Thursday, August 31st, 2023

💸 Funds Wired! 💥

Just moments ago, I received a text from our lender regarding our next project in Homewood, Illinois. The closing statement has been balanced and approved by all parties! It’s time to CLOSE!

Can I tell you how GOOD this feels?!

And for transparency’s sake, up until about an hour ago, I was still sorting through feelings of uneasiness. Even though this is my ninth deal, I’m still learning a ton as it relates to the lending process. Friends, you are always a student! So, get comfortable feeling UNCOMFORTABLE in this business!

For those of you who follow me on IG or FB, you know I’ve been busy with this latest project in Homewood, IL. I’ve come to learn that the most nerve-wracking period of a project is the timeframe between contract to close when you’re knee deep in due diligence.

It’s at this point here today, with a scheduled closing date and funds wired, that I finally feel like I can rest.

So, what were the surprises that popped up along the way from one signed contract to another?

Well, if you have a few minutes, let me tell you 🤦‍♀️.

For starters, this was my first project using a hard money loan (HML). Previously, I’ve raised funds through private money lenders to purchase and rehab my projects. This time around, my partner and I chose to pursue a hard money loan since raising the total funds needed for this project ($280,000) proved a bit more challenging. 

Now, while I’m accustomed to all the typical financial requests…

·      Loan Application

·      Scope of Work

·      Track Record – Experience Worksheet

·      Personal Financial Statement

…what threw me for a loop was the scrutiny I fell under for being an out-of-state investor. Especially since my 5 previous renovation projects have been in the same region as the subject property. 

When initially asked to draft up a LOX (letter of explanation) to clarify how I planned to execute the rehab from 1,500 miles away, it was a very simple explanation in my opinion. This project is a JV (joint venture) with one of my business partners, Vesta Partners, Inc., who lives in the area that our subject property is located. 

Oddly enough, I learned that the truth wasn’t the “appropriate” verbiage 🤷‍♀️. So, to work I went drafting some BS letter about having hired Vesta Partners Inc as my “project manager.” In addition, I was encouraged to note that my other business partner, Harris, who will also be our realtor in the final sale, will serve as another local set of eyes on the project. Whatever…I followed my loan officer’s orders and drafted up the LOX accordingly.

So, that hurdle overcome, I believed the coast was clear regarding concerns over my being out-of-state. Well, that wasn’t the case and I’ll come back to this in a bit 😣.

Another looming issue was the fact that my partner and I, Vesta Partners Inc, decided together that we would close in my LLC since I was applying for the HML. Well, silly me didn’t think about the extra steps that would be necessary to do so since my entity is a Nevada LLC, and the property is in IL. Obvious oversight, and a problem that clearly needed addressing prior to close.

The easy solution here is to apply for what’s called a foreign file in the state in which you plan to do business. 

Easy enough right?! 

So, with that knowledge in hand, I called up Anderson Advisors, who manages my entities, to get ‘er done. Thinking this would be a quick fix, I was informed differently just four days before closing. My advisor expressed concerns about the foreign file exposing my anonymity that we had worked acutely to build to protect me in my real estate endeavors. As a result, she recommended two different courses of action, but neither process would be able to be completed in the timeframe we were seeking. Blerg…

I felt stuck 😣.  

Without diving too much into the weeds here, the seller of the property was unwilling to sign any additional paperwork that would enable me to close in a newly created IL LLC. So, if I wanted to get this deal done, I had no real choice but to file the foreign file for my Nevada LLC and expose my anonymity (more on this and LLC structuring in a future blog).

As a result, I committed to the plan of filing a foreign file ASAP. The clock was ticking to hit our closing date of Friday, August 25th as it was Tuesday afternoon…

While I would typically lean on Anderson Advisors to file something of the sorts, remember that my advisor shot me straight and said the timeline was too tight to turn around this process by Friday. It was time to strategically outline Plan B (and what felt like Plan Z at this point 🙃!)

To the rescue came my other business partner, Harris 😎. As real estate attorney, I literally have Harris on speed dial as my go-to for any legal related bull$hit that I don’t understand. After researching how to get a foreign file executed IN PERSON ASAP, Harris willingly drove to city of Chicago to visit the office of the Secretary of State to get this process executed within a few hours 🙌. Mind you, he does not live close to the city of Chicago. This kind of dedication to see through a deal is just one of the reasons I value Harris so highly. 

So, with a signed and executed foreign file sitting in my inbox, I was feeling confident that there were only smooth waters ahead. 

As you can guess, I was not so lucky… 😞.

