SS44: How Do You Build A Real Estate Team?

Charles explains how to build a real estate team in order to acquire and manage investment real estate.

Watch The Episode Here:

Listen To The Podcast Here:

Talking Points:

Before you start putting in offers on properties; put together a real estate team so you are taken more seriously when speaking to brokers, and sellers and submitting offers.
Commercial Real Estate Brokers
- is where I would start off because they are a great source of information and contacts
- Make sure you have decided on your markets, neighborhoods, and property size before reaching out
- You want a full-time broker that specializes in the types of properties you want to acquire
- Aligning with a new agent might be a great strategy since they are usually more motivated and willing to work with new investors
Property Managers
- A manager that manages the size and class of properties you are targeting (not A class managers for C class)
- Have an office nearby
- Manage properties in the immediate area
- Willing to assist with due diligence (for a fee)
Attorneys
- Real Estate Attorney
  - An attorney that specializes in commercial real estate
  - Best if they own commercial real estate
  - Always have them draft purchase and sale agreements and review contracts
- Litigation Attorney
  - For when there is duress/lawsuit or a potential lawsuit
  - For assessing your legal exposure and answering questions
  - Make them the agent of your corporations
- SEC Attorney
  - Required when you are syndicating deals
- Asset Protection Attorney
  - Once your net worth hits the $1 million mark
Commercial Lenders
- Commercial brokers and bankers
- Local banks and credit unions for commercial loans under $1m or non-stabilized properties
- For loans over $1m; use an agency broker for Fannie Mae and Freddie Mac
Accountant
- Needs to understand commercial real estate, depreciation, and cost segregation
- If you are planning on becoming a real estate professional; make sure they understand this as well
Bookkeeper
- You can find them easily and inexpensively online; make sure they are experts with the accounting software you are using
- No matter how many hours you need them; hire them
Insurance Broker
- Find one by referral that is able to write insurance policies anywhere in the US
Property Inspector
- Get a referral from a property manager or real estate broker

Make sure they focus on your real estate asset class; if you are buying an apartment complex; make sure they inspect them regularly; similar size is helpful

Transcript:

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing how do you build a real estate team now, before you start putting in offers on properties, put together a real estate teams are taking more seriously when speaking to brokers, sellers and submitting offers the number one person on that team would be a commercial real estate broker. Now it’s where I would start off because they are rates source of information and contacts. Make sure you have decide on your markets, neighborhoods and property sizes. Before you reach out, you want to hire or look for a full-time broker that specializes in the types of properties you want to acquire. You know, aligning with a new agent might be a great strategy since they’re usually more motivated and willing to work with new investors. If you’re seeking out a more seasoned broker, they’re already going to have their short lift, the people that they send deals to when they cross their desk with a new agent, you’re going to be able to be on that short list as you start buying properties and moving up.

Charles:
Now, the next thing I would say before we move forward is having a residential real estate agent as well on your team. And the reason be this because I’ve purchased properties, commercial properties before with residential agents, you know, some banks that are, might foreclose on something, they wouldn’t know where to sell it. They go through their same REO, real estate owned agent. The other thing too, is that if you are looking for say a 15 unit apartment complex or a 20 unit apartment complex, and someone had just inherited one and they don’t know what to do with them. And since they’ve, they’re not in real estate investment and it was like, you know, their fathers and they have this now they’re probably gonna reach out to a residential agent that they’ve used before. Maybe one for their family that buys helps them buy and sell houses and bring this property to them that agent’s most likely going to take the listing, but they’re not gonna know what to do with it.

Charles:
They’re going to try to find comps. They’re gonna try to run it like it’s a one to four unit property. They’re not going to know how to value it. They’re not going to know what type of strategy a buyer would be using with it, how to get financing. So if you are networking with residential agents as well, this is perfect. Whenever you go to network events, don’t skip over the residential agents, give me your card, put on the back of it. Exactly what types of properties you buy and possibly they’ll call you. If they get something that’s pretty unique. Now, some of that’s happened with me before, as I’ve reached out to brokers, commercial brokers in other assets, asset classes, then multifamily and self storage and stuff like that. And ask them to you know, to let me know if they have any properties that I might be interested in.

