Invest In Real Estate Now?
Remember, rich dad always said, “Investing is a team sport.”
On my rich dad’s team were his accountants, his attorneys, his brokers, his financial advisors, his insurance agents, and his bankers. I use plurals here because he always had more than one advisor. When he made a decision, it was with his team’s input. Today, I do the same.
My question today for you is, “If you want to be successful, who do you need on your team?” And, “Why don’t you have them yet?”
Team members are the deciding factors in spelling success or disaster for a real estate project. I have seen teams that operate seemingly effortlessly and others that are clumsy and doomed to failure.
So how do you assemble one that works effortlessly, and avoid the kinds that are disasters waiting to happen?
The answer is, you can’t.
You can only try to do your best and know that the reality of your team—particularly as you are just starting—will fall somewhere in the middle of those two extremes.
When it comes to business and investing, many people are lone wolves. They could be enjoying the advantages of a pack, but instead, they choose to work alone.
The result is that they often make less money than they could or would like to.
Many investors today try to invest as individuals. For instance, many people are day traders, sitting around in their PJ’s trading stocks online. This is a perfect example of an individual trying to trade against a well-organized team. This is why so few of them succeed and why many lose their money—especially in real estate.
Before you say to yourself, “This team thing seems like more trouble than it is worth. For my project, I’ll keep it simple and do most of the work I need alone. I’ll keep the team small—as small as possible—and that will minimize my problems,” understand that it is very hard to do anything in real estate alone.
Real estate investing is the ultimate team sport and as such, I encourage anyone starting to assemble the best team possible.
The Importance Of A Team
Working with my team is the best education I could have. By investing and building businesses with my team, I’ve learned more than I ever could have on my own.
Having a team of experts on call is not free and it’s not cheap. Those are the two biggest reasons why many inexperienced investors make a rookie mistake: They try to do almost everything themselves. Sure, they may save a few dollars in the short run, but they usually lose in the long run.
Without experts on your team, deals take longer to find, evaluate, and close, so there’s the value of your time and the loss of valuable opportunities. Do-it-yourselfers miss details the experts would see in a minute that can cost them everything.
In my experience, nowhere else will your team come into play more than when it is time to perform your due diligence. It’s a necessary part of every real estate deal, and with the right team, it can be your best friend and a lot of fun because you often find the hidden gems that can signal great opportunity.
On the other hand, it can be the beginnings of a vivid nightmare you are living because you are the proud owner of a “problem-property,” thanks to a team that missed something big during due diligence.
Core Team Members
My Rich Dad Advisor, Garrett Sutton, offers this list of professionals you should consider as your core team members, the ones you’ll need for virtually every real estate deal you do:
#1 Real estate attorney
Some states and jurisdictions require real estate attorneys to preside over every real estate transaction—the laws vary by location, so be sure you select an attorney who is familiar with the area and type of real estate in which you plan to invest, and who specializes in real estate.
#2 Real estate broker
Realtors or other agents are your eyes and ears to the real estate market, so they’re essential parts of the team. They know the trends, they recognize patterns, they know the market, they have access to the information you need, and they can tip you off to deals.
#3 Mortgage broker or loan officer
These people might be mortgage brokers or loan officers at financial institutions, or they may simply lend money as private individuals. Your lender can tell you what you’re qualified to invest in, and, hopefully, is prepared to support you in your purchase. It’s a good idea to get quotes from several lenders, to be sure you select the one best for you and your situation.
On a side note, you may opt to find other sources of investment capital, including friends and family members. Sometimes this is a great solution, but sometimes it ends up making things worse. Money has a way of interfering with relationships. My advice is that if you’re planning to go this route, you spell everything out in writing in a formal document that clearly defines the “exit strategy”—Would you sell the property? Buy the other out?—before you enter into the arrangement.
This may also be your real estate accountant, but he or she will not only know the law as it pertains to your taxes, but also the tax ramifications and loopholes inherent in real estate investment. A good tax accountant is an invaluable member of your team, and in the case of an IRS audit, he or she will represent you. Ultimately, this person always has an eye toward minimizing your tax obligations.
#4 Insurance Agent
You’ll need to find an agent who specializes in real estate to make sure you have insurance coverage on your properties to cover risks and liabilities.
#5 Property Manager
Although many people—especially new investors—manage their properties, a property manager is a wise investment that can save you a lot of time and money.
A bookkeeper is a valuable resource to have, as he or she will assist you with the day-to-day oversight and management of your books and records. You might opt to tackle this yourself as you get started, but what often happens is that investors quickly realize that they’re spending valuable time on these administrative tasks that they should be devoting to their investment activities. Hiring a bookkeeper is an investment in ensuring accuracy, as well as your valuable time, and it is well worth it.
You’ve probably heard of the saying, “You get what you pay for.”
People like to cut corners on some things to save money. That might be acceptable when you are grocery shopping and you decide to go for the store brand instead of the name brand. But in business, it’s not that simple. I know some investors that get a killer deal on their properties and then balk at the fees a management company charges.
Your team is there to minimize financial risk, time risk, design risk, and quality risk. It’s about choosing the right people to help you achieve this and working collaboratively all along the way. What is a successful investment worth to you? You can’t cut corners when it comes to finding the best team members.
You’ll find as you go from simple projects to the more complex that your team will have to function at a higher level with greater cooperation and problem-solving abilities
In all instances, and with every project—big or small—that you do, have qualified team members looking out for your interests.
Editor, Rich Dad Poor Dad Daily