Growing up we played a lot of sports. Ron played football under John Madden at San Diego State and my sport was water polo at UCSB.
One thing we both learned was the value of putting together a great team.
You'll want to do the same when you decide to become a real estate investor... this is true if you plan on buying only one home or many. Below we've put together a list of the various people you'll want to consider.
BUYING/ACQUISITION TEAM:
MORTGAGE LENDER:
Unless you are paying cash for all your properties,
a mortgage lender will be a crucial player. One thing we've learned in our 20
years in the business is that not all lenders are alike. There are a lot of
amateurs out there that can get you in trouble.
We recommend that you hire
someone with a lot of experience with non-owner occupied real estate loans and a
clear track record. We personally prefer mortgage bankers over brokers. We've
simply found to many variables, especially in underwriting policies, when using
a broker.
REAL ESTATE AGENT/BROKER:
Let us say up front that we are
Realtors. That said, most true investors do use a real estate agent or broker
when buying investment property. A good agent will know the market conditions,
have access to data and valuation tools most lay people simply do not have. We
qualify a good agent as one who is:
- Full-time in the business with a minimum of 5 years, preferably over 10.
- Knowledgeable about the various markets.
- A strong negotiator
- Conversant in the math skills required to evaluate investment property
- Someone you feel you can trust
- Someone who shows you the best properties available, not just his or her own listings.
- We recommend you interview several agents to find the one who you find most competent.
HANDYMAN OR GENERAL CONTRACTOR:
There is a good chance, especially in
the current foreclosure market, that a candidate home will need some work. You
may have the skills and time to do some or all of the work yourself. If not, a
good handyman or contractor will be essential.
A contractor or handyman will
help you evaluate the costs and time line of bringing the home to rentable
condition. His or her input will be important in determining CAP rate and thus
the maximum purchase price you'll be willing to negotiate. Important criteria
includes:
- Ability to provide an accurate cost analysis.
- Ability to perform the needed repairs on time and on budget.
- A background in investment housing and best materials to use in a rental application.
THE BUSINESS TEAM:
REAL ESTATE LAWYER:
The Boy Scout motto of Be Prepared is
the focus here. At some point in time you will probably need to initiate
eviction proceedings on a tenant… it comes with the job.
Pre-planning an action plan and having the necessary paperwork drawn up in advance is important. If and when the time comes, immediate action is your best course and can often help in actually training and retaining a tenant. When they learn that you don’t mess around, they are not as apt to either.
A lawyer can provide you with the necessary lease agreements and other paperwork to keep you safe and on course as well as advise you on specific issues. Some believe it is best to hire a real estate attorney who invests in rental properties him or her self as they will have working knowledge of the issues.
ACCOUNTANT:
An accountant/CPA will be invaluable. Understanding
the tax consequences of rental property is tedious and usually beyond
most investor’s abilities. In addition, a knowledgeable accountant can
provide strategies and advise that will may you more profitable and
keep the IRS off your back. Your accountant may help you determine and
set up an LLC for your business if needed too.
PROPERTY MANAGER:
We can’t say whether or not you’ll need a property
manager. We recommend you interview a few and find out exactly what services
they provide. At the conclusion of the interview you have to ask yourself if you
have the resources and skills to do the job yourself. (See our page on Property
Management for more details.)
TENANT SCREENING SERVICE:
Finding a good tenant is of great importance.
One of the tools you will use is a tenant screening service. Tenant screening
provides you with a variety of important information about the quality and
background of your future tenant. Services vary by company. We recommend at
least the following information be gathered:
- SSN Validation
- OFAC/Patriot Act Search
- Evictions + Suits
- Liens + Judgments
- Bankruptcies
- Criminal Records Search
- Sex Offender Search
Tenant screening services may be offered ala carte by property management firms and can be found online by Googleing “tenant screening service".
MISCELLANEOUS TEAM PLAYERS:
You may want to interview and have on hand some
or all of the following service providers:
- Bookkeeper
- Insurance Agent
- Landscape Maintenance
- Plumber
- Painter
