Team Member 12- Hard Money Lender

A hard money lender is a type of financier who specializes in properties that traditional lenders would often avoid, usually due to the condition of the property. The presence of a hard money lender on your team validates you as a serious player in your market because it allows you to pursue deals that other investors might walk away from and therefore allows you to reach more potential clients. In addition to allowing you to produce more revenue for your business, hard money lenders also help refine your evaluation of potential deals. These financiers will only fund a certain percentage of the property’s value so it also helps establish you as a better negotiator.

Team Member 13- Private Mortgage Lenders

This Team member is a big difference from the Hard Money Lender described above. Maybe you’re one of the fortunate few who has plenty of your own capital to invest in your own business but many investors (including myself when I got started) are lacking in this area and need to work to raise capital as part of their business development. Private mortgage lenders are vital to credibility for two key reasons.

First, if you can sell the concept of your investments and your business model to those who might provide you with funding, you can certainly sell it to your clients. Pursuit of private money gets you thinking differently about the upsides of your business and this will make you more effective as both a salesperson and as a negotiator. Second, the ability to immediately produce capital to fund a particular deal gives you tremendous leverage, and this value cannot be overstated.

Team Component 14- Assistant (Live or Virtual)

When businesses get busy, some sort of day-to-day help is inevitable and the process of bringing on an assistant can be critical to the business’s ongoing success. When you think about it, this is all about maximizing the time you can spend earning. Let’s discuss both factors. First, there’s the basic element of business productivity. You can only do so much yourself, and if the need to hire an assistant becomes real for you, then it probably is an indicator that things are going well enough to justify doing so. Believe me, you’ll thank yourself in the end for doing it. There are various kinds of help you can utilize. There is of course the person who comes to the office and helps with phone calls, filing, and knocking out things on the so-called ‘to do list’. There are also virtual assistants, who handle things from afar and can be great for taking incoming calls, responding to emails, monitoring web activity, etc.

At some point, your time will become too valuable to be doing the things an assistant can help with and having a perceived ‘staff’ will also bring valuable respect to your business by offering the appearance of a larger organization than may actually be the case. You don’t have to create the image; people will perceive what they will and, if that gives you a boost, so be it. My suggestion is to look at this team member as a time saver and revenue builder first and foremost. If and when you do take the leap to bring on additional help, you’ll wonder how you ever got by without it.

Team Component 15- Support Network

Your support network is your friends and family who support what it is you are doing as an investor. They are also professional colleagues who are following similar paths to success and who equally appreciate the challenges and hurdles encountered along the way. It is vital to have some sort of support network and also important to recognize that it may not be principally composed of those closest to you. I’ve met many an investor who have told me that unfortunately those closest to them are the ones that challenge or question why they were pursuing real estate. In the absence of a good professional support network, this kind of input can be, at a minimum, demoralizing and, in more extreme cases, prone to drive otherwise motivated investors right out of the business.

The importance of a support network is not just to get pumped up and stay motivated. You should be able to fuel your own fire, at least to a certain extent, because that is just a part of being in business for yourself. Consider this, professional athletes make the big bucks because they are the best at what they do and because they are self motivated people. You need to strive to be the same way. That said, recognizing that external support is important is a critical part of being successful in business, you must get that support wherever you can find it. Maybe it is on the home front and, if so, then you’re fortunate to have it. Maybe it’s from a professional mentor, someone who chooses to take you under their wing to help you grow in your own business pursuits. Maybe it’s a mastermind group of like-minded businesspeople who meet with some regularity to challenge each other and help fuel each member’s own success.

Your team is important to the long-term success of your business. If you don’t already, you should view yourself not as a CEO, but rather a CLO, Chief Leverage Officer. Your professional team is depending on you to leverage their skills, which in turn creates a win-win relationship. First, a team expands your effective level of experience. Many investors find that a lack of experience is a drawback, especially when a client asks ‘How long have you been doing this?’ With a solid professional team, you as an investor can cite that your ‘team’ has _____ years of experience and boost your own credibility without having to emphasize your own lack of experience.

