The RE-Investing Team
One of the most exciting games to play is who’s your top five. Come on everybody has them. If the world got hit with a zombie apocalypse who are you going Rick and Michonne with? And for all the guys, you know your squad has to be three to five deep in 2K or COD. Real estate is no different and it can be very difficult to create a profitable real estate investing cycle without one. Here are the top five specialists you need on your RE-investing team.
This forefront player takes care of important paperwork and search records to find reasons not to take the deal. They give their expert opinion on matters regarding the title. The flipping side of real estate requires a savvy creative mindset since the web of ownership can become quite tangled. Out the gate your attorney should be running a title search to find any encumbrances involved with the property. They should even be ensuring a survey is conducted to determine property lines and verifying the zoning of the property and structure matches. I can’t tell you how many stories I’ve come across where a structure was built on another person's land and that owner is nowhere to be found during the time of sale. I’ve even gotten my client to the closing table only to find out the property couldn’t be funded because the property has been seized by the seller’s lender. Put it like this the best attorneys can sniff bs from a mile away.
Many investors feel like they need to become a realtor themselves to do multiple transactions. While it can be favorable to do so, why not just hire a team member with the dedicated expertise. This affords you the time to focus on other matters like diversifying your portfolio. Yes, it can be thrilling to be the jack of all trades, but retaining this member keeps deals flowing your way. A great realtor knows their market from the different community rental rates and amenities to market trends. They also have many resources to point you in the right direction. An investor realtor is unique because they can analyze the returns on flips and buy and hold. If your realtor can even put together pro formas (a financial model projecting income, expense, debt and returns) then you have someone who can always help you make the best bet. Stories of becoming house poor or walking into a money pit are common when the realtor doesn’t specialize in real estate as an investment. Not every realtor is suited for working with investors. There are different niches: residential agents, commercial leasing agents, foreclosure specialists and more. Investor agents are typically investors themselves building their own sizable portfolio or putting together a syndicate for larger properties. Once the property has been renovated they will market the property for you to generate a buyer to cash out.
You cannot do a flip without a construction team. I repeat you cannot do a flip without a reliable construction team. They are the ones who are at the property everyday tearing apart your investment to put it back together of course. Starting off you’ll be going through several contractors to get an idea of how each one actually works, the time frame they can complete the project and the quality of work they can produce. This is a grueling process which is why many investors try to work off of referrals. However, having a dedicated team to your projects ensures that you never miss a solid deal because you don’t have the manpower. The general contractor is the person who pulls together a team and oversees the entire renovation process. They are typically carpenters, brick layers, tilers or general overall in terms of trade. You will find creative partnerships within this industry such as joint ventures where you can partner with the GC to complete the project with a profit sharing incentive. Or you can retain their company to do all of your projects and the GC acts as the foreman. It really depends on how important independence is to your contractor. Some contractors look at dictating where their crew goes and handle all administrative tasks. The flip side and most typical side is a contractor who wants to trade the overhead concern to just work on the craft of building. Whatever the case, this person is a powerful asset to the team. If they are not paid they have the ability to put a lien on your property making it impossible to sell unless they are paid. Many investors decide to become GCs themselves. They are called administrative GCs because they know all the paperwork but not how to do the actual work. Although it's not necessary if you plan to be a full time real estate investor running more than three to four projects a year it is encouraged. Regardless, you want to make sure this person is paid well. They protect your investment by making sure it is built correctly and to code to give you a signature look.
Can you go to the store with no money? If you do, it's called window shopping. The lender takes the deals and finds the money for it. Just as realtors specialize, so do lenders. Some banks have awesome renovations loans with competitive interest rates. An experienced lender will be able to analyze how much a deal is going to cost you. If they are a broker they will shop the deal around until they find a bank or private investor. It's important to understand that with flipping properties loans come at a higher interest rate and are short term. This is why they are called hard money. Not because they are hard to get but because they are sometimes hard to bear. A broker will shop around for a better interest rate and cash to close. Brokers generally will add their fees in addition to the lender fees. The lender will look thoroughly at the borrower’s credit profile and expected return on investment of the flip. The best lenders are well versed in various loan products, grants and pending laws that will affect the real estate industry. Working in a solid relationship with a lender will open up lines of revolving credit that increases just as your returns.
For some reason, this person is always so hard to find. I ask everybody I meet who’s their accountant only for them to turn around to say, “I don’t have a good one to say, do you?” Once you find this person for your team you are clear to earn the high dollars. A good accountant isn’t necessarily giving you investment advice. Typically, that’s a different type of consultant. However, they should be very well versed in the law and tax codes especially regarding real estate. There are ways to defer paying taxes on a real estate transaction called a 1031 Exchange. That is a clear open to keep all of your hard earned money then doubling it again and again. While practicing GAAP rules they will keep your financial records so clean the banks would give you money to invest. Imagine getting a phone call from a banker saying, “Hi there, we’d really love for you to use our money?”
Flipping houses can be very profitable and it has made a lot of people rich. Despite what the general public thinks it is not going to be an industry that goes out of business only because land is everywhere and people will always need shelter. Having the right team in place will keep you RE-Investing for decades. This type of system creates generational wealth and stabilizes communities by updating homes boosting neighborhood morale.