Should I consult professionals before taking my first step?

Question

Hi again BP!

I'm a noobie from central Florida who's still figuring out my goals and the strategy to get there. I'd like to get your thoughts. Would you recommend visiting with a local CPA, real estate attorney or any other professionals prior to making my first real estate purchase? Id rather get it over and done with at the beginning than get a couple properties in and run into headaches. In your experiences is it worth the investment to meet with these professionals? Or can I get the same knowledge through my own research?

Thanks!

Robert Adams · Answer

I would recommend research as much as possible on your own and putting together your plan the best you can for free. Consult mentors, RE agents, RE investors, lenders, online blogs and forums, etc.

Then once you have a plan together run it by the people you deem knowledgeable and see if that can find any holes in your plan. Once you think you have a solid plan then I would consider spending the money to have the professionals you listed review it and help you execute your final revised plan.

Victoria Winters · Answer

Hi Niles,

I'm also new on Bigger Pockets, but not new to investing.  In response to your posted question, START.  Take the first step by writing out your idea, plan or goal.  Out of your mind and on to paper is the first step to reaching any goal.  It does not take a lot of time or effort to write down an idea, but many people skip this step.  It is an action toward your goal.  You can say you have taken the first step in your investment business.  That does not require the advice from any professional.  Good luck to you.

Daniel Alegre · Answer

@Niles Treber

Again, take my advice with a grain of salt on these next answers as im new and im sure some of the senior members would have much better ideas but here are my thoughts on what you asked.

Should I start an LLC before buying my home? First the first few probably an unnecessary move. Don't rush into buying up property like crazy, buy and hold is not a get rich quick game. It is get wealthy steady game. Buy maybe 3 small 2 or 3 unit properties over the next couple years, learn the ins and outs then you can do a 1031 exchange sell those properties off and get into larger unit buildings , at that point you can start doing LLC's.

With a lump sum of cash and a buy-and-hold strategy, would it best to finance as many as you can? I would finance as much as i could. Using to much of your own money can put you in a bind. You will need cash reserves because of normal maintenance, emergency repairs, vacancies, future down payments, reno costs...etc. using to much of your own cash could limit you from progressing as quickly as you may want.

Most of the successful investors i have met don't use their own money, their start off financing then work themselves into raising private money.

As a first investment my wife and i have bought a 2 unit house, we live in one unit and rent the other. This was a smart first move i believe as it allows us to get our feet in the water yet keep us from over extending ourselves. You will see how much you learn just from your first property.

Louis Leone · Answer

@Niles Treber

I would recommend getting involved with your local REIA by locating it at this site: (http://www.nationalreia.com/).  In addition, see if you there are experienced investors on Bigger Pockets in your area by searching under Network -> Find Members.  They can be invaluable.  Next, I would locate a very knowledgeable broker in your area who can get you up to speed on the market and the most recent transactions.

I find CPA's and the like are usually out of touch with the real estate markets as they don't see enough current market transactions.  That being said, most seem to have an opinion, however right or wrong they may be.

Elizabeth Colegrove · Answer

Honestly we just got started with a real estate agent and than just progressed forward. You are better off to just jump in than to get analyst paralyses.

Daniel Alegre · Answer

Hi Niles,

I'm new myself and i didnt use any professionals and i think i did just fine on my first action. Could i have done better? Sure. But i didn't have BiggerPockets as a tool when i started. I think depending on the niche you want to follow through with you can basically get most info you need here on the forums and you should probably try to find a local mentor. Join a REIA in your area and network. Before spending money on a CPA or real estate attorney you should really get a clear strategy mapped out on what you want to do. After that if you feel there is something a CPA or an attorney can do for you then find them and seek their advice.

Good luck

Niles Treber · Answer

Elizabeth  Colegrove thanks again for the advice. What your saying about LLCs seems to be what most seasoned people on here are saying. Im also going for a buy and hold strategy. Im not worried about heaps of cash flow now but I just want to make sure I have enough to cover my expenses. I know I can acquire more properties by financing and hanging on to my cash for more down payments. Im just worried that if I spend all my cash gobbling up properties then what do I do if a couple rentals go vacant at the same time and I cant cover the payments. I guess Im just trying to find the sweet spot with risk/reward. Its tempting to think of just buying a few properties cash (I recently got a decent sized inheritance and consider myself blessed) and instantly having a few grand in cash flow. Then saving that for downpayments on more down the road. At the same time if its better to take more risk and finance more properties now it seems the benefits are by far better down the road a bit. Is my line of thinking somewhat on the right track with this?

Niles Treber · Answer

@Daniel Alegre

Yes these are the nightmare scenarios that keep pulsing through my head. You nailed my biggest fear besides vacancy: a bad roof. Its expensive and it cant wait. Otherwise the damage and expenses just increase. Thats the first thing im going to ask the inspector about.

Im thinking of taking a medium risk approach: which I suppose would be putting a little more down on each property to allow a little more monthly cash flow to cover unexpected expenses. It may mean spending more of my immediate cash on higher down payments and sacrifice using it on down payments one or two additional properties right off the bat. But im thinking its worth the piece of mind.

Thanks again for the perspective!

Daniel Alegre · Answer

@Niles Treber  i agree with what you said to Elizabeth is true you are double minded at the moment which is going to keep you from moving forward.

If i were you i would just make your first deal, get it ready and rented. Assess how you think it went and from there make your decision on how quickly you want to expand. Take this step by step.

Vacancies will happen, to stack the deck in your favor having a clear set standards for prospective tenants and a very thorough screening process will help with that. But to me vacancies is not the hidden dangers, its the emergency repairs, for example i just had a leak that is destroying my tenants dry wall and causing danger because it is leaking into the unit near an outlet. I need to replace the fascia and gutters which will cost me over a grand. things like that will start to eat up reserves.

Buying up property quickly may seem like a great move but unless you really are prepared for the possibilities it may be a hard lesson. I would rather have 1 property cash flowing properly then a bunch that im breaking even with. I just recently talked to an investor that said they made to many moves at first that they ended up just breaking even.

Niles Treber · Answer

@Daniel Alegre

Thanks for the confidence boost! I have a million questions I feel like I need answered before I make my first move but I feel like what I really need to do is just dive in and buy my first property. Maybe you figured some out yourself and help me out?? lol- Just a few things im wondering: Should I start an LLC before buying my home? With a lump sum of cash and a buy-and-hold strategy, would it best to finance as many as you can? Pay for half in cash then finance the rest to reduce risk? Finance the first few and pay cash for the rest? My goal is to retire and have a cash flow of at least 8K a month after the mortgages are paid. Now that Ive established my goal, Im just trying to figure out the smartest way to get there!

Thanks again for the tips you gave!

Niles

Should I consult professionals before taking my first step?

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