in Red which tells me visually what is completed and what still needs to be done.

All documents are filed in the order corresponding to the numerical list with Number 1 on the top and Number 19 on the bottom.

Also my 'sell' documents are on the right side of the file and the 'buy' documents are on the left.

Now when I handle the file, I have instant access to phone numbers and addresses and can not only find the document I need quickly, I can tell what needs to be done at a glance.

Create Your Own Templates and Checklists

The point here is that each process you engage in can be tackled the same way. For example in the rehab business, you might have things on your checklist like:

Call inspector to schedule prelim
Call back hoe operator to verify appointment
check to see if back hoe operator called locating service to find underground power line
Complete bid from each sub etc...

If you are managing a direct mail program the same type of checklist can be very helpful to manage frequency and results from the mail out.

The reasoning for these things is to develop a system that anybody can follow. When you are starting it tends to be hands on. The better we develop our system tools, the easier it becomes to train staff or subs about how we need to receive information and improve communication.

Poor communication can lead to issues with partners and loved ones. It is always better to communicate more than less.

Good systems help. Comma delimited spreadsheets, for instance, exported from Quicken - that you can email to partners regularly with recap notes - is a good idea.

My greatest weakness in the last several years - in retrospect - has been communicating effectively. It is something that I am focused on correcting.

Comments from a subscriber about Newsletter # 6.

Richard from Texas writes:

'Your foreclosure solution description explained in the Issue 006 brings to mind cautionary advice I have received in recent years about these type of purchase-leasebacks. I have had both investors & attorneys caution against allowing a distressed seller to stay in the property after purchase under a lease, or lease purchase agreement. Apparently, there have been instances that the distressed seller has made the case (thru a devious attorney) that they hadn't understood, nor intended to sell & leaseback...that they understood it to be a loan and they thought they still owned the property. And that you had hoodwinked them and taken advantage of their situation, and apparantly some courts have held for the seller. Perhaps this has only happened in consumer-debtor-tenant favored states (NY,MA,CA, etc); but have you heard additional feedback since this newsletter article?, or are you able to add some more detail to this?'

Here is the email I sent to Richard in response:

"Thanks for your feedback about leasebacks to sellers who have defaulted.

I am aware of the legal ramifications and the recent unscrupulous activities of attorneys representing sellers.

Several points:

1) Please note that I have sellers sign a series of documents clarifying that they know exactly what is going on. I have these signed and notarized at the same time I get the deed.

There are a total of about 23 documents (the number varies depending on the specfic transaction) - four or five of which relate specifically to these issues and these documents have teeth in them. I have accumulated them over time via interactions with other investors and from studying. Most of the documents I have are copyrighted material.

I have purchased several packages.

It is sad to say this but I have seen sellers change their tunes on many transactions. Greed and integrity are interesting animals. I have developed a healthy skepticism about those in foreclosure because of the behavior I have been exposed to over a several year period.

2) This is the only time that I have done a leaseback to a seller. It was an unusual set of circumstances. The seller actually sold the house to a third party in 2002. That third party got a new first and the seller took back a second.

When the third party defaulted - or was about to on the 1st - the seller foreclosed on his second and got the deed back in lieu. He wanted to save something out of his house rather than loose all of it.

In addition, this guy is a single dad raising two daughters. He is a kind and loving father and is an exceptional person. We have become friends.

3) I will do some research and actually do a newsletter on the topic. There is recent court precedent to support the advice you have been given because I have heard of some horror stories myself. However, to be fair, it was only 'third party' through the grapevine - and I can not site the cases specifically.

4) In the short term, I will be sure to bring up your comments in my next newsletter because I think it is a valid point that ‘newbies’ should be very aware of.

Thank you for bringing it to my attention Richard.

Please note that I have been unable to find specific examples of the horrors stories brought on by unscrupulous attorneys over the last few years in my recent internet searches that I can document. If any of you can shed some light on the matter your feedback would be appreciated and I will pass it on to the group or post it on a web page and forward a link to it.

That's it for this time...

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See you next time.

Best regards,

Michael Barrett