Second, a professional team establishes an overall level of reliability by demonstrating that you have ready to go resources available to you. It adds a definite level of professionalism to suggest that paperwork will be reviewed by an attorney, properties will be managed by a company dedicated to doing so, and that closings will be handled and managed by a licensed title company or closing attorney. Clients love the feeling that the situation is handled at all phases and I feel it looks better to have team members involved, rather than presenting yourself as a one stop shop.

Like it or not, your clients (buyers or sellers) are your customers and they need to have trust in what you do and must want to do business with you. An investor who is able to delegate many parts of the purchase and sales process to their team has the time to do what they do best, which is to focus on the human side of the real estate business. Trust me, your clients will notice this level of attention to their needs, will see it as a validation of your reputation, and this will translate into more deals and more consistency for your business.

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Team Member 9- Financial Planner

Now that you are in business or are at least considering it, do you think it will change your financial outlook? You certainly hope that it will and it behooves you to be prepared for the changes that are coming. A good financial planner is just an essential part of modern money management and you may want to have such a professional behind the scenes to help streamline and optimize your financial growth. Are financial planners critical to negotiating deals on properties? No. Are they critical to you feeling comfortable that you are operating within a defined plan that actually has a chart and a course? Absolutely. When you have confidence in the big picture of what your business is doing, you will be more confident and that will show in how you handle yourself and as you meet new people.

As a spin off to this topic, you may also want to look into adding a self directed Roth IRA into your plan for retirement. Imagine buying and selling a property and the proceeds from that sale going directly into your self directed Roth IRA, which means you’ll never have to pay tax on that money (when you follow the rules). This may sound too good to be true, but trust me it’s not. If you haven’t already, you should look into setting up a traditional Roth IRA now while the government still allows you to and then converting it to a self directed Roth IRA down the road when you are ready. A qualified financial planner who has experience in self directed Roth IRA’s should be able to help you with this, but do your own due diligence as well.

Team Member 10- Property Inspector

A dedicated property inspector is not necessarily one of the foundational team members you will need for your real estate business but is important all the same, especially as you start purchasing properties that you intend to keep for a while in order to produce monthly income. The presence of an inspector on your team helps you both avoid problem properties (aka the money pits out there) and also demonstrates to others that you are serious about your purchases and are ready to perform all necessary due diligence before ever completing a transaction.

The best way to find a good inspector is through a referral. Try to find an inspector that can also provide you with, or knows someone that can provide you with a certified termite inspection and a mold inspection. These two little hidden demons can cause you serious problems down the road if you don’t take the appropriate precautions up front. Take it from me, I have the scars to prove it.

Team Member 11- Property Management Company

I learned a long time ago that property management is not a profession for the weak. Maybe many of you are very compassionate people at heart or tend to generally trust people you meet. These are redeeming qualities but will make you a poor property manager. Managing tenants may not seem to be that big of a deal but, if you believe this, you’ve likely never had to coordinate a difficult eviction or deal with a ‘professional’ tenant who likes nothing better than living rent free. In short, if you’re serious about owning rental property, I believe property management is an essential part of your professional team. Pay someone else to deal with these problems while you utilize your time to invest in more deals.

Personally, I don’t do straight rentals, but rather lease options or seller financing because I want my tenants to feel like homeowners. I want them having the feeling of home ownership in the property and maintaining or fixing up the place rather than trashing it. I find that if they have a vested interest in the home it results in fewer problems. When problems do arise, the existence of property management in your world of real estate investing will save you countless hours, reduce stress, and also boost your credibility by showing the world that you are running a business like a business and, in doing so, that you recognize your own limitations. Forget the investors you talk to who insist that managing your own properties is the only way to go. Most I’ve met who feel this way look like the business has aged them 15 years and I don’t think it’s just a coincidence. Sometimes the best thing you can do is to admit you need help with something and this is a great example of that point.

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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.

In my last post, I introduced you to a list of support team members for your real estate investing business. Now, I will begin discussing each one and their roles in helping your business to succeed. An important key point: Make sure that you don’t ever become dependent on any team member. When you become dependent on someone then you can become trapped within your business. Always have other alternatives to consider.

