Building Your Team (Beyond the Core 4)

Fundamental Principle

While a debit on the books, the right team pays outsized returns in growing and sustaining your business.

Our Story

When we first launched our out-of-state investing business, we pursued the turnkey path - as we were just testing the waters, and more critically, hadn't established relationships or built our network. In completing that deal, we recognized the far larger opportunity in rehabbing our own properties - and set out to begin building our team.

Nick had spent the last year reading, listening, and watching everything he could to build his understanding of out-of-state investing, and found key insights in David Greene's Long-Distance Real Estate book. We started by focusing on our agent, and after calling ten agents from positive Zillow reviews (not necessarily the strategy we'd recommend now), we found one we liked. He was hungry and, most importantly, willing to invest time in new investors without a book of business. From there, we were able to leverage the same Contractor, PM, and Insurance Broker we'd used with our TurnKey, and found a new inspector and lender through referrals.

The team we built in 2017 is not the same team we're using today - in fact, it looks remarkably different (more to come in our next blog). Our needs, and theirs, evolved - and in many cases, that meant a mutual parting of ways. As our business has grown, we've also added new players who are essential to our team - including our Tax Accountant and Legal Counsel - and built stronger relationships with players many consider "fringe" like our Inspector and Insurance Broker.

And in some cases, such as lending, we're still looking for that right partner (or set of partners). Building a great team takes discipline, time, and continued management to ensure mutual success. That said, we feel our time is well invested - at it’s best, our team uncovers opportunities and prevents catastrophes, giving us peace of mind from 2300 miles away.

Building The Dream Team

While David Greene's Book focuses on the "Core 4" - we're going to go a bit further, and speak to the many players who make our business possible today. We're only a few years into building our portfolio, so chances are - this team will only continue to grow.

Your Agent(s)

As you begin to network with agents, you'll quickly discover that most agents aren't really "investor-friendly." You'll come across some who don't have the knowledge and expertise to be your eyes on the front-line (especially if you're managing out-of-state, as we are). Those who are experienced may not have the hustle you're seeking to uncover and create great deals.

As you set out to find your agent, begin networking with investor groups for your market. Fellow investors are typically generous in referring their agent (especially if that agent has done well for them). Make sure, however, that you're not a tire kicker - most experienced investors won't want to refer their agent if you'll waste his/her time.

What we don't recommend is following our path - and cold calling Zillow agents. Most Zillow agents work with owner occupant homebuyers and aren't interested in high maintenance investors. We'd also recommend you avoid exclusivity contracts, as you don't want to be trapped if a great deal comes along from another source.

Once you've identified an agent, you'll want to evaluate if this is a long or short-term partner. An agent who hustles for you, and brings local expertise to the table, is the right partner - note: this is likely not someone closing 100's of deals. They won't have time for you, particularly if you’re just starting out.

Your agent is the center point of your team - it's fair to expect them to know the market, and bring new partners to the table, including contractors and lenders. On the other hand, you should not expect your agent to bring you ready-made deals so you can sit back and relax (if you find such an agent, please let us know). In today's market, you're probably not getting a 100% BRRR deal - and if you are, you're out hustling and self-generating it. Our best deals are crafted, not cookie cutter on the MLS. You should ask your agent to send you listings, but be specific about what you want - and be ready to think creatively in structuring win-win deals.

As you begin partnering with your agent, there are a few signs that you've stumbled on gold.

• Your agent tells you not to buy a house. This is your agent working against their own immediate interests (commissions) for your best interest. This shows they are long-term minded, and the sort of partner you can build a business alongside.
• Your agent takes things personally, on your behalf - not for their commission. Our agent goes above and beyond to fight for our interests - even without skin in the game.
• Your agent keeps the communication coming once a transaction is done. She/He shares market insights, new leads, and looks for opportunities to help you grow your businesses together.

Your Lender(s)

When you're first starting out, lenders are a dime a dozen - transactions are simple assuming you have a W2, savings, and reasonable credit score. Look for the best rate, a timely closing process, and someone you enjoy working alongside.

As your finances grow in complexity, this becomes one of the most critical partnerships you can build. You need experts to work alongside you - and you need to nurture that relationship (we've actually been fired by a lender for overly complex finances).

