Real Estate Investing is very much a team sport. Below you will find a list of the 8 people you will need as a real estate investor. Not all of them on the list are mandatory, but having them all together on your real estate investing team will make life much easier in the beginning and end!
I hadn’t yet realized this when I did my first deal, but quickly learned. Mortgage brokers have access to many more lenders than the banks do. When I was getting ready to get a mortgage for my second property, it came to my attention that the bank’s lender would only count 50% of the rent proceeds as income when tallying my income to debt ratio. One of my broker’s lenders were able to use more rent income, which brought down my ratio and made getting approved much easier. As a real estate investor, your income to debt ratio is going to be high (on paper anyway), so any way to attribute more income will help in the end. It’s also important to select a broker with real estate investing experience. This way they know exactly how to proceed and get you the best rate possible.
Real Estate Agent
One of the more vital components of an investing team is your real estate agent. If they are familiar with investing, it will make all the difference when giving them your criteria for opportunities. As with any of the people on the list, it’s important to treat them professionally. They don’t want to have to go through 100 houses and then make a measly commission of $1000-$2000. Be specific with your criteria and do not waste their time. As time goes on you will find yourself presented with better and better deals as you prove yourself to be an outstanding client to have.
Even though we’re not getting our mortgages through the bank, it’s important to have a personal banker that you know and trust. There will be times when you need to up your line of credit to get some renos completed, or help with day to day banking when times are tough. I recently went through a month of “worst case scenarios” with a couple of my properties that left me a bit thin in my real estate bank account (yes, I separate real estate from personal banking). I ended up with a negative balance and no overdraft protection. I called up my banker to let him know what was happening and that I’d have money in the account in two days. My guy was awesome and told me that they’d pay anything that came in until I got the money in there. I know this is a lot easier done in a small town than a city, but it can make a huge difference to have someone that you know and trust.
Chances are you probably have all your insurance with one company for convenience. However, it’s worth a trip to a broker to see if you can get a cheaper rate elsewhere. Every little bit you can save is money in your pocket. There is specific insurance for rental properties, so make sure this is what you’re getting. You should also make sure that your clients have content insurance as well.
It’s very, very important to befriend a home inspector. Someone you know does a job above and beyond and that you can trust. The last thing you want is to purchase a property only to have $1000s of dollars in repairs required early on. Your real estate agent should be able to help you with this as home inspections are usually a condition of a pending sale. Never buy a home without doing a home inspection. Aside from actually finding bad things that would make you not want to purchase a particular house, you could also use the home inspection as a way to back out of a purchase agreement should a client in a rent to own situation backs out at the last minute.
If you’re doing flips or buying homes needing work prior to renting them, then you’ll need a handyman. You need someone that understands the difference between renovating for investment purposes versus your own home. Renovating for investment purposes is not as detailed as for your own home. It should be clean and simple. Time is money. The ones that understand this are as good as gold, so hold on to the tightly. The ones that are good at what they do but don’t quite understand the concept will need more supervision in the beginning. The less involvement you have in the renovation process the better. You time is precious and better spend finding a new money making venture.
Obviously you’re going to go to a lawyer that is familiar with real estate transactions. Make sure they’re familiar with N4 and L1 forms as you may need them some day to remove a tenant from your property (I did!). It’s also quite handy if they’re familiar with lesser used real estate tactics such as wholesaling. Not all lawyers will be familiar with real estate investing so make sure you find one that is.
As you may know, all this money we’re making on the side of our 9-5 job is untaxed, so we’ll need to report this to the tax man and then find deductions we can declare on our taxes to lessen the blow of all this tax free money. This is where an accountant comes in. I specifically use an accountant that has rental properties of her own, so I’m confident that she will find all the deductions that are pertinent to my situation.
As you may have noticed, there is a glaring theme to all of this. Make sure the people you are using are familiar with real estate from an investment standpoint. Once you have your above team assembled, you’re ready to start looking for that first investment!