Happy Valentines Day! Yeah, not really my favorite "holiday." I haven't decorated for it at all (minus a wreath) but I am going to go decorate cookies at a friend's house and possibly feed lobster to the missionaries since it's on sale at Albertson's.
Whelp, here's a real estate article for you. If you're not really into the article, at least scroll down to see the property of the week. Have a very lovable day!
Build Your Real Estate Power Team
Most people have found the greatest amount of success in real estate investing by creating a power team. A real estate power team consists of the people to work with throughout the steps of buying and selling property, and everything in between. This article will focus mainly on who your power team should be made up of to be most beneficial to you. If you are a first time home buyer, this is also a good article for you because it explains the people involved in the real estate purchasing process. It may help you be a little less overwhelmed (but probably not ;)).
The 9 most important and influential people on your power team are your Realtor, home inspector, rehab crew, property management company, title company, real estate attorney, insurance agent, mortgage broker, and mentor. In this article you will find out how many people to use in each area and some strategies on how to utilize them most efficiently.
Realtor
Your Realtors are probably the most important people on your team. Realtors can find you fabulous deals. Some markets have too many properties for one Realtor to handle. You should have 2-3 Realtors per market where you invest. This will ensure that you have access to many deals in the area.
The Realtors must be based in the city where you invest. They will know the area and be able to get new deals to you quickly. They will also know if the property is located in the type of area you want to invest.
Let them know that you are an investor and would be interested on working with them on a lot of deals. They will be happy to send you many options.
You should work with Realtors who have experience working with investors in a specific area. The following are examples of questions that you may want to ask your Realtors:
- Where are you located? – Make sure they are in the area where you want to invest
- Do you work with investors? – Work with Realtors that have experience working with investors, otherwise you may miss out on deals that would have benefited you because your Realtor didn’t know exactly what to do in the situation
- What types of deals do you do with investors? – Make sure they do the type of deals you will be doing (foreclosures, flipping, etc)
- How long have you been in the business? – Your Realtors should have at least 2 – 4 years experience as Realtors (this will ensure that they know what they are doing)
Home Inspectors
You should always get a home inspection! Always. Always. Always! Home inspectors go through the whole property -in depth- to see if anything is wrong. They check the grounds, roof, plumbing, electric, etc. If something is wrong in any area they will write it in a report that you will receive when the inspection is finished. This will give you power to negotiate with the seller and thereby, save you money.
You will benefit most if you hire home inspectors with a lot of experience (200–300 jobs completed) because they will know exactly what to look for. Your Realtor will be able to give you a list of good home inspectors in the area. In my experience, the Realtors we have used ordered the inspection for us with a company they trust -- very helpful if you are new to buying houses and are completely overwhelmed.
Have your home inspector give you a repairs estimate. A repairs estimate is a list of the estimated cost to fix the things that should run properly, but don’t. With the repairs estimate you will be able to show the seller how much you will need to invest in repairs in order to make it “livable.” You can then renegotiate the price of the property.
Rehab Crew
Your rehab crew is the group of specialized people you will hire to fix up your property (I talked about this in depth in an earlier article). It is very important to get a rehab crew that is licensed (plumber, electrician, etc.). This way you make sure you are dealing with a crew that is legal to work in your country and that the crew is obligated to do the work at the standards set by correct authorities.
You will benefit by asking them some specific questions, such as:
- How long have you been in business? (You want someone that has had experience with the work you need done.)
- Do you work in the city that I do business?
- What kind of rehab do you do? – They must do the right rehab for your area and property (if the house is in a low income neighborhood it doesn’t need expensive countertops, etc.).
- How many people are on the rehab crew? – This is for time efficiency. The more people they have, the faster.
- Are you bonded? – Get a copy of the certificate.
- Do you have your own vehicle and tools? – Only use people that have the necessary things in order to get the job done.
- Ask for references – If they have done a good job in the past they will be happy to give them to you. If not, they are not good enough for you
You will also benefit by getting a copy of their drivers’ license. You don’t want to be the victim of a scam. If you have their drivers’ license you will have information for any legal recourse, in the event of a theft or anything they might do that could hurt your business.
Before you give your rehab crew a key to your property, you should make sure you have them sign a contractor’s agreement. The contractor’s agreement should include:
- A list of everything you want done to the property (including the little things such as light switch covers)
- Payment phases – commit to paying your rehab crew in 2 or 3 phases. Pay at the end of the phase, but don’t pay until 100% of the phase is complete
- Completion date – set a reasonable date by which the rehab crew should have everything finished. Give them a week cushion if you’d like.
Hint: some people put in an incentive such as: “if the job is not completed by DATE, a $50 fee will be deducted per day. If the job is completed early, a $50 bonus will be paid for each day.” This ensures that it will be completed on time, if not early.
Property Management Company
A property management company is worth using if you are planning on renting out your property/ies. They will manage your properties usually for a percent of the rent you collect. They will take care of leaks and other things that are small but could take a lot of your time.
To find a good management company get referrals from your Realtor. They know the business in the area and have probably worked with people who used a property management company.
Ask the Property Management Company:
- How long have you been in business? - Again, they should have at least 2 years experience.
- How many units does the company manage? – This is to see what they can handle.
- What types of units do you manage? - You want to hire a company that works with properties similar to yours.
- How do you market for tenants/residents? - Do they market for the type of people you want.
- What is the monthly management fee? – (Is it based on the money they collect or is it a flat fee? You want to go with a company that only gets paid depending on what they collect. They will be more motivated to collect the rent.)
You do have control over the type of tenant you rent to. If it is important to you, have your property management company do a criminal and addiction background check on the tenants.
Title Company
Find a title company that is investor friendly and does a lot of work with investors. They will have experience with deals like yours. Once you find one you like, work with them over and over to establish a strong business relationship. They might be able to help you out in some tough situations. If you are a loyal returning client, they will do what they can to keep you.
Real Estate Attorney
Real Estate Attorneys understand the legalities of real estate and can help you protect yourself and your assets. They can help you with your rental contracts, through the eviction process (if applicable), or anything else that has to do with your property.
When choosing your attorney, make sure they live in the city in which your investment property is located because they will know the area and possibly have some connections with someone you may eventually need.
Insurance Agents
Insurance agents search for the best rates for insuring your property. Have at least two on your team. They will both shop for the best rates but one may find you a better rate than the other.
Mortgage Brokers
Loans are different for investors than they are for first-time home buyers. It is very important to find mortgage brokers that know about investment loans. To ensure that you find the right people, look for brokers that are investors themselves. That way they will understand what the process of investment loans and be able to decide what kind of loans will be best for you.
They need to be able to find creative financing. Most of the time there are better ways to come up with financing than doing an 80/20 conventional loan. For example, you could get an 80% loan and have the seller finance the other 20%. Your mortgage brokers should have different options available. But don't forget that I recommend paying cash for any and all investment properties.
Your mortgage brokers should have at least 2 years experience.
Mentor
Everyone should have their own mentor. Your mentor will guide you through the process. He/she understands the stress and frustration that you are going through and can help you through tough situations.
Mmmkay, as usual, here is the property of the week. It is 3860 square feet with 5 bedrooms and 4.5 baths. The lot is 10 acres, with 2.5 fenced as horse property. The other 7.5 acres are supposedly leasable (no, probably not a word) to grow hay. It is very "country," which isn't exactly my style, and needs some updating, but for the right price, I'll make it my style. It has been bank owned for months, so maybe the price they are asking is negotiable. I'm going to look at it in person tomorrow.
