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Updated almost 10 years ago, 02/24/2015
Which comes first....
In a way, this feels like one of those "Which came first, the chicken or the egg?" type of questions...which is probably why it's so hard to figure out when just getting started.
I have seen people say that the first thing that you need to do is get your team in place. Start with finding your RE agents, lenders, contractors, lawyers, etc, etc.
I have also seen people say that, especially when you're just starting out, there's no point talking to most of those people until you've found a property or two you're interested in moving forward on. That lenders especially will laugh if you want to get pre-qualified for a loan on an "imaginary" property.
So my question is this then...as a new investor who is getting serious about moving forward, do I need to start by interviewing contractors, lenders, and lawyers? Or, do I start by just working with a RE agent to find decent properties?
You can get to know those types of people through REI networking events, but you aren't going to actually be able to build the team until you have business to give them (or at least the expectation of business in the relatively near future). They'll take you much more seriously when you can actually claim even one or two properties in your portfolio.
Find what interests you in real estate.
Then find out about it.
Then do some research.
Then get started.
I agree with Greg. After you do a deal or two people will begin looking at you differently, even treating you differently. I'd focus on looking at properties and honing your evaluation skills. Successful deals will lead to more successful deals and the team will fall into place. I felt like a lone wolf a lot in the beginning.
Agreed with the guys above. Go get deals. You will need a property before you actually put the lenders/contractors to work.
#5 Classifieds Contributor
- Lender
- Rochester, NY
@Andy V. As for lenders you want to get pre-approved prior to searching for property. Hoe else will you know what purchase price you can go up to?
- Jerry Padilla
- [email protected]
- 585-204-6923
Andy V. I would agree with what the folks before me said but I'll try to add what I think you should do. As you know in order to get lending from a bank or hard money you will need some sort of track record or experience. Having said that its best to start the first few deals with either private money or an equity partner with whom you could discuss your business model and what kind of ROI they can get from investing with you, even before you have a deal. You just have a plan of what criteria you're looking to get into (location, price range, how much rehab needed etc) and what profit margin is considered ok by you.
At the same time as you're talking to your potential partners you should be talking to several RE brokers and ask them to show you available deals that fit your appetite. As you're looking and analyzing several deals you will become better at identifying a good deal vs a bad deal. As soon as you find a deal that you feel there is room for you and your partner to make a decent profit show the deal to your (potential) partner.
By now you should have a list of reliable contractors. You gotta be able to tell your potential partner "listen bro, if you agree to invest with me, x is what you will invest. X is what I will be contributing to the deal. I have several reliable contractors whom I'll be getting bids from. It should take x amount of time. You will be making x amour which is an annualized return of x! Now this is an amazing deal! Are you in?"
In short you should be working smart on several fronts at the same time. Look for good brokers. Look at deals. Talk with money investors. Find contractors. You gotta inch in from each angle until you hit the target head on.
Good luck!
Thank you all for your comments. In a lot of ways, it reinforced what I was already thinking while still giving me some new things to consider.
Originally posted by @Andy V.:
In a way, this feels like one of those "Which came first, the chicken or the egg?" type of questions...which is probably why it's so hard to figure out when just getting started.
I have seen people say that the first thing that you need to do is get your team in place. Start with finding your RE agents, lenders, contractors, lawyers, etc, etc.
I have also seen people say that, especially when you're just starting out, there's no point talking to most of those people until you've found a property or two you're interested in moving forward on. That lenders especially will laugh if you want to get pre-qualified for a loan on an "imaginary" property.
Start with the financing. Lenders will only laugh at "imaginary" income and assets.
You need to know what price range you can qualify to borrow against. Separately you need to run the you numbers personally and see what you are comfortable with in terms of a payment in case of vacancy, etc.
I would look on the MLS and find a couple potential properties. I would interview 3 to 4 agents and ask - an example of a recent investment purchase, a property on the MLS they would recommend and their thoughts on your potential properties. You could do this over the phone or even email. I would be upfront with the 2 favorites and say you want them to show you 2 or 3 potential investment properties and you are interviewing agents. If you want to make an offer, you have to go with the agent who showed the property. Beyond that go with your favorite from the showings.
@Andy V. Here's the bottom line. Throughout your REI career your team will constantly evolve. Your contractors, agents, lenders, lawyers, wholesalers, partners,... W/ that in mind you should be doing it all right now. Interviewing agents, getting your funding resources in place, looking for property w/ agents, interviewing laywers, interviewing contractors,..... When a deal crosses your desk that makes sense you'll need to have it all in place.
when I started, I just did it. And was using my contacts "team" it didn't work out well..
I've been doing this for 12 yrs, and I only now have team.
The difference is I'm doing more projects so I employ my team more frequently and therefore they are on my team now, figuratively speaking. And I built credibility ;)