Fast forward one week later, it’s now Tuesday, August 29th. While closing did not ultimately happen on the 25thas planned, all parties were confident in the deal closing.  We were just waiting on the backed-up underwriters for final review and approval.

So, it’s Tuesday morning, and I receive a text from my loan officer stating that he had some good news andsome bad news. Bad news?! What could possibly be going wrong this late in the deal?!

Let’s pick up where I left off regarding the lender’s concern about me being an out-of-state investor. While I had originally been pre-approved for a loan covering 85% of the purchase price, during that final review period the lender had a change of heart of felt my deal was “riskier” than originally assessed because of my being an out-of-state investor. 

Ummm…like he didn’t know this from day 1?!? AND did he recall that all my experience (my track record) is in this very region!?! I digress…at this point, I just wanted the loan closed. 

So, what were the ramifications for being an out-of-state investor? 

A decrease in the loan amount by 5%.  

F*UCK. 

Now look, I’m juggling 3 properties at this point. As a borrower who always has “skin-in-the-game,” my own funds are currently tied up in two of those projects with this one on deck. While 5% doesn’t sound like a big decrease, it’s an additional $11,500 that I’d be required to bring to the closing table to close this deal. 

Enter, my angel and private money lender on this deal, Clare. Clare and I had connected a week prior, and she stepped up to the plate to support us on the gap funding needed to close on this deal (a hard money lender only covers so much of the costs). I gave Clare a call and very straightforwardly explained the situation and asked for the additional support.

It was at this very moment that I really felt God working…without hesitation, Clare said YES. YES, she would be able to support us with the additional funds needed to close this deal. Amen 🙏! This deal was meant to happen.  

So, there I was on Tuesday afternoon, at peace with this deal despite all the chaos that had recently ensued. By Wednesday, we had a set closing date on Friday, September 1st and I had everything lined up on my end for a successful close.

…

Now, I’m picking up here on this blog post a few days after a successful closing because I feel it’s important to include one more anecdote to drive home the point that a deal is not closed until it is successfully FUNDED.

On closing day, my notary missed ONE signature. The most important signature of all. The statement outlining the personal guarantee 😩.

At the time it was discovered, it was Friday afternoon, 3:45pm Central Time, and I was driving with my family up to Brian Head, UT…miles out from a FedEx where I could print and sign the required missing document. I had signed the closing documents nearly 3 hours ago and never considered such a faux pas could arise. 

Here again, steps in Harris, who by chance requested I sign a POA (power of attorney) for another process he might need to assist me with on this property. As a result of this piece of paperwork being signed, he was able to sign on my behalf and the lender at 4:35pm CT approved the funding. 

Approved the funding…. While the deal was officially approved, the deal was not officially FUNDED. There is a difference. The seller was expecting the funds in their bank account that very day. And that did not happen. As a result of the missing signature and the time at which that document was approved by the lender, funding would take place on Tuesday, September 5th due to the holiday weekend. 

Blerg. While I wasn’t physically at the closing table with Harris and the seller, I could feel the disappointment in the air from 1,500 miles away 😞.

Well, I’m happy to report that all went smoothly on Tuesday, September 5th and the deal was funded as promised. But what a f*cking rollercoaster 🎢!!

These are the sagas most voyeurs of real estate investing don’t see. Buying, rehabbing, and selling property looks glamorous from an HGTV standpoint (and it can be!), but these are the ups and downs that can happen during the process. 

So, now that I have my wits about me, and I can chill the f*ck out 😆, I have all these feelings of gratitude flooding my heart.

Friends, I wouldn’t be here right now if it wasn’t for the people I’ve connected with in my network. None of this would be happening if it wasn’t for the slew of chance and intentional encounters with the individuals I’m fortunate to have on my “team,” two of them who are now my business partners (separately) who organically stepped into my life. 

On closing day, I posted about the people that made this all possible, and you can check it out here.

I walked away with so many great lessons here, but the biggest one, once again, was the power behind having a strong team of support. This team was built over time, through several challenges and even some failures. But if you don’t get up and try again, you might never find the kind of success you’re ultimately looking for. 

For those of you thinking about investing in real estate, don’t let this post scare you. Understand that the only way to overcome these big and scary obstacles is to take one step forward at a time. Sometimes you might even feel like you’re taking a few steps backward, but there’s a reason for it and these challenges will ultimately provide you with the space and momentum for you to springboard forward. 

With that, I’m excited to announce that we’ve officially “broken ground” on this property and demo has begun! Follow along on my IG or FB page as we flip this house!

☕ Cheers! ☕