Charles:
I remember I was speaking one time to a land broker and saying, Hey, if you have any gave them the asset classes that we like buying a size of property, stuff like this, and perfect. If they find anything there, they’ll send it over to me. They send over a couple of deals before that never penciled. But the thing though is that you’re most likely getting properties that haven’t been shopped around because they don’t have that list. If you’re a land broker and you get a self storage complex that comes across your desk, what are you supposed to do with it? Well, you’re going to go to the one or two people that told you before, Hey, I want to buy self storage and say, Hey, are you interested in this? And and maybe you might find a deal because it’s miss valued that you can get at a pretty nice discount.

Charles:
Next thing on your team is going to be property managers. Okay. A property manager that manages a sizing class of properties, you are targeting is very important. So if you have a C class property find a manager that manages C class property, don’t find one, that’s managing a high-rise A-class down the street. It just won’t work. They have to know about your tenant base. They have to know about the area have them make sure they have an office nearby. I like to see that managers manage properties in the median area. And this is for twofold. Number one is that if they’re managing properties in the near, in the immediate area, they know exactly what the rent is and what the ability for rent is. And for the finishes, they know that a to one with black appliances that’s been updated we’ll get a thousand dollars a month.

Charles:
And they know that if you change that around and you put stainless steel in there, you’ll get 1300 and do that package through it and they’ll know exactly for your property, what you should do. And we should plan on when you’re renting out your property, when you do the renovation, when you do the value, add it and everything like that. So it’s very important. The other thing too, is, are going to be in your area. If they have multiple complexes, there’s gonna be someone probably driving up and down the street every hour from that management company, if there’s something wrong with your property in your property they weren’t at it’s going to have immediate attention. The other thing too, is that they’re going to know the tenant base that’s in the area, and this is very important for C class real estate.

Charles:
So like I said, the main thing with not going from a A-class manager for your C class is that they don’t understand the tenant base. They don’t understand when tenants working. I mean, when you’re in C class real estate you know, you have to kind of bend the rules of a lease because that’s the people you’re renting to, if you want to make money. It’s very difficult to say, Hey we’re going to hit you with this huge late fee on the second day of the month and all this kind of stuff you have to work with the people maybe have them give them a three day window when they can pay their rent and all these different things. And it takes the right manager to make money and C class. It’s very easy when you’re an A-class, Hey, you didn’t pay by the first.

Charles:
And you know, we’re going to hit you with $150 late fee and that’s that, and that’s all you can do with it. And we won’t accept partial rent and all these different things that managers in a class and B plus and stuff like this can do, you can’t really do an C class, right? If someone owes me rent and C class, and they’re going to pay me half the month of rent, I’m going to take it. And unless I want them out next is they’re going to be, hopefully they’re willing to assist with due diligence for a fee. This is great. I have a property that I have under LOI or having their contract, and I’m going to the management company and saying, Hey, can you review this with me? Can you walk through the property with me? Can you can we do kind of, when we walk through the units, I’ve done this before and we look at a few things, they have a spreadsheet that they’re keeping track of everything on, and you’re going to obviously pay them for your time, their time, but you have an idea.

Charles:
They have an idea of what the property looks like from the inside. You have now a really good idea of what it’s going to cost for a construction and renovation and everything like that. While also you have an idea of what is you know, what your game plan could be with the property. You know what I mean? And they’re going to know better than anyone, and they’re definitely gonna know better than your brokers because they’re renting they’re renting these properties. They’re working with other owners that are renting these properties and dealing with renovations and value and everything like that. Next part to your team as attorneys now, number one would be a real estate attorney. So an attorney that specializes in commercial real estate best if they own commercial real estate themself, and always have them draft purchase and sale agreements and review contracts.

Charles:
If you have one of these attorneys already send out your LOI to them just the, you know, just the template of it, have them review it before we start putting on offers. You probably don’t need them to review every letter of intent that you send out, but have them initially, okay. The template as being fine. And then once that, once that signed, once you have an executed LOI, both parties, buyer, and seller have signed it. You can send it off to your commercial real estate attorney and they will draft the PSA or purchase and sale agreement. Next is a litigation attorney. So for when there is duress to a lawsuit or potential lawsuit for assessing or legal exposure and answering questions, I mean, there’s so much more legal exposure that people get themselves ex you know, opened up to with business.

