Who Needs to be on Your ALL-Star Real Estate Team

We like to think of ourselves as masters of our own fate. That goes doubly for real estate investors, who leverage today’s data to create tomorrow’s wealth.

However, nothing great is ever created alone. Even books with one author have a list of names in the acknowledgments at the end. Whether it’s a groundbreaking company or a real estate empire, prosperity is a team effort.

By assembling a team of professionals to back you up, your chances of succeeding as a real estate investor multiply significantly. Here are the seven key members to your real estate investing team. Even if you don’t have your first investment property in your sights, start building this team now. You will need them!

1. Mortgage Lender

Most investors choose to accelerate their returns by leveraging their investment. In the case of real estate investing, this means taking out a mortgage loan to finance part of the property.

Mortgage lenders take a number of forms, including:

• Mortgage Brokers. Mortgage brokers are easy to find, but be careful—most of them are used to dealing with prospective homeowners, not prospective investors. They are used to slotting buyers into a very specific set of boxes, and they may not be ready for some of the demands you make as a real estate investor.

However, if you have substantial W2 income, a mortgage broker may be able to find you some very attractive options. Try to find one that has experience working with real estate investors, and possibly relationships with commercial lenders.

• Banks and Other Institutional Lenders. You can also go directly to the bank and skip the broker. If you form a relationship with a mortgage banker whose institution lends to investors, that banker may be able to help you bypass the red tape.

• Hard Money Lenders. These lenders write short-term, high-interest loans to investors, usually for home flips. The upside is that they tend to take the financial viability of the property into consideration, not just the income of the borrower like a mortgage broker does.

• Private Lenders. Private lenders usually offer higher interest rates than banks, but they are more likely to consider the financial viability of the property and the experience of the investor, not just their income.

By building a lending relationship early, you will find it much easier to get loans as you gain experience. With a relationship of trust built, your lender may begin to “rubber-stamp” hundreds of thousands of dollars to finance your deals.

2. Real Estate Agent

You probably pass ten real estate agents on the way into the grocery story. Indeed, everyone has a REALTOR® cousin or brother-in-law. Barring that, look for the nearest bus station bench.

But once again, very few real estate agents are accustomed to dealing with investors. Most of them focus their training around homeowners, who far outnumber investors. They may have no clue what you are looking for. They might be baffled at your apathy over the sparkly new-construction starter home in the burbs that gets their newlywed clients salivating.

Look for a real estate agent who knows how to handle investors—who looks for short sales, foreclosures, and infill fixer-uppers with strong value-add opportunities. If you want to negotiate creative financing, like subject-to or seller financing, make sure you find a real estate agent who is comfortable negotiating those kinds of terms.

3. Title Agent

Title offices open escrow, secure title insurance, and perform legal due diligence to make sure the seller has the right to sell the property. Otherwise, competing owners might surface and kill the deal.

Title offices aren’t hard to find, but if you want to do creative transactions like subject-to or a mortgage wrap, you can’t go with an off-the-shelf title agency like Chicago Title or First American. These franchises are great and closing traditional, straightforward home-sale transactions, but they will throw up their hands in horror at a sub-to deal. Their rank-and-file title officers will probably tell you sub-to deals are illegal (they aren’t).

If you want to make creative deals, make sure to find a title agent who has experience closing these kinds of deals.

4. Insurance Agent

Your mortgage lender will require insurance and possibly an escrow payment to make sure insurance is funded. However, this escrow may only budget for the minimum required insurance … not what you actually need.

Investors must consider many factors that homeowners don’t have to consider, including:

• Periods of vacancy, which require higher insurance payments.
• Construction insurance for renovations.
• Extra considerations due to flood plains and other liabilities.
• Umbrella insurance to cover the investor if a tenant slips and falls on the porch and decides to sue.

Find an insurance agent with experience covering landlords, and make sure they know you want full coverage, not just the bare minimum.

5. Property Manager

Many first-time investors try to manage their properties themselves, but hiring a property manager allows you to scale your business. You can be off looking for the next property in your empire, while the property manager handles day-to-day tasks like collecting rent, marketing the property, paying bills, and executing required paperwork.

Property managers usually perform these tasks in exchange for a percentage of the gross rent collected, typically anywhere from 3% to 8%. Make sure to factor in this expense when calculating your potential cash flow.

Property managers are also invaluable sounding boards for the real estate investments you are considering. Since they will be the ones responsible for actually managing the asset once you buy it, you can usually count on them for a blunt, informed opinion to help guide your buying decision.

6. Maintenance Team

Real estate is tangible, and tangible things break. You don’t want that 2AM tenant call about a broken toilet to come to your phone. Instead,get maintenance professionals on your team, stat. These could be contractors, handymen, or third-party property maintenance vendors. They may even have an emergency number you can give to your tenants for that 2AM toilet call—one that doesn’t ring your phone.

7. CPA

One of the best reasons to invest in real estate is the savings at tax time. These come from:

• The ability to take a depreciation expense on the property, which reduces your tax liability while costing you nothing out of pocket.

• The fact that rental income is taxed at a lower rate than ordinary income.

• The ability to write off property management expenses like repairs and mortgage interest.

• The ability to do a 1031 exchange when you sell the property, deferring capital gains taxes.

To take advantage of these tax benefits, you need a CPA with a knack for squeezing all the marrow out of a real estate investment, making sure you pay the bare minimum to the IRS.

Preparing tax returns for a real estate investment usually involves juggling multiple entities—you as the investor, an LLC that holds the property, possibly limited partnerships, management LLCs, and returns filed in multiple states. Find a CPA that is up for the task.

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There it is—your real estate investing dream team. Start assembling them now, one piece at a time. Ask other investors, or your new team members, for recommendations to fill the vacant roles. When the deal of a lifetime presents itself, you will be ready to pounce.