I work with investors all across the country that are trying get ahead and make a living by investing in real estate by trying to be a one man show. So many individuals have to be on top or in control of every aspect of their businesses that they are often bogged down doing menial administrative work when they could be doing much more productive items.
So many investors struggle with being more productive and closing more deals due to the fact that they don’t implement systems or effectively put together teams that can help investors exponentially grow and take their investment business to the next level.
The core of any successful investor’s team is comprised of several realtors, several hard money and private investors, one to two title companies, one to two mortgage brokers and/or loan officers, and a good real estate attorney. I often compare investors to the plate spinner that you see in the circus.
Investors are often running back and forth from spinning their proverbial plates of finding deals and then pulling comps, finding, inspecting, funding, closing, and then doing almost the same thing to get the property sold.
It’s no wonder that so many investors suffer with keeping momentum going and have problems closing or working on multiple deals at one time, which in turn leads to large gaps between closings and profits being deposited or wired into the “plate spinner’s” checking account.
The most important member of any investor’s team is their realtor or realtors. While a lot of realtors want to be the sole realtor that an investor uses, the amount of work and deals that investors are going through would rapidly wear out any single realtor.
I like to recommend that you utilize one realtor for your short sale business, one for your REO business, and one for your foreclosure (NOD/NOT) business. When you figure in that realtors have to pull lists, run comps, and fill out contracts for each property that you as an investor submit, along with their other clients.
Most traditional realtors will often wear out from filling out a ton of contracts without keeping in mind that the investor is looking to buy several properties on an annual or monthly basis versus the single property every five years that a traditional home buyer will buy. Sometimes (actually most of the time) it takes the investor working and training several realtors over time to fit their roles.
Once investors find their deals, the biggest question and concern is “How am I going to fund these as I don’t have the money to do it myself?” While many investors state that you can buy property without using any of your own cash, you often do need money for earnest and option money checks, you shouldn’t be tapping into your cash for more than these items.
Smart and successful investors utilize other people’s money, be it from hard money lenders or private investors with cash! Most hard money lenders will start out lending very conservatively in today’s market to new investors and will over time (and as the investor performs); often reduce their rates and points. While everything is negotiable, it is often easier (and cheaper) for the investor to spend some time and contact their database for finding private money (which is a whole different blog to get into!) to help fund deals.
Often times, great deals will find money when presented properly to investment clubs and other marketing sources (Craigslist, Backpage, Kijiji, Meetup.com, etc). It’s important to have multiple sources of funding due to the fact that often private and hard money lenders will often run out of money and it’s important to have back up financing in case the funding falls apart at closing.
Closing deals is always important and having a place and people to make sure that everything goes according to plan is important, hence having one to two good title companies to ensure that deals have clear title, liens are paid off, and funds are dispersed properly. Along with that, a good title company can be worth it’s weight in gold as they have helped me find investors, funding, and provided me with title searches and HUD-1’s for my short sales in record time.
But in today’s market, some title companies aren’t doing simultaneous closings, double closings, or messing with wholesale REO flips, so having an investor friendly title company that has investor friendly attorneys on staff along with closing and escrow agents to ensure that your deal gets closed properly.
Utilizing the same one to two title companies can make your life extremely easy as title agents will often bend over backwards to make deals work along with overcoming hiccups along the transaction’s yellow brick road to your payday.
Getting your potential deals sold and funded and checks deposited into your account is also important, especially if you want to keep food on the table! And in today’s hectic lending market, having a mortgage broker and/or knowledgeable loan officer who understands and is up to date with the lending laws, programs, and credit requirements of USDA, Fannie Mae, and Freddie Mac is more important than it was before.
Your mortgage professionals also have to be familiar and able to do VA and FHA (the new sub prime) loans as well. Don’t waste your time dealing with lenders that aren’t VA/FHA licensed as you need to have access to as many exit strategies or buying strategies for your buyer’s pool as possible.
The final person of your professional team is someone that a lot of investors try to skimp on, but end up spending more in the long run. Your real estate attorney is someone that you should have on speed dial.
A good attorney can help you avoid pitfalls and suits that could have been otherwise avoided by contacting your attorney and either discussing with them the proper way to structure a deal or have them actually write up the contract as well.
What small amount of money that you could save by writing up a contract yourself can often grow exponentially if you end up in a suit and have court and attorney fees to pay at that point. An attorney can also put you in touch with other investors or private investors that they work or network with. Seek out an attorney and it will be the best money that you have ever spent (and not spent in the long run)!
Once you’ve got your team in place, and it might take plugging in a few different individuals here and there, your business will not only run a lot smoother and more efficient, it will also generate more and more deals for you as your team becomes educated about your business and invests themselves into becoming a more effective part of the team.
Your team will become a smooth running and well oiled machine that will close more deals and give you a license to print money in this awesome market. If you can’t make money in this market with a decent team, you are doing something wrong! Take the time to delegate your tasks to your team members so that you have plenty of time to do the things that you want to do. Remember, summer is right around the corner and the pina coladas and mai tai’s are calling!