Team Member 1- Real Estate Agent

Whether or not you regularly use the local Multiple Listing Service (MLS) to find deals for your business, a good real estate agent (or agents) is still a critical part of your success. You are somewhat a reflection of what your team accomplishes behind the scenes and a good realtor can do many things for you, including: submission of offers, submission of letters of intent to purchase, streamlining closings with either buyers or sellers, and of course finding you deals or helping you find buyers. None of this requires you having to spend a lot of your own valuable time when you have the right agent or agents on your team and this is one of those foundational team slots that you need to take very seriously.

Team Member 2- Mortgage Broker

One of the most critical team members to establish early on as a real estate investor is a mortgage broker. They can be instrumental in getting your buyers qualified, and allowing you to recognize profits in a more streamlined manner. Buyer qualification is one of the tough issues in today’s real estate market and this team member alone can be hugely impactful for you and your business.

Good collaboration with a reputable mortgage broker can help give you a foundational knowledge base concerning the world of home finance. You don’t need to be up to speed on all emerging trends but what a good broker can offer you gives you informational fuel you can then pass along to your clients and help establish you as both a knowledgeable and credible investor.

Team Member 3- Real Estate Business Attorney

A good real estate business attorney can help you review your paperwork of choice to make sure it is compliant for your area and protects you sufficiently in the event of a dispute. Although it’s often not pleasant to think about needing to have an attorney as part of one’s team, it is absolutely essential, and in fact you probably should have more than one that you can get advice from. Unfortunately this and so many other professions are so tied to lawsuits and other such unsavory topics these days. Therefore you want an attorney on your team for this exact reason. The chances of being sued, especially if you have a successful business are pretty good, and you want to have an attorney who understands your business when that happens.

When choosing an attorney to handle the professional business matters that arise, my best advice to you is not to skimp here or else you may one day be sorry you did. A good attorney also does a lot for your professional reputation. Being able to reference the fact that you have an attorney or need to run something by your attorney is not only a professional and credible approach, but also discourages a client with unscrupulous intentions from pursuing their objectives. The best value a good attorney can offer is to position you where you rarely, if ever, need them.

Team Member 4- Title Company/Closing Attorney

Another critical team member is the person or organization that handles your closings. A title company (or closing attorney in some states) can add a layer of professionalism to your business by making these processes seem simple and with minimal issues. The performance of your title company can be a solid reflection of your business so it is important to choose carefully and make sure they understand the variety of transactions you will be doing with their help. Title companies also perform title searches, which can help you avoid unnecessary issues with transfers of ownership and recording of documents. I would also highly recommend to you that your closing attorney close your rental or lease option agreements. You can find no better witness if a tenant cries foul than your closing attorney. When in doubt, let your attorney do what they do best which in this case is finalize agreements between two parties, so that you can do what you do best which is buy and sell houses.

I owe so much of my investing successes to the support team members I have assembled. Each one has their own purpose and keeps my investment train on track. Next week, I will continue discussing essential team members.

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One of the first things you need to realize as a real estate investor is that you don’t have to master all of the skills in running a successful business on your own. Forget for a moment the image of the solitary and committed entrepreneur, however nostalgic that may seem to you. Every great entrepreneur in history had a good support team around him or her, even if the team didn’t get all the notoriety in the end. Why should you be any different? I have confidence that each and every one of you reading this has the potential for greatness and step one to reaching that milestone is the recognition that you’re not alone.

Your professional team is absolutely essential to the general flow, success and longevity of your business. After all, your clients (present and future) won’t expect you to have all the answers or expect you to be able to do everything, even if you don’t realize that just yet. I’ll say this and forgive me if I repeat it later: it’s OK to say ‘I don’t know’ as long as you mention that you know where to find the answer. Stated another way, it’s far better to defer a question you get from a client to one of your team members than to just make up an answer in fear of saying ‘I don’t know’. Deals fall apart when such things happen so don’t let this happen to you.

For starters, let’s establish the framework for your professional team and then talk about the numerous attributes of having one. Depending on where you may have received some of your real estate education, you may see a team referred to as a wealth team or power team, but I’m talking about the same thing here. Your team is the assembly of professionals who handle the aspects of your business that you either (a) don’t have the background or expertise to handle yourself or (b) choose not to spend time working on yourself. Either rationale is valid and the important thing is to establish a competent team.

