Real estate investing is not a solo game. You will have to rely on many other people to achieve maximum success because it’s just not possible to do everything yourself. Since your success will have to rely on other team members, make sure you choose wisely! The main team members you need to select and will deal with are; a realtor, a property manager, a banker, and an accountant. We’ll talk about them in the order they need to be added. It is important to know enough of every subject to have intelligible conversations with each member of your team, but rely on them be the experts in their field. Your focus is on becoming the expert at investment analysis and acquisitions.
Find a local realtor that is reputable and reliable. If at all possible look for a realtor that specializes in investment properties for even more insight. Although an investment specialist is not always available in all markets, some will still have more experience than others. Talk to several about and gauge their experience and knowledge. Tell them your plans and what types of properties you are looking for. Not only will a realtor be able to set you up with automated alerts whenever something matches your criteria, they can also advise you on trends, neighborhoods, and values.
THE PROPERTY MANAGER
A good property manager is worth way more than they charge. Not only can they often make you more money than their fee over the course of time, the peace of mind of not dealing with tenants while knowing your property is being cared for and maintained properly is invaluable. They can often rent your property faster and for the highest amount that doesn’t increase vacancies. General repairs and maintenance are often at a lower cost than you calling service providers and the repairs are performed much faster. However, a poor property management can turn what would be a good investment a loser, so choose wisely!
When selecting a property manager meet with all of them in your area. Create a list of questions and go interview them, questions such as; How many properties do they manage? What type of property do they specialize in? How long of a contract do they require? What is their fee structure? How do they market to tenants? How do they screen tenants? What are their maintenance charges for various items? How often do they do inspections? What vendor relations do they have that may save you money? What do their owners reports look like? Do you get copies of all the bills and invoices with your monthly reports? How often do they pay the owners? Do they pay by direct deposit?…
Create as long as a list as you would like. Research them online. Find out what people are saying, both tenants and owners. Ask for a few owners you can call and talk to for references. Be incredibly thorough. These are the people you are entrusting to maintain the profitability and the condition of your investment. (More insight in the Property Management post)
There are multiple options here. You could just loan shop every time you buy another property to get the best term every time. However, there is tremendous value in building a relationship with a single bank and having a main point of contact. I prefer working with mid-sized banks vs national banks for many reasons. As opposed to a national bank, at a mid-sized bank your point of contact for investments will likely be much more than just an order taker. They can provide valuable insight and advice. I have learned an incredible amount from my banker about investment properties and am a much wiser investor because of him.
Also, since they have all of your info and personally know you, the speed at which you can move and close a deal once you have an established relationship can be a huge advantage. A phone call can often get your pre-approval letter in minutes for a hot deal. This could give you the edge over other investors. They often have some more flexibility in decision making. Many service their investment loans in house instead of just checking every single box is checked to be able to package and sell off the loan. Even if it’s not the absolute best loan deal you can get, all of these other benefits are worth much more than the cost of an additional 1/8th of a percent difference in interest rate.
Plus, after you are well established with the bank they may even be able to provide other special loan structures that blow traditional structures out of the water. Talk to a lot of local banks in the area. Ask to meet with whomever you would deal with for investment deals. When you meet with them ask them all sorts of questions such as what are their typical investment loan structures? What is required to qualify for the loan? Do they count the rental income towards debt service ratio? What is the lending cap for an investor?
I highly encourage finding a great professional accountant that really knows the ins and outs of rental property and all the tax loopholes available. Interview several of these as well and gauge their experience in dealing specifically with rental properties. The tax laws are constantly changing year to year. Having a good accountant that stays on top of the changes is vital. Ask them how many clients they have with rental properties and their experience with them. If they don’t deal with many real estate investors, they may not be able to capture all of the savings available by utilizing every tax loophole and advantage possible.
Ask them what advice they have for you and compare their answers. This could be a great way to gauge their real knowledge of the subject and very useful in comparing them. If one has a lot of solid advice and another can’t think of much off the top of their head, then it’s obvious which one has real experience with rental properties.
A good accountant that knows the ins and outs can also provide advice on legal structures that would also minimize your tax liability. Ask them about their rates too, but this only be a deciding factor between two similarly qualified accountants. Trying to save a little bit by doing your taxes yourself, or going with the cheapest accountant is a mistake. You may actually cost you thousands a year in missed savings.
ADDITIONAL TEAM MEMBERS
Are you going to be managing your properties yourself? If so, knowing a great handyman that is reliable and quick to respond is vital for when you can’t get there yourself. Are you going to be doing value add properties (flip & hold strategy)? Then you’ll need a good general contractor or sub-contractors that you’ll work with. A real estate attorney can also be a vital team member. Just like with the accountant, make sure to find one that actually specializes in real estate law. Having well written contracts and leases that protect you could save thousands upon thousands. Especially as you start dealing with larger and larger investments.
Building and selecting the right members for your team can greatly improve your success rate in real estate investing, so choose wisely.