As we all know from playing sports and from hearing the saying over and over – there’s no I in team. In order to truly become a success in this business, it is extremely important to build a team that you know you can trust. Your team will be responsible for a lot of the day to day responsibilities in your real estate investing operation, and if you can’t rely on your team, your business is destined to fail. Luckily for you, you are reading this article and you will know which members of your team are absolutely critical. Two points that I need to make. First, In my opinion, the single best way to find proficient members for your team is through referrals. If someone that you like and trust is using a team member, there is probably a reason for it. Second – As I’ve mentioned in other blog posts, you only get one shot at a first impression. When meeting your team members for the first time, it is important that you know your real estate! It’s not only going to be an interview for your team members when you hire them, it is also going to be an interview for you. Here are some of the most important team members that you will need and what their roles will be.
- Property Manager
While I am a huge proponent for self management, if you do end up hiring a property manager, this member will be one of the most important members of your team. They will deal with property maintenance, the marketing of your properties, rent collection, evictions, bookkeeping and much more. Most property managers will collect their money based on a percentage of the gross income collected (Make sure that they get commission based on the income COLLECTED, not just the projected income – ask me how I know…) usually anywhere from 7-10%. As you get to larger multifamily properties, this commission will drop to 4-6%. You will want to understand what fees the property manager will charge. Do they have maintenance fees, late rent fees, disposition fees, renewal fees, and other fees? Compare the fees that one property manager has versus another. Another thing to look out for, is does the property manager own property of his/her own in the same market? If their property is a vacant one bed, and your property is a vacant one bed, which property do you think they will fill up first? While this may not be a deal breaker, it is certainly something to watch out for. When building a relationship with your property manager, your PM should help you with understanding your market, and they will play a huge role in underwriting and inspecting potential deals with you. Some may charge a fee to do this, but if you build a good relationship with them, and they know that the business will go to them, many PM’s will do this for free. Truthfully, a property manager can make or break your investment. Make sure you know how available they are to answer questions for you, and how often they will be providing financial reports for you to review. One important note – make sure to set your expectations clearly UP FRONT with your property manager; you need to make sure that your property manager is performing and that they are responding to tenant complaints quickly, evicting non paying tenants immediately, and ultimately, maximizing the overall return of your investment.
- Broker/Agent
Your broker will play a huge role in your ability to find off market deals in your real estate market. Remember, this is a two-part interview process. You want to find a broker that will find you deals consistently that match your investment criteria, and your broker wants to find an investor who can close on deals efficiently and with as little headache as possible. Make sure that you set your investment criteria before reaching out to brokers. Having a very specific investment criteria (B class, 20 years old, value add, etc.) will prevent you from receiving multiple deals that will ultimately waste you and your broker’s time. When your broker does present deals to you, make sure to promptly (within 24-48 hours) respond to your broker as to why you do or don’t like the deal. Send your broker a very specific explanation, and tell them that if they find any deals that meet XYZ criteria, to please send them your way. By simply doing this, you’ll be ahead of the majority of your competition. Another golden nugget – you can’t expect to meet your broker one time, and to receive a surplus of deals from that point forward. Send your broker follow up emails every now and then if you get approved for a loan, or if you add another deal to your portfolio. This will build trust and credibility with your broker, thus providing you with a larger deal pipeline. Lastly, if the broker asks you to sign an agreement that allows him/her to be your sole broker representing you in future deals I would recommend that you don’t sign it. This will ultimately reduce the amount of brokers you can reach out to for your deals!
- Accountant
I save the fun part for last. Having a competent accountant/CPA as part of your team is crucial. You need to understand how conservative or aggressive your CPA is willing to be with the tax code, and make sure that it aligns with your interests and goals. Make sure that your accountant is a REAL ESTATE account, and that he/she has experience in dealing with apartment syndication (if that’s what you are doing) or just real estate as a whole. I believe that in the beginning of your real estate journey, that you should be your own bookkeeper, but if you don’t have the time, it may be worth the investment to hire a bookkeeper as well. To set your expectations with your CPA up front, you should talk about: do you want to meet every month, or just during tax season? Is your CPA going to charge you by the call/email or is he/she just going to charge you a flat fee? I’ll say this with the CPA (and ultimately, this is important for all three of these team members) make sure to ask each of these team members for referrals, no matter how great they seem from the original conversation. Call the referrals, and ask them questions about the respective team member, you’ll thank me a few years from now.
There you have it. Adding these three team members to your team is going to be a crucial part of your success in this business. Not only will they be operating much of your day to day business activities, but you will also be able to leverage their experience when raising money. If an investor asks you about your experience, but you haven’t invested in an apartment yet, mention to that investor how many units your property manager currently manages, or how many value add deals that property manager has successfully turned over. These members are a part of your team, and they will dictate much of the success that you have, therefore sharing their experience with potential investors can go a long way. Now go out there and build your rock star real estate team!