Let’s face it, doing something new always feels harder than it should be.
Whether it’s going to the gym or moving across the country to start a new job–whatever the case may be–it’s always easier with a friend by your side or a spouse/partner making the leap with you.
Getting started in real estate is no different.
Real Estate is complex and carries risks but it can also be incredibly rewarding and profitable if done right.
Some people who want to get started in real estate are so excited about it that they want to start today! Maybe they heard a friend talk about their success in real estate, or maybe they went to a weekend seminar on real estate investing and they’re so pumped that they’re ready to buy the first property they see.
As a real estate investor, we need to throttle back a bit and get those emotions (excitement, nervousness, etc.) out of the equation, or at least keep them in check. If you’re basing decisions on your emotions you could get hurt.
Don’t get me wrong, I appreciate all that excitement, I do.
However, being excited or nervous about investing in real estate can create a million questions in your head. I’m sure you know what I’m talking about. And that’s ok, it shows that you’re thinking… as long as it doesn’t lead to paralysis. I’ve seen it too many times. That’s why I wrote this article to help people just like you.
And believe it or not, the first step you should take is not to go out and buy the first property that you see. No, the first thing you need to do is to build a strong real estate team. Whether you’re excited or nervous, you will soon see why it’s critical to have a good real estate team in place upfront to be a successful real estate investor.
Why You Need a Real Estate Team
Think of it this way: if Elon Musk or Jeff Bezos were to start a new project, something they’ve never done before–like building a rocket to go into space–do you think they know how to do it all themselves?
Absolutely not!
From managing the various jobs needed to design a spaceship from scratch to knowing the best legal entity for this new venture, they need to rely on the expertise of others to arrive at their end goal. They know that they aren’t the smartest ones in the room to do those tasks, so they put a team in place around them to achieve success.
And you should do the same.
Like in the case of Musk or Bezos, not only will your real estate team be able to do things you don’t know how to do but they will also see things that you don’t. That is incredibly valuable! Let’s face it, we all have blind spots, the better you build your real estate team, the better chance they will expose those blind spots and help you face challenges head-on to not only avoid disasters but also increase your chances of success.
How to Build a Real Estate Team
As I said, real estate is complex but it gets a whole lot easier with the right team. Let’s look at, as a minimum, who you should have on your team:
| Bank or Lending representative | You will want to start by finding a suitable representative depending on the type of property (asset class) or investment you are looking to do. Your options will be very different if you are doing SFR investing vs multifamily investing vs fix & flip investing. Understanding this will not only force you to think about your strategy but also define your funding limits. They should be on the front line of preventing you from purchasing anything that will not be profitable. This process of finding the right bank or lending representative will take some time, so start early. |
| Real Estate Agent | Your agent needs to have experience working with investors and with the asset class you are looking to purchase. If they are not then you and they will become frustrated and you will lose valuable time and opportunities. They should also be able to provide comparables of what has recently been sold so that you don’t overpay for a property (or what was recently rented so that you don’t rent for too little). |
| Property Manager | Finding the right property manager can be difficult. Remember that they are the customer-facing part of your business (i.e., they will be dealing directly with your tenants) so if they don’t have the right approach, attitude, solution, or level of professionalism you could experience high turnover, or worst yet, a tenant that doesn’t pay. |
| Contractors
| Even with a Property Manager I recommend having at least one handyman on your team. You can use them when turning over apartments between tenants and use them to make repairs found during yearly inspections. Your property manager can also help but I’ve found that good handymen are cheaper and can complete everything from painting to light plumbing or carpentry to hanging window blinds.
If you’re doing a fix & flip or remodel to rent, then having good contractors and signed statements of work (SOW) or contracts is important. |
| Real Estate Attorney | Not all attorneys are created equal. Just because they provide closing services on a property doesn’t mean that they know landlord/tenant laws or how to properly structure an entity like an LLC or Corporation to shield you from liabilities. Research and interview attorneys before purchasing a property. You may need to have the entity in place prior to submitting offers and operating as a real estate investor. |
| CPA | You will want an accountant that has experience working with real estate investors. Ideally, as you work with your attorney on the entity structure, you will want to keep your CPA informed as the entity you create may impact you negatively from a tax perspective. |
| Leasing Agent | You could have either your Real Estate Agent or your Property Manager be your Leasing Agent. It may depend on their costs and how they advertise vacant units for rent. Or you may elect to have a separate Leasing Agent as part of your team. |
| Insurance Agent | Like the others on your real estate team, you will want an agent who is familiar with investment properties. Not all insurance companies underwrite a policy for investment properties, so you will want to be sure to choose an experienced insurance company that has been and will stay in the line of the investment class you are looking to invest in. |
Start Building Your Investment Foundation
Building the right network of hand-chosen service providers is essential to your success as a real estate investor. As you can see, knowing what your short-term and long-term strategies are will be important in setting up the proper team.
Not only do you want to maximize your profits but you also want to mitigate any legal liabilities and taxes. Your team can help you achieve all that.
Laying the proper foundation with an experienced real estate team is critical to making profitable investments. There are many ways to find the right team members for you. We’re here to help you find them when you’re ready. Don’t feel like you have to do it alone. We’ve got your back!