Charles:
And it’s something that you need to have open lines of communication with your litigation attorney about, Hey, is this gonna be a problem? Is this not going to be an issue? What we do is we make them the agent on our corporations. And so if there is a problem or there is any type of issue the attorney knows about it before we do pretty much. And that’s something that they are already working on it, they’re already assessing it. So we each speak to them. You know, they kind of have an idea of what’s happening already. Next is an sec attorney. Even if you’re not syndicating deals, you should have an SCC attorney in your CRM and it’s, it is required when you syndicate deals, but you don’t know. I mean, you’re not sure when you’re doing that, get a referral for an sec attorney reach out to them keep in contact with them, get on their mailing list.

Charles:
If they have any webinars, stuff like this, you can start joining in and learning more about it. And then when you do have a property that you want to syndicate, they, you can just email them, tell them, Hey, this is already under contract and we can start the process. You don’t have to be searching for sec attorney to work with next is an asset protection attorney. Now this isn’t really required when you’re starting off, but once your net hits the million dollar mark, I would definitely suggest that you start looking for an asset protection attorney. It’s going to be a saving grace for you as your business grows, okay, next is commercial lenders. And so commercial brokers and bankers and local banks and credit unions for commercial loans under a million dollars or non stabilized properties. When I’m saying non stabilized properties properties consider stabilized.

Charles:
If it’s had 90% plus occupancy over the last 90 plus days, that’s considered stabilizing. So a non stabilized property would be a property that’s requiring major renovation what we call a heavy lift, and you might be able to find local banks to help you with that and finance that it’s also, if you’re buying commercial properties under a million dollar loan amount. Now when loans go over a million dollars, you probably looking for an agency broker for Fannie Mae and Freddie Mac, even if you’re not having or sourcing loans right now, for properties, with loans over a million dollars you should get a referral from someone for an agency broker and, you know, open the lines of communication. So when you do have a property that comes through, you’re not searching for this, this broker, and you have an idea of the costs and how the whole process works.

Charles:
And it’s going to make you a much more educated investor when this property confronts you. And so you can move forward and most likely acquire it. Next is an accountant, and they need to understand commercial real estate, depreciation, and cost segregation. If you’re planning on becoming a real estate professional, make sure they understand this as well, because when you become a real estate professional there is you can offset a lot of your income with depreciation and they have to understand that. And they have to understand to make sure that you’re actually a real estate professional, if you’re planning on being able to do that. So it’s very important to get a good accountant. Next is a bookkeeper, and you can find them easily and inexpensively online, make sure they are experts with the accounting software you are using. And no matter how many hours you need them hire them.

Charles:
I mean, even if you have minimal transactions, even if you use them once a year for two or three hours or if you use them every quarter or every month depending on all the transactions that your business house definitely hire one, we use a local one, they do a fantastic job for us, and they handle all of our bookkeeping for all of our businesses. Next is an insurance broker. Now find one by referral. That’s able to write policies anywhere in the U S now in your, if you’ve purchased properties and you’re purchasing, purchasing similar properties in a, in, in the same area, you’re going to have an idea of what insurance costs and you can do. You can figure that out in your underwriting, but when you’re getting into larger properties, commercial properties, larger commercial properties you’re going to want to pull a quote when you’re doing underwriting.

Charles:
So you reached out to your broker, Hey, this is what we’re looking at. You know, we’re going through the final steps for the underwriting here. What would, you know, what would insurance cost on this? And you can pull that and you can work that into your underwriting. So it’s actually a legitimate, accurate number. Next is a property inspector. So get a referral from a property manager or real estate broker for this inspector and, and make sure they focus on your real estate asset class. If you’re buying a apartment complex, make sure they inspect them regularly. Similar size is helpful. So I remember speaking to a property inspector for the first time and asking them if they took care of a larger multi-family properties. And they’ve said like, in the last two weeks, they had walked a 200 plus unit complexes. This is perfect.

Charles:
This is exactly what you want. They come onsite, they have a team, they know they bring what they need with them, and there’s not an issue. And that’s what you want. You don’t want someone that says yeah, I could do that, right? You don’t want someone to know, we normally do this. We can do them. We usually charge this amount. Depends on how far we have to drive and all this kind of stuff. But that’s when you know, you have someone that you could use and your property manager will probably have a very good one. So I hope you enjoyed, please remember to rate, review, subscribe, submit comments, and potential show topics at global investors, podcast.com. Look forward to two more episodes next week. See you then

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