Real estate investment is a business that cannot be done solo. While the rugged individualist may succeed in some fields, this is definitely not one of them. This is due partially to the specific skills and training needed for some areas (like legal and accounting) or the experience to know what works in others (like construction and property management), but ultimately it is about time. Even if you have the ability to do everything, you certainly won’t have the time to do everything profitably. Thus, you will need a team—and you will probably be surprised at how big that team will need to be!
Your success as a real estate investor will be directly related to the team around you. You will work with many different people on your investment journey. Some with amaze and others will disappoint. Seek to build increasingly strong, loyal relationships with the best. Keep the best close and always be on the lookout to find even better players. Your goal is to assemble the best of the best. Those that prove ineffective should gently fade away, since you don’t want to make enemies that would tarnish your reputation.
Some investors have teams of more than 30 people helping them succeed. Of course, they also help their team succeed. In this article, we will cover some of the key roles you need to fill. Initially, they will all likely be on contract, but some may become employees in time. You can identify prospects be simply asking other people in the business who they would recommend. Real estate meetups are a great place to network, ask questions, and build your team. You can also read the forums and post questions on sites like BiggerPockets.
This list isn’t exhaustive, but it will give you a good start on players you might be missing on your team. I’ve ordered the list by getting started, getting deals, closing deals, rehabbing, and growing your business.
If your goal is to treat investing as a business, you need to embrace the idea of having a mentor. There are many articles about mentorship and some great books (like Coaching and Mentoring by the Harvard Press). Even if you only plan to house hack or buy a duplex, a good mentor will help you immeasurably. Look for someone local, who is already where you want to be in 5 years. They will have recent memory of the challenges you will soon face. Remember, this isn’t all about you. How can you can help them achieve their goals faster. If you are helping each other, they’ll be happy to help you achieve your goals and mentor you through the process. This player will help you put everything else in place.
Having a lawyer is critical to your success. You’ll need someone with at least basic real estate knowledge so they understand the contracts you need. You’ll also need help creating partnerships and reviewing contracts with your vendors. If you haven’t bought homes before, ask if they will help you through real estate closings and help review all documents. Ideally, find an attorney who owns their own investment property.
Whether you pay with your own cash or take out a loan, you should have your financing in place before you actually need the money. There are many places to find financing, but your best bet will be with a local community bank. These banks focus on building their community, have more flexibility than the big players, and enough assets to help you grow. You may be able to use traditional or qualified consumer mortgages to start out (which is cheaper). Depending on the property and your situation, you will eventually need to move to commercial loans. Bankers are looking for clients and love repeat business, so shop around to understand the terms and funding process before you make any offers. When a good deal comes along, you’ll need your bank partner ready to move quickly.
One investor shared how he bought a house at auction, only to discover the angry home “owner” burnt down the house hours after the auction closed (something about, “If I can’t have it, neither can you”). Fortunately, he had a strong relationship with his insurance agent and called the agent the moment he won the auction (before settling up with the county). Insurance covered the loss.
There are big differences between different insurance companies and agents. Many won’t insure multi-family (more than 5 units) and others will limit the number of properties they will cover. Some specialize in investment properties (this is good for you), while others focus on flips. You need to understand what the agent offers, ensure it matches your business model, and that the rates are favorable. You may find yourself working with several agents to cover different types of properties. The key is, they are not all the same.
Real Estate Agent
Even if you plan to find your own leads or buy off market through wholesalers or sites like Loopnet, you should have a good real estate agent that works primarily with investors (not homeowners). The needs, goals, and expectations of an investor are completely different from typical homeowners. It is a good sign if they response to investing terms, like CAP rate and ROI. If they respond with a comment about the lovely view, it’s time to move on. They will help you find deals, manage relationships, and connect with key players in the community.
The title company manages your closing process (along with your lender, home inspector, and attorney). You’ll want a company that understands your needs as an investor (again, different from a typical homeowner). Ask who other investors are working with. There are probably a couple in your area that work well with investors. Once you find a great company try to use them exclusively to build a long-term relationship. Many of them offer extra value to retain business, like helping you identify solid lenders and avoid the flaky ones.
