Though the statistics and the demographics of any area are the main parameters in judging the suitability of any location for investment, it’s the trust and relationship with key people that matters the most. Your success as a real estate investor also depends on how closely knit your team is.
In the real estate business, working with the wrong people is what causes issues, it’s never the numbers. When you have people in your team who are dishonest and greedy, you will lose money. The people you work with are the ones who make or break your real estate business.
Wondering who the most critical team members are in your team? Let’s have a look.
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Essential Real Estate Team Members
Mortgage Broker: Although I’m a big believer in building the foundation of your portfolio with cash, I know that many investors opt for using finance. If you do, this guy can make all the difference.
Real Estate Attorney: When talking about legal issues, people often refer to the fine print. Legal documents are not easy to understand. So have someone on your team who can go through all your contracts and legal documents and who knows the legalities of all your moves. We spend thousands on legal fees here in Ohio, as there are so many laws and regulations regarding real estate.
Contractor: If you want to get anything done in real estate, you’re going to need a contractor. They will handle the labor, material and equipment needed to get the job done. Good ones are hard to find sometimes, but the search will certainly make up for it when they finish the job under budget. To be honest, I am still trying to figure out this part of the business. I’ve been hiring and firing contractors ever since I started investing in real estate.
Real Estate Agent: Real estate agents are on the lookout for hot properties and inform you if they match your criteria. They are awesome in doing market research and assisting with giving you an opinion of a property’s value. It’s worth keeping one in your team, even though the best deals in my opinion will never be found on the MLS. Tell your trusted realtor to tap into his college friends that are now attorneys. They might have properties going through probate that you can steal a bargain on.
You have to treat real estate investing as a business. Without these people on board, you don’t have a business. You can draft all the contracts you want, but in the end, that won’t do it. You need to be able to trust these people more than anything. It’s important when investing nearby, but it makes all the difference when you’re investing out-of-state.
What Can Possibly Go Wrong?
Unfortunately, the reality is that it’s very difficult to find people who keep your interests first. Sure, they want to make money themselves, but it shouldn’t be at your expense and in bad trust. With a greedy and dishonest team, it’s difficult to survive. Think about it — these people’s positions are so critical to your success that each of them can really ruin any investment. Many investors have suffered a lot because of an inefficient team. And of your team, a bad real estate agent and a bad contractor can harm you the most.
A Bad Real Estate Agent
Let’s start off with a bad real estate agent. A bad real estate agent brings you bad deals, it’s as simple as that. You want to buy a property at the best possible price, but your real estate agent might just be looking at something he thinks is more important: speed. A real estate agent who’s bad for you will be looking for speed instead of getting you the best price possible. Getting you a good price takes time, as does making multiple offers and negotiating with the previous owners.
If you’re using a real estate agent to sell the house afterwards, you could easily run into the same issues. Even though they get a higher commission from a higher price they might be able to get you, focusing on speed instead can be very rewarding for them and very costly for you. I submit around 50 offers every week through my trusted real estate agent and will only buy one property per month if lucky. With that being said, I also let my trusted real estate agent list all of my higher end flips, so it is more than worth his time to keep sending me offer contracts via Dotloop and to always have my best interest at heart on any given deal.
A Bad Contractor
And then we have the contractors. Similarly, bad contractors can burn a hole in your pocket. If you decide to build a property from scratch, you have to rely on contractors. The same goes for when you’re just looking to make some cosmetic changes to a property.
A bad contractor will be easy to spot. They raise the budget beyond what you have in mind or what you have agreed upon. They’re also likely to keep delaying the project and asking for more money via variations. And then you have the materials they use. They’re the ones who select the suppliers and charge you for the materials they use. By using substandard materials that you might not even know about, they could cause future maintenance issues. Sometimes contractors even delay a project for their own gain, as they get busy on other jobs and ignore the urgency to complete your renovation.
Every single person on your team can have such an enormous impact, and it’s easy to get hurt. The reason why the real estate agent and the contractor can have one of the biggest impacts is because their interests can easily be the opposite of yours. For both, it’s very lucrative to rush a deal or have too many projects running at the same time.
This is why trust between you and your team is the single most important thing you can have. They may not do anything illegal, but that doesn’t mean they can’t cost you dearly by rushing and not having your best interest at heart. These people are key, so spending the time in establishing a good relationship with them first should be your priority.
But is it really that hopeless? Is there nothing you can do? Yes, there is! There are things that can tip you off and tell you that the person you’re dealing with might not be the best partner going forward.
Recognize bad real estate agents and bad contractors with these tips.
5 Tips to Avoid Bad Real Estate Agents & Contractors
Beware of slow a response. Communication is the major issue between an investor and an agent. While you shouldn’t expect your agent to be on call 24/7, he or she should respond to your voicemails and texts in a timely fashion. Though it’s not always possible for the real estate agent to respond immediately to any inquiry posed by the investor, responding within 24 hours is decent.
If not, it’s time to look for another real estate agent. Why? Well, maybe they don’t care enough about you, or maybe they just have too much work. Either way, you’re not getting the attention you need, and given the large sums involved with real estate, you deserve attention.
Look out for pushy agents. Good agents are those who ask questions to get a better idea of your needs. The others… well, they have themselves in mind. All they care about is making the sale. Bad agents are pushy creatures who simply want to shove some deal or their listings down your throat. You can feel it when it happens; they try way too hard to reason you into a purchase or a sell. If this is the case, run!
Be cautious of fishy deals. Everyone needs to make money. If a contractor offers a bid that’s too low in comparison to other deals, watch out for a red flag. Underbidding simply means that either the contractor is a novice and is unfamiliar with the work, or the contractor wants to charge you through the roof with variations when the job starts.
Always get references. Beware of contractors who do not have any reference to show. If a contractor has done a good job, he will have a lot of references and a fixed address. Ask for the address of the contractor. If the address sounds suspicious, it may mean that he’s a fly-by-night operation.
Insist on a written agreement. Be cautious when the contractor tries to do away with the formalities of signing a contract. “You have my word!” just doesn’t help you when things get ugly. I don’t really follow this rule nowadays, as I have already established a few great crews that do great work. Make sure to have a written agreement in place for anyone who is new and starting their first job.
You need a good team of professionals who assist you in your real estate investment. You need people who are honest, have a professional attitude and know how to do their jobs. In order to look for these people, there are many things you can do, but these two are the most important.
- Use real estate agents, contractors and other key team members recommended by people from your network. Seek help from them. Always cross-check with other people as well in order to be sure of the references. And if you don’t know anyone in the area with experience, get to know them and ask who they’re working with. Remember that your Network = Net-Worth.
- When interviewing people for your team, short-list those who have long term experience in real estate. Ask them to provide at least two references. Call these references to learn more about your prospective team members.
A team is about sharing the same vision and working together towards the bigger picture. If you can trust your team to have your best interests at heart, you’re going to have a far easier job of investing in real estate. And while working with them, it’s good to have faith, but never take your finger off the pulse and don’t shut your eyes completely.
Investors: How do you avoid bad eggs on your real estate team?
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