Real estate investing is a multifaceted skill, and it’s important to understand that you can’t do it all on your own. Building a team is a crucial step in any real estate investor’s journey. Not only does it humble you to the fact that you still need to rely on others even though you work for yourself, but it gives you access to a panel of experts that can help with your transaction. A prudent real estate investor will have the following people on his or her team: a real estate agent, a mortgage broker, an inspector, a general contractor, a title company, a lawyer, and a tax accountant.
Unless you decide to pursue your real estate license for the purpose of making your real estate investments, you’ll need to partner up with a licensed real estate agent that you enjoy working with on a daily basis. Real estate investors have different risk appetites, needs, and desires than a normal buyer or seller, so it helps if your real estate agent has worked with investors in the past. If you plan on purchasing multiple investment properties at one time or several properties each year, discuss this with your agent in advance. They will need to provide constant input and potential property suggestions to keep up with your unique demand. They can also help weed out properties that don’t fit your investment criteria. Real estate agents are often experts in their local markets, so your agent may be able to help you hone in on a specific area that has good investment potential. They facilitate the entire transaction process and make your life easier. Here’s another bonus – an agent’s commission is always paid by the seller. Don’t let the fear of paying commission keep you from working with a great real estate agent. You can focus on the investment and let them do their job. You’ll be better off for it.
Unless you’re buying a property with cash, you’ll need a mortgage. And unless you live in an ideal world, mortgage interest rates change every single day. Any real estate investor should have two or three mortgage brokers with whom he or she can compare interest rates and discuss mortgage programs. Mortgage brokers are invaluable resources to help understand your transaction costs. Mortgage interest rates have a tremendous impact on the profitability of your property because they greatly affect your monthly mortgage payment. If you use an FHA mortgage, you’ll be paying private mortgage insurance. Your mortgage broker can help you figure out what program to use and whether it’s worth it to pay for points to lower the interest rate, and they can help you plan for closing. They are invaluable when it comes to understanding the financial side of things, and they can even offer lender credits that may help to cut costs. You’ll work with your mortgage broker throughout the entire closing process, so it’s important to work with someone you trust and can build a longer-term relationship with.
When you analyze the market for potential investment properties, your focus as a real estate investor is on the numbers. You will calculate your profitability, your return on investment, and other metrics to help you understand how successful the purchase may be. Once you narrow down your potential properties to the one that you’ll make an offer on, things get a bit more serious. Finding a profitable property is hard enough but be sure to always have property inspections done to confirm that the property is of sound quality. Having an inspector on hand that you can trust and rely upon to be available quickly is crucial. After your first few purchases, you’ll likely build a relationship with one inspection company that you will continue to use for all future purchases. A prudent real estate investor will work out a deal with the inspection company to get a loyalty discount, since you’ll likely be using their services multiple times per year. Once you build a relationship with an inspector, you can better rely on them for honest advice and feedback on the property. You’ll know what to expect even before you get the inspection report which saves you time and the headache of waiting for results.
As mentioned above, the state of the property you’re purchasing is just as important as its profitability. If you run into any major issues during the property inspection process, it would be helpful to have a general contractor that you can trust to help walk you through the issues and create a game plan. A general contractor is well-versed on major and minor issues related to construction, HVAC systems, electrical systems, plumbing, and others. They can give you an estimate on how much it would cost to repair certain issues you may come across with any given property. This would help you determine whether it makes financial sense to continue with repairs or abandon the investment property altogether. Save yourself the guesswork and invest in your relationship with your general contractor. They can give a more accurate estimate than a quick Google search would, and you’d be able to trust them to follow through on the work for which they’ve been contracted.
Another party that will be present throughout the closing process and which is absolutely crucial to the closing of the deal is the title company. It helps to build a relationship with a title company because they facilitate the entire transaction process from offer to closing. Many title companies are willing to offer a reduced service fee for repeat business, but more meaningful than this is the trust you’ll build with the team that delivers you the property deed. Title services are an important part of the purchase process because they determine whether the previous owner is truly delivering a free and clear title. This is the only way to ensure that the property you’re buying will be yours and yours alone. As an investor, this is a non-negotiable part of buying a property.
The benefits to having a lawyer experienced in real estate law on your team should be obvious. A practitioner in real estate law can help answer any legal questions you may come across during your real estate investment ventures, and there will be many. They can also help walk you through difficult conversations or situations with the other parties that are often involved in any given transaction. In the worst-case scenario, they can represent you in the event that you become involved in an illegal or unethical situation. While most real estate agents have access to a legal hotline through their local or national Realtor association, it’s best for you to have a lawyer on your side that you can trust and that you can reach out to without any hesitation or delay. As a real estate investor, you may run into circumstances that are legally questionable, and a sensible real estate investor would ensure that all of his or her boxes are checked and that nothing is being done that shouldn’t be.
Finally, as a real estate investor, your tax accountant will likely become your best friend. The tax system is baffling enough as it is – you’ll want someone you can trust to walk you through the annual tax return process and to give you general advice on how to conduct yourself in business and in finances throughout the normal course of business. There are a wide array of credits and tax deductions available to real estate investors, including mortgage interest deductions, benefits for having a home office, and mileage deductions for traveling to and from properties. Your tax accountant can help reduce your tax burden and maximize the benefits you receive from the business you’re already conducting. Instead of spending hundreds of hours learning the tax code and manually itemizing your tax return, work with a tax professional that you trust and can envision working with long into the future. As your real estate investing business grows more complex, your tax accountant can help you structure your business to be the most beneficial to you. Most importantly, they will help ensure your compliance with the tax laws and prevent you from getting into trouble with the tax authorities.
By now it should be clear that real estate investment is not a one-man (or one-woman) job. It involves a multitude of experts in order to get to the finish line. Having a team that you trust and that you enjoy working with can make all the difference. As a novice real estate investor, don’t feel overwhelmed that you have to do all of this yourself. You have plenty of people around you that are experts in what they do, so that you can be an expert in what you want to do. Building a team takes time, but it is a natural progression as you continue to do business with the same people. If one member of your team isn’t giving you what you need, don’t hesitate to move on to someone else. Real estate investment is a tough business as it is, and your team is meant to make your job easier, not more difficult.