So, who comprises your team? There are a couple of ways to think about this. How you do so depends on who you are and how your business is organized. For example, are you currently working on real estate investing as a part-time venture? If so, then having some core elements of a professional team will likely be sufficient to help you get started. If your business is a full-time pursuit, then your team assembly will likely be a more comprehensive undertaking. Below is a list of team members with an asterisk next to those that I find essential for all real estate investors, even those who are part-timers and/or just getting started in the business.

Real Estate Agent Accountant or CPA Financial Planner

Inspector Banker(s) Hard Money Lender

Contractor/Handyman Mortgage Broker Assistant (Live or Virtual)

Real Estate Attorney Appraiser Support Network/Mentors

Title Company/Closing Attorney Private Mortgage Lender

Property Management Company

How about that for a list? Some of this will of course seem perfectly logical and I don’t want you to look at the list as a daunting task if you’re new to the business. This is part of what it means to be a real estate investor. In the weeks ahead, we’ll look at each team member and the assets they can bring to your investment business.

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To better understand the psychological nature of real estate investing, you first need to understand the nuances of the real estate market, and how the opinion of the market differs between investors and the rest of the universe. Consumers might use the following terms or phrases to describe the current real estate market: bleak, dismal, sluggish, and catastrophic.

Investors, on the other hand, might use a slightly different set of descriptions for the exact same real estate market, because we will always view market conditions different from the majority. Examples include: opportunistic, a rare gem of possibility, a millionaire maker, ripe for the picking and a never-ending opportunity.

The truth, for investors, is that there has rarely ever been a market condition that is better than the one you are experiencing right now. Like the hundred year flood, you may never see the likes of this again in your business lifetime and it represents a rare and exciting opportunity for people like you and me. The public, influenced as you know by the popular media, sees things differently and in a much more pessimistic light. As real estate investors, you have an amazing opportunity in front of you, and in the spirit of building a multi-million dollar business, you also have to bear in mind that your view of the market is dramatically different than the one your clients will have. This is a gap that needs to be bridged if you are to have optimum success.

In part because of the difference in perception about the market and in part for reasons I’m about to describe, it is the unfortunate truth that investors, as a group, often get a bit of a bad rap and have a questionable reputation in the world of real estate. Why is that? I can think of several reasons that are worth discussing:

Greed

Jealousy

Ignorance

Dishonesty

Lack of Credibility

First, you have the greed factor. Basically, in a nutshell, what I’m referring to here is the small percentage of real estate investors who let their pursuit of power, money, and glory get in the way of running an ethical business. Ultimately, the emphasis should be on creating outcomes that benefit all parties. We’ve all come across examples of greed in this business, and if you haven’t, you will. It could appear as the slumlord that maintains slovenly apartment units to better line his or her pockets with revenue from rents. It could appear as the scam artist who dupes others into sinking funds into phantom projects that never actually materialize. It could appear as the heartless person who promises the world to a client in pre-foreclosure and then leaves them stranded at the eleventh hour. I could go on and on.

These select few make a bad name for the rest of us and it is an unfortunate reality for those of us who wish to run our business the right way. There’s not much you or I can do about it. Real estate is a commodity from which tremendous profits can be realized, and as a result, some greedy people are going to get into the mix. What you can do is recognize how these people affect the reputation of real estate investing as a business and place extra emphasis on building a reputable business that will show the true colors of your craft.

Second, you have the issue of jealousy. I might be going out on a limb or sparking a little controversy here but some of the current reputation for real estate investing as a profession comes from that which is explained by real estate agents and brokers. It is unfortunate, but some (not all) of your real estate brethren are often working against you either consciously or subconsciously. If these select few would simply take the time to learn something new, and open their eyes to the many unconventional and creative opportunities that real estate offers then they would truly understand why you choose to be a real estate investor, rather than a real estate agent. There are hundreds of differences between selling houses for a commission, and buying and selling houses for equity and profit. Personally, I’ll take the equity and profit any day of the week.

Should real estate investors to be alarmed? Not necessarily. Rather, it is important to be aware of the preconception that exists in this business. Credibility must be built in spite of this obstacle, rather than simply expecting that things you can’t control will somehow change.

