This is a tip that most folks may know, but something that newer investors might not think about. If you are purchasing a property that has current tenants, it is best to close somewhere between the 5th day of the month and the 10th day.
-Your first mortgage payment will not be due until next month.
-As long as your contract states this (which it should), you will be given the rents for that month that the seller has in their possession at a prorated amount.
-Closing on day 1-5 is not best since many tenants may be a couple days late, or the mail may take a few days to get to the seller. After day 5 the seller is most likely to have the cash in their possession and less likely to make an argument at closing that they do not have the rent.
-You will get the prorated amount back as a credit on your HUD closing statement. Essentially this reduces the amount of money that you need to bring to the closing table. On FHA house hacks with 3.5% down, this could be a nice little amount of your down payment.
*As a side note, you should also be inheriting current tenant security deposits at close. This will come to you as a credit as well, but these funds are not to be touched and should be placed directly into your properties' (interest or non interest bearing depending on state) bank account.
Hope this quick tip helps someone minimize their cash outlay at closing! Any other considerations please chime in below! Have a great day BP!
Good tips, @Jeff Brower , thank you! Very helpful.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.