T.E.A.M, the acronym commonly found in sports locker rooms and offices around the country, is a cheesy saying designed to promote collaboration. In fact, my boss has this written on his whiteboard and I am forced to see this message everyday.
Despite the acronym’s corny nature, the statement contains a lot of truth. The same holds true for having an all-star real estate team. You cannot expect to succeed in real estate on your own and will need to surround yourself with a team all-stars if you wish to succeed.
Most people believe a real estate agent is the first person to to engage; this is a common misconception.
First and foremost you will need a lender or mortgage broker. This is the MOST IMPORTANT PLAYER ON YOUR TEAM. I kid you not, your lender, banker, or mortgage broker should be a perennial M.V.P.
Lenders, bankers and mortgage brokers all serve the same function; their job it to get you a loan. There is little difference between the three. My personal preference is a mortgage broker since brokers typically have a larger number of products to offer.
A quality lender is a game changer for your team. Lenders are very knowledgeable and will help determine your buying power. A good lender offers various loan products. The products may vary based on down payment, fixed rate or adjustable rate, and loan term (how long until the loan matures).
Additionally, your lender will provide you an approval letter. This document is required for submitting an offer on a house (unless you are buying all cash). Approval letters legitimize your ability as a buyer and provide sellers comfort in your offer.
I highly recommend going with a seasoned lender who has experience closing loans. This is not a position you want filled by a rookie.
The Real Estate Agent
The real estate agent is the second most important team member. Truthfully, most agents are horrible and not worth their commission.
However, when you find a quality agent you now have a master negotiator and someone who knows the market like the back of their hand. If you are interested in rental properties, you should not be looking for just any agent. Preferably, your agent is an experienced investor.
You want to find an agent who owns and/or manages investment properties that provide POSITIVE cash flow every month. This type of agent will assist you in analyzing deals, provide insight to market rents and help you avoid any pitfalls.
Never buy a property without a home inspection. Let me repeat that. NEVER buy a property without a home inspection. NEVER EVER! You are about to invest tens or even hundreds of thousands of dollars to buy property. Do NOT skimp on the inspection.
A quality inspector will tell you everything you need to know about the property. The inspector’s job is to look under every nook and cranny; if there is a problem they will find it. The inspection may take a couple of hours. Be patient – its worth it. Your real estate agent will refer an inspector if you do not know one.
I ended up walking away from the first property I ever had under contract. Thankfully, I had the guidance from my lender and real estate agent to order a home inspection. A simple home inspection saved me a small fortune.
At first glance the property looked great. The house was modestly renovated and reasonably priced. On the surface everything looked great. However, the inspector found a BIG problem.
The attic access was painted shut. After cutting into the paint to open the hatch, he discovered an alarming problem. Most of the beams for the roof were rotted out and moldy. The roof and all of the framing would need to be replaced. This was a serious problem. Walking from the property saved me a tens of thousands of dollars and countless headaches.
Like the property inspection, insurance will protect your investment. Insurance brokers are boring and mundane but provide a vital service. Banks will require that you have insurance. On the off chance you are buying all-cash, you should still purchase insurance. Why would you spend a small fortune to have a renter burn the place down and lose everything? Insurance protects you from those “oh shit” moments.
In addition to insuring the property, most policies provide liability coverage up to $250,000. The liability coverage will take care of accidents such as someone slipping on ice or cover legal expenses if are sued you for a indecent that took place at the property.
Furthermore, you can purchase an umbrella policy. This type of policy is in addition to your home owner’s policy and protects you and everything under your ‘umbrella’. I highly recommend an umbrella policy once you have more than a few properties. The policies are affordable; $10-$20/month will get provide well over $1 million in coverage.
Not every player can be an all-star. You will need a few role players to round out your real estate team. Each role player has a specific skill set that is only needed during crunch time or an emergency.
- The LICENSED electrician – unless you enjoying being shocked and know what you are doing, I highly recommend finding a LICENSED electrician. Electricians are hard to come by but good to know. Want a new light fixture installed? Need a heavy up? Bought an old house and need to install new GFI outlets in the kitchen and bathrooms? Or perhaps the property is so old the entire electrical infrastructure needs to be replaced. An electrician, more specifically, a LICENSED electrician can help with all of these problems. You should only use a licensed electrician; bad electrical work could lead to bigger problems such as fire.
- Mr. Plumber – plumbing problems will almost certainly occur if you own rental properties long enough. Some problems may even require a plumber. This team member can assist in snaking drains, installing new fixtures, outdoor faucets or assisting in the building of a new bathroom.
- HVAC – ever lose air conditioning during the hottest day of summer? What about heat during the coldest day of winter? That shit sucks! Having a reliable HVAC repair person/company is vital. Without one, you may be stuck with nagging tenants begging for a hotel room until heat/ac is restored.
- Appliance guy – refrigerates, ovens/stoves, washers, driers and dishwashers are typically cheaper to repair than replace. Having a great appliance repair person will save you a small fortune. Ideally, you would like an individual or company capable of repairs all appliances. Additionally, you would want a quick turnaround (next day or two).
- The Generalist – Jack of all traits and a master of none. You will want a generalist to round out your team. This member is capable of doing various small and medium size products and repairs.
- The Lawyer – When push comes to shove, you want a quality real estate attorny in your bullpen. A good lawyer can help you review lease agreements, navigate the local landlord-tenant laws, and assist in any legal proceedings. Be sure to find an attorny with local real estate knowledge.
Finding Your Teammates
There are many ways to find your teammates. Generally, your real estate agent will be a good referral source.
Also, I highly recommend going to local real estate investing clubs. These events are great for networking, finding likeminded individuals and mentors. Additionally, attendees at such events will likely refer you to potential teammates.
You can also ask your existing team members. I once found a plumber through my electrician; they worked on a job together a while back. This is a people business and its who you know.
Your local home improvement stores like Home Depot might be a good way to find a few team members. Perhaps will bump into a handyman/generalist in one of the isles. You may also find an electrician picking up wires.
Also, you should always request recommendations or references before hiring a team member. Hiring the wrong person is costly mistake and a project will quickly go over budget if you have to replace them. Save yourself headaches by doing your due diligence up front.
Lastly, I highly recommend that all your team members are local. You do not want to depend on someone who is an hour away and three towns over. Having local team members makes them more accessible and cuts down on repair times.