Property investors have an almost absurdly difficult job. The task of assessing which properties are undervalued potential flips or are going to appreciate in value and/or produce positive cash flow is challenging. The task of actually managing those projects and properties and navigating the pitfalls and hurdles of unexpected repair costs, disastrous tenants, irritating inspectors, and actual criminals is insanity-inducing. This is why property investors need friends. Let’s talk about who those friends could be.
The deal-finder isn’t a specific job description per se, but rather is a general category of person—the kind of person who finds and sends you solid leads on property deals that are the kinds you are most comfortable dealing with. Call him a bird dog, a wholesaler, a property scout, whatever—there’s a symbiotic relationship between you and them. They need buyers to feed deals to, and you, presumably, want more properties that dependably turn a profit to add to your portfolio.
The deal-finder can also help you on the flip side, when you have a property that is ready to be sold, whether that’s because you just finished your renovations and it’s time to flip or because you’re hitting the go button on your exit strategy and leaving the landlord life behind altogether. Buyer or seller, being on The List™ of a few skilled deal-finders is a boon few property investors are better off without.
Of course, those deals aren’t going to pay for themselves up front, so you need to have access to a decent supply of liquid assets that you can use to acquire the deals in question. A financer can come in the form of a friendly banker, a wealthy benefactor, or anyone else who can put you in a position to make investments when the opportunity arises.
Real estate law is a finicky beast—there are so many different issues, and you don’t know what you don’t know until often it’s too late! Few have the time and expertise to create and review purchase and vendor contracts, set up companies/corporations, create a “bullet-proof” lease, handle evictions and other tenant legal issues (mold claims!), and/or defend/pursue lawsuits when needed. Yes, it’s possible to get by most of the time without a real-estate lawyer, but establishing a relationship with a good real estate lawyer (or two!) is completely mission-critical.
Accountancy, a few great men once said, makes the world go ’round. If you’re a real estate investor, the quality of your accountant can make the difference between success and failure several times over. A skilled accountant can structure your investments for maximum tax efficiency, provide perspective on issues of appraisal and capitalization, and guide you toward strategies that maximize leverage while keeping your risk tolerance in mind. There is no part of a property investor’s lifecycle where a talented and allied accountant isn’t on your shortlist of best friends!
The Property Manager
Each of the best friends above provides invaluable assistance in the process of acquiring and dispensing of investment properties. But there are three parts in the cycle of existence: creation, destruction, and the phase between those two. Call it “preservation”—but in the real estate world, it’s better known as “management.”
Related: The Landlord’s Ultimate 34-Step Property Management Checklist
The property manager is the entity who takes care of all of the tasks necessary to keep a property turning a regular profit while you focus on your next acquisition or disposition. Property investors can operate without a property managers, certainly, but at that point they need a whole new list of friends, including contractors, inspectors, advertising writers, photographers, real estate agents, debt collectors, security personnel, landscapers, utilities liaisons (yes, that’s a real thing!), and private detectives, to name a few. It’s certainly possible to be a full-time investor and a part-time property manager or vice versa, but in terms of keeping your health and sanity, it’s generally not a good idea once you’re trying to manage more than a few houses (especially if they’re even slightly far-flung).
Wholesalers and flippers, of course, don’t need to fuss over the whole “management phase”—but your clients may need a referral to a good one, and you’ll look good if you have one to give, so developing a relationship isn’t a bad idea! And, of course, anyone facing the prospect of becoming a landlord would do well to consider the values of befriending a property manager.
Investors: Any vital figures you’d add to this list?
Let me know with a comment!