There are many ways to find deals, but you’ll probably need to use multiple strategies. Wholesalers are a great way to access great deals. They invest in marketing to find the deals and offer them to investors at a solid discount. Keep in mind that wholesale businesses depend on speed. They are looking for buyers who can decide and close quickly (either cash or an established lender relationship). They will reach out to you once, or maybe twice, but will move on if you don’t perform. When you are ready to buy, find a few wholesalers who specialize homes that meet your criteria.
In any community, there are people who know everyone in the area and know how to make things happen. The good news is that these people will be happy to meet you (they are always looking for new, interesting people). Seek them out and begin to form a long-term relationships with them. They will always be looking for ways to help you. By the same token, you need to always be looking for ways to help them. People like this know when long term investors are tired and ready to dump their portfolio or when a new contractor is looking to prove the quality of their work. As your business grows, you’ll find they can be the most powerful members of your team.
When should you look for a contractor? Always! If you have three great contractors, you should still be looking. Situations change and you never know what tomorrow will hold. Look for trustworthy general contractors that fit well with your style. Early on, you may want to defer many decisions to their expertise. Over time, many investors provide specific guidelines on pain, finishes, cabinets, and even light fixtures that must be used. As your business grows, your needs will change and you may need to change contractors accordingly. Treat them well! Pay promptly, set out a clear scope of work, and leave no uncertainty on your expectations for money and timeline. You may want to give them an additional bonus or financial incentive if the project gets done under time and under budget. In some cities, like Omaha, licensed contractors can obtain same-day building permits online (versus the standard 5weeks). In spite of the overhead of using a general contractor, you’ll likely lose far more if you try to manage the project yourself.
Pest Control Company
It depends on where you live, but almost every community has some form of pest. If you have older buildings or sloppy renters, you will need a good pest control company. You might even need a couple of specialty companies to handle unusual (we hope) pests like bed bugs. Build the relationship and be consistent with your business.
Some tenants believe they should leave their apartment better than they found it. Others seem to believe the trash cans are too far from the kitchen and someone else should clean up after them. You’ll need a company that can clear out the garbage and make the apartment sparkle again. You’ll need their services after any rehab and between tenants.
Finding good property managers is hard. Many investors have started their own property management companies because they couldn’t find a good company to work with. Shop around for rates and services, try to learn from them about the community and tenants, and then research their online reviews. You may decide to manage your property yourself. Whether you do it yourself or hire it out, you can gain great insight from the local management companies.
It can be difficult to find a reasonably priced handyman, but this person is critical for your business’ success. Find someone who can grow with your portfolio and take good care of them.
If you own older rentals, you will ALWAYS need a reliable plumber on your team. Find a good plumber and take good care of them. Tenants have zero patience after they break your plumbing. Some jobs are just more than your handyperson can handle.
While often less urgent than a call for a plumber, you want to have a competent electrician ready to respond to calls for help.
Hard Money Lender
We addressed creating a banker relationship earlier. Hard money lenders provide another option for investors who need more volume or can’t get banking relationships to work for them. Take time to understand the pros and cons of working with hard money. If it makes sense for your business, you should start building a relationship long before you needed.
Private Money Lender or Equity Partner
Most private money lenders/equity partners want to see some investing experience before they will risk their assets. That makes it tough for your first deal, but you may be able to engage a private money lender or even equity partner after you can show success. Equity partners are often structured as partnerships where one provides the money and the other does all the work. This can be a great approach if you know someone interested in investing but with little time for it (usually professionals).
I wanted to close this list with something similar to the mentor we started with. One of the most important roles on your team is someone who can help you focus on the right things. Keeping focus when faced with a barrage of distractions and low priority tasks is often the difference between success and mediocrity. The ideal person might be at a similar level of experience who will understand your goals and be able to support your efforts to meet them. You should meet weekly (at least monthly) to stay on track.
As I mentioned earlier, this list isn’t exhaustive, but it’s a solid starting place if you haven’t already begun building your list. Remember that networking through local real estate meetups is a great place to start building relationships and developing your team. The attendees are often diverse and most are looking to build relationships to help them build up their network.