BiggerPockets

What is everyone's thought on the initial expendature of funds on propfessional services such as financial planners, attorneys, CPAs, etc. Do you foot the bill upfront, or go at it alone and hope you don't make a mistake?

I use a CPA and a lawyer, but I don't use financial planners. I think a good test with financial planners is whether they make more money that you do. In 2002, only the top 10% of financial planners made more than $108,000 and the average financial planner earned $57,000. If that's all they make, why in the world would I take advice from them? It sounds to me like the financial planners need advice!

Mike

Will,

I think the answer depends on what skills and experience the newbie has. For example, if a newbie has 20 years experience running other businesses, he probably doesn't need a lawyer or accountant to help set up a LLC or chart of accounts.

On the other hand, someone with absolutely no experience probably does need some help on these and other issues and therefore should hire an accountant and/or lawyer to help him get started.

I would not recommend a financial planner as most financial planners don't have expertise in real estate and most financial planners are not very successful on their own. Why take advice from someone who is not successful?

Mike

There is no question that you need to know how some professional service providers get paid. The FP you refered to was obviously paid a broker's commision by selling the stocks and funds he was "pushing" you on.

There are good and bad professionals in each profession. Obviously, you need to choose your team carefully. The point I make to others who ask me this question is this: if you have no experience writing contracts (or negotiating them), it would be more cost effective in the long run, by footing the bill for an attorney upfront rather than go at it yourself and hope for the best. a mistake could cost more than the fees you "should" have paid out in the beginning.

The answer:

You need to pay to play. A team of professionals is needed to protect you and your business.

There are some low cost options to use at the beginning stages:

1. Pay for one solid consultation with an attorney. I do not care if you have ran another successful business for 20 years or not. Each business has its own unique legal challenges.
2. Be prepared for this legal consultation. Be very clear with your goals so that this fee is not wasted. The attorney is there to answer your questions, not start a business plan from scratch.
3. Websites like Legal Zoom and The Company Corporation to set up a corporation or LLC. The process is easy, and will save you a lot of money over what your local attorney will charge.
4. Interview and hire a good accountant. Do not go at this alone, as it will only bury you in the long run.
5. Quickbooks - This software is affordable, and will save you a lot of time and money on your accountant's fees.
6. PrePaid Legal - While many may look at this mlm style company in a negative fashion, they have a business product for only $75 a month that is perfect for a new business owner. We still use their service to this day for contract and document reviews. We can even call them and ask questions anytime!
7. Insurance - Find out what type of insurance you need to protect yourself.

There is no real short-cuts in business, but there are cost effective solutions. I have seen too many people simply "wing it" only to get buried in IRS, legal, or other troubles that are much more costly and could have been avoided.

Thank you for the kind words, It is very appreciated!

My personal goal, and the goal of my company, is to provide people with the best possible chance to succeed as a long term investor.

Here is one of the first books a newbie should read: "The Richest Man in Babylon"

It will lay the foundation of what wealth creation is all about!

The beginning stages of how you form and run your real estate business, and the habits you make along the way, will be crucial to your survival in this brutal business.

Expect nothing less Josh!

It is definitely worth the money, it will payoff in the long run.

Experience Investors always say-Make sure you build your team first. That statement is truely critical when building a successful RE. Investing Bus. With that said, however, I don't think it's necessary as long as you have acquired the specific knowledge you need to get started. Joining a Investment club or working with a mentor until you feel comfortable doing your own deals. Then, you can hire a CPA and attorney!
Mathews Realty Associates/
Buyer's Agent/Investor
Multi-family, apartment Specialist.

I took Dwights post as you need to know what your doing before you start talking to the professionals, you might get discredited fast. Hanging out at the club with your wallet home and locating a mentor so you know what your doing is just as critical as building a team of pros.

The biggest mistake I did was listen to people that thought they know what they were doing. This included my Realtor. I have no problem giving someone money for EXPERT advice. The key is to find the right experts.