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Professional Real Estate Support Team (Continued)
Team Member 5- Banker
A good real estate investor should have numerous financing options at their disposal and a local banker should be on your team to help with these options. Local bankers can usually issue loans that national lenders cannot, and be more flexible with you as you accumulate more and more properties. From a financial standpoint, local bankers can also help boost your business presence through issuance of business credit lines and by showing that you are a player on the local scene. Being committed to developing business relationships with local lenders will only open doors for you and will help establish your business as a fixture in the local economy as well. A word of caution however, I recommend only using borrowed money for short-term transactions. Avoid getting a new mortgage each time you want to buy a house. Personally guaranteed debt can be very dangerous!
Team Member 6- Accountant/CPA
As your business grows, so too will it’s complexity. Considerations are your asset base, tax implications of running a business and managing these assets. A good accountant, while perhaps not an immediate concern for the novice real estate investor, is a team member that will soon provide clear benefits to you. Beyond the basics, a good accountant can help you structure the finances of your business properly, and in doing so save you potentially thousands in taxes.
Key Point: Be careful not to become obsessed with cost control and deductions. As the business owner, your job is to always focus on revenue, while your CPA can focus on reducing your cut to Uncle Sam.
Team Member 7- Contractor/Handyman
I’ve seen far too many investors attempt to justify a deal by saying it is profitable if they do the work themselves. Many of these investors end up spending twice as much time on a project than necessary, overdo their budget in the process, and ultimately watch their profits slowly erode away. Some of us are handier than others and sometimes I find that being handy can be a detriment to investors as it makes them more prone to take on projects that they should hire out to be completed. As for me personally, the last thing that I want to do is pick up a hammer. Just remember that you are running a business first and foremost and taking care of property maintenance should be something you look to get past ASAP. You’ll thank me later.
Team Member 8- Appraiser
Your real estate agent may have a good appraiser they know, as may your mortgage broker, but most experienced investors have an independent appraiser that they call their own. This professional is the conscience that drives many real estate decisions, helping you to determine whether a deal has enough potential to pursue. Your real estate appraiser is there to validate the assessments on individual properties when needed. Be aware, that sellers tend to see more value in their properties than you do, so an appraiser can help give you the confidence to do your own due diligence to understand a property’s real value. When in doubt, get an appraisal however don’t automatically assume that this value is final. If you think a second appraisal is justified, budget accordingly.
Key Point: An appraisal is only someone’s opinion. The true value of a property is what a
buyer is willing to pay.
Your time should be spent constantly learning and growing your business, and as a result you will be seen as the person in charge, not the person who wears all the hats. Let the professionals do what they do best, but be able to supervise and understand the nature of each role and how it helps your business progress. Don’t be afraid to ask a question when something is unclear, either. Just because you hire an expert doesn’t mean they are perfect and ultimately your business’ success depends on your ability to know what’s going on and make changes when necessary.
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2 Responses to “Professional Real Estate Support Team (Continued)”
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I agree with your philosophy of assembling a team of professionals to assist you with your real estate investing. They say “you’re no better than the people you surround yourself with.” And it applies to everything including real estate investing. Good article.
As a real estate investor and the owner of a remodeling company in the Seattle area, and I have to comment on #7. This is a tough one because the wrong contractor can totally blow your profit on a flip. Additionally, doing the work yourself eats up a lot of time and if you do it wrong will also cost you a bunch of money. Usually more than if you hired a contractor to start with.
Work with professionals. Get bids, and work with the people that don’t screw you. Be loyal to the good ones, but never take your eye off them. Even good contractors can go bad if they have a bad year.