The importance of a good team is mentioned over and over again. The reasoning behind it makes total sense. For a first time investor when is the best time to bring on those team members?
Our goal is to initially do buy and hold in single or multi-family units. At this point, we have met with a few lenders and secured financing. Also, spoken with an accountant about different tax implications. We have also reached out to a realtor and are set up to receive MLS listings that match our criteria. We have done the initial basics and are ready to move forward. We have branched out to people but not created any official business relationships.
Our next step is setting up our LLC(s). Is it best to do the basic online form, or should we get a lawyer/accountant involved? Do we get a lawyer and accountant on board to make sure everything is set up correctly as we move ahead? The time spent with these individuals is valuable but not cheap. Being able to spend our money wisely is key.
When did you bring people in to create your team?
I would say the best time to bring someone on is when the answer to the following question is yes: Will bringing someone on right now make me more money? I ready a book on entrepreneurship who's name escapes me that said you always want to be a little understaffed; it pushes you. So the other good sign you need to hire someone is that there's simply not enough time to do all of the work yourself. (And I would try to avoid the 60 hour weeks, research shows that your productivity plummets after 40 hours).
before you need them
Funny thing is that i do it the opposite way. I always bring a team member one first, ie attorney, CPA etc. Then if I find that it is so simple i can do it myself or it's not worth the money, I'll do it myself on the subsequent times. But if I've never done it before, I rather bring someone in so I don't get myself into trouble and then be in a desperate situation trying to find someone to me out.
Put your team together first...then start investing. This way, they are there when you need them. If you wait until you need them, to start looking for them, you'll lose deals, or you'll pick team members based on "avail" ability, and not actual ability. Be proactive.
In my head there is a difference between your "go and do stuff" team (contractors, REA, wholesalers, etc) and your "keep me safe" team (attorneys, CPA, etc). Your "keep me safe" team is more like your insurance policy. By the time you need them, it's very possibly too late. Deciding when to hire them is very much an exercise in finding how risk averse you are.
Maybe a football analogy with offense vs. defense works here?
@Jeff Meachen As a CPA who's target client is real estate investors, I can tell you even from my short experience that it's better to get an accountant/CPA on board early on. They can help you with the entity structuring, financial and tax planning, and "what if" scenarios.
Some people are great at managing their own books and doing their own taxes. Others aren't - and they pay me a pretty penny to correct their errors and, on top of that, generally end up owing the IRS a couple thousand dollars.
Forming the LLC is a simple process with the state, atleast in California. The tricky part with an entity is the Operating Agreement, which does not need to be complicated or created if you and/or your spouse are the only members.
Thank you for all the advice. It is very wise to have all in place prior to getting to work. It is hard though to determine who would be the best fit and what our needs are starting out. I think we have a good handle on what we need covered at our current capacity. We are just looking and organizing. I am a DIY kinda guy, but I also know my limits! Thanks again to all for the input!
You don't need to spend money until you actually require their services, but it's a good idea to begin building your relationships with team members as early as you can.
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