Once you’ve found that perfect real estate investment to start off your passive investing journey, there are some simple steps that you’ll want to follow to complete the transaction. While each operator’s process will be a little different, we’ll walk through some of the common steps among all operators so you’ll know what to expect.
Soft Commit – Reserve Your Spot
The first step is to tell the operator that you plan to invest with them on a specific opportunity. You’ve likely received some type of communication via email with all the details on the investment, and that email will usually have a section where you select to “Soft Commit,” “Invest Now,” or “Reserve Your Spot.” This will bring you to an online landing page where you’ll fill in details like your name, email address, phone number, investment amount, and accredited investor status (see previous blog for this definition). You might also have to designate if you will be investing as an individual, married person, or another entity at this point, and I would encourage you to check with your legal/tax counsel to determine the best option for you and your specific situation.
Do I have to Read the Legal Documents?
Once you’ve made your commitment to invest in the previous section, you’ll receive instructions on how to receive all the legal documentation for the opportunity. This process can seem a little daunting, but I strongly encourage you to read everything that is provided. Yes, it will take some time to comb through the paperwork, but you will learn a tremendous amount about the business plan, the risks of the investment, and quite possibly a few other things you didn’t even think you needed to know. You’ll want to take note of any questions you have as you work through the documents so you can circle back with the operator for clarification before signing.
Executing the Legal Documents
Often, the legal documents will get forwarded to you via DocuSign for execution. If that be the case, you’ll get prompted through the documents to the points where you’ll need to input information. Most of the inputs are easy to figure out, but you can always call your investor relations contact with your operator if you run into any questions. The team should be very well versed with the documents and be able to answer your questions or find the answers to your questions quickly.
Wiring Your Funds
This point in the process will likely be the most nerve-racking part of the entire investment process. We’ve all heard horror stories about people wiring their funds to the wrong person or someone intercepting and manipulating the wire information before you receive it. To avoid issues like this, I prefer to pull the wire information from the portal where all the other documents are housed or calling my contact to confirm the information verbally before heading to the bank versus using the information that is emailed to avoid any possibly errors or fraudulent activity. Once you are comfortable you have the correct wire information, head to the bank to wire the funds. You’ll get a confirmation form your bank and should expect to get a funds received confirmation from your operator as well within 24-48 hours.
Congratulations on your first passive investment in real estate! You’ve come a long way since you first started your journey to passive investing. Most of the work is done, and you can sit back and watch your distributions come in and start the process to find your next great opportunity.