Third, you have the issue of ignorance, not as much on the part of your colleagues but on the part of the general public. I’m not suggesting the public is ignorant in a general educational sense. What I am suggesting is that the general public is very unlikely to be up to speed with the kinds of concepts and techniques that you will be utilizing as a real estate investor. For example, the majorities of homeowners only buy and sell a few homes in their lifetime and in doing so utilize realtors who are pretty much driving the transactions based on conventional wisdom. We as investors on the other hand are trained to buy and sell properties as a business and perhaps have completed dozens if not hundreds of deals or more. That said, while this type of ignorance may impact the reputation of investing as a profession, it also opens a key door of opportunity for you to really establish a local name for yourself and your business that will literally make believers out of your clients.

Next, is the unfortunate issue of a few dishonest investors out there who threaten what you do on a daily basis. Whether it’s an unscrupulous developer who cuts corners or abandons a project, or foreclosure investors who skim equity or take funds up front from clients and then disappear, the bottom line is the same. Like any industry, real estate investing has its share of “bad apples” and unfortunately, these people get more attention than the good ones. The media loves a story where some evil investor scams an innocent consumer because; (a) it’s negative, and (b) people pay attention to that kind of stuff. My commentary on the media aside, it’s important that you recognize what your clients are likely hearing or reading and how it relates to what you do for a living. You do not want to let yourself become defensive about it but understand that your reputation will in part be built upon showing clients that you do not fall into the “bad apple” category.

Last on my list of things that give investors a poor reputation is a simple lack of true knowledge & professionalism. In short, some of your investor colleagues just don’t know what they are doing and this can impact the overall perception of what you do as a business. While I can’t oversee proper education for all investors, I think (in fact I know) that this can work to your advantage. Where other investors fall short, you will finish. Where other investors are weak, you will be strong. Business is about survival of the fittest and, even though some investors may damage the reputation of the business as a whole by not being very good at what they do, that can and should be seen as a great opportunity to establish your own reputable foundation and build from it.

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Welcome friends to one of the most beneficial series of articles on real estate investing that you may ever read. No, I

Appendix

The appendix to your credibility kit is just what the name implies, a collection of added features. Technically, the appendix is optional and may frequently be absent in a very simple credibility kit, such as one you might distribute to investor colleagues or to a potential client. These types of recipients likely have no interest in your business plan or your financial projections for your business so it is best not to include this, as it will just be seen as fluff.

When it comes to more professional types of relationships, such as those with a banker or any number of private lending sources, these same kinds of appendix items all of a sudden become more useful. Why is this? It’s pretty simple, really. The second group is in a position where you are seeking money from them and the stakes are a little higher. Sure, the same fundamental components of a credibility kit are still helpful, but they will likely want to see more.

For example, if you are seeking private lenders to pursue REO properties (those taken back by the bank), some market statistics for the volume and pricing for these kinds of homes would be very useful in presenting your cases to a would be lender. Similarly, sales statistics for these kinds of homes in your area are also useful, as most lenders are rightfully curious about how long they will have their money floating around and tied up in your properties.

Business plans and financial projections are what I like to call the 3^rd level of what you might include in an appendix section of your credibility kit. Colleagues, clients, and even private lenders may not want or need to see this information but a banker sure would. Even if they don’t specifically ask for this kind of information, it adds a solid professional touch to your presentation and, in today’s day and age where money to lend seems pretty tight, every little boost you can give yourself will help.

My suggestion here is to prepare the previously discussed components of your kit and have them ready to present to all clients. This would represent your so-called core part of your kit and will be the most widely used. Your appendix should be designated for specific types of recipients only and the fact that this extra information is included in an appendix section makes it easy to either add or leave off, depending upon who is getting your kit.

The remainder of this section discusses one of the most common and most critical parts of an appendix that being the business plan. For other parts of the appendix that I have discussed, I suggest working with a local realtor for much of the market research data, keeping real estate clippings from your local paper so they can be scanned into a digital form, and tabulating your short and long term growth projections into a spreadsheet. Sure, these things may take a little time and effort, but it is well worth it. Also, as you’ll see in the last section of this guide, we can also assist you with this entire process so stay tuned for more information on this valuable service.

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