Depending on your market of choice, you might struggle with small loan amounts. You'll need to seek referrals for your local market (think credit unions, local lenders, etc.) Notably, you're past BofA and Wells Fargo at this point - they likely won't help you. Again, ping your local investors network - find tried and true lenders who have worked with others in similar situations.

As time progresses and your portfolio grows, you'll need to figure out who the big investors are in a particular market - and who they're using. Identify which banks are lending at a given time (note: you have to keep an ear to the ground, this can change). You can find reviews in your local investor groups, or even attend REIA meetings if you're a local investor.

A great lender is one who continues to close, even when you're in the range of 4-10 loans. After a few loans, every new one will be a financial colonoscopy. Lenders who are organized, reply quickly, and know what to ask for in advance - are gold. Note: they expect you to be just as organized and responsive. You should have your files in order, categorized, and easy to navigate - before the transaction begins.

Your Property Manager(s)

The property manager is arguably the most essential part of your team day to day, especially if you're an out of state investor. Investing time to find (and build a relationship with) a great Property Manager will absolutely pay off.

Begin by having conversations with investors who have been with a given Property Manager for a year or longer. You'll want to interview this investor (hint: send along a thank you note, or even better, a six-pack - this is a long conversation) and make sure you cover these key topics. You’ll of course want to have this same conversation with each Property Manager you consider.

This is an aggressive list - and we've built it this way for a reason. We've worked with several Property Managers for whom we could not answer many of these questions favorably - and we've learned the hard way to ask upfront. It might take some real time to find a PM you can confidently add to your team - and it will definitely be time well spent.

Get the Checklist

Your Contractor

Finding a contractor who completes quality work in a timely fashion saves countless headaches (ask us how we know). If you're locally based, go to Home Depot early in the morning - and ask around. See who is there, and who is working! You can also check out construction in your neighborhoods, and talk with the people working (no trespassing).

If you aren't local, start by asking your agent for referrals - these are likely solid leads if your (trusted) agent is willing to recommend them. You can also leverage your investor network, and look in local groups - contractors are likely part of them. Notably, "good" is subjective - think about the project needs and budget, and choose accordingly!

When you've found a reliable contractor, validate their work by asking for references and photos of their past projects. You should also have them bid for the job, and confirm this with your inspection report.

Once you've hired them, ask for their design insight, and see if they can bring fresh ideas and current trends into your homes. Hold them accountable to the timeline and scope of work - but build in a margin of error as we rarely have a project finished on time. And perhaps most critically, have your inspector go through the house when they're done - you'll pay for this, but it's worth every penny.

Your Inspector

An inspector will typically come as a recommendation from your agent if you're new to a market - and many will see this as a fungible individual. We firmly believe in the value of finding a thorough inspector, and sticking with them. In working with the same inspector for several years, we've been able to train him to pick out investor-specific problems. He also calls us to discuss live the critical items needed to make the property rent-ready.

Because we give our inspector steady business, we benefit from discounted rates, especially on walk-throughs to validate contractor work. More importantly, we trust his word - and this allows us to rest easy from 2200 miles away.

While it's hard to know straight away if you've found a reliable inspector (unless you have considerable expertise), you should look for trends here over time. An inspector likely won't catch every single thing that could go wrong with a property, but if you have consistent issues pop up, you know it's time to move on.

Your Tax Accountant

We were Turbotaxers back in the day - but once we acquired our first rental, we realized we were out of our depth. You'll want to seek a referral here, vs. just conducting a quick search - as you're looking for a professional who will have planning and strategy conversations with you outside of "tax season." Tax planning is critical - buying, selling, depreciation - having a real estate tax professional will save you far more than it costs you.

Outside of communication, you're looking to ensure your Accountant has dependable systems in place. For example, they should have secure document portals, and precise record-keeping to reduce repetitive asks.

It's up to you if you want a big firm, or an individual running their own ship - there are pros and cons on each side. We've done both, and we like having a unified point of contact vs. a large firm where we need to bring someone up to speed in each conversation.

Your Legal Team

We'll be brief here - you don't necessarily need to proactively hire a legal team - but we'd surely recommend you have a trusted point of contact saved in your phone. When (sorry, not if) things hit the fan - you don't want to be scrambling.

Your Insurance Provider

Insurance is an interesting category - most investors are on a race to the bottom from a pricing perspective - and it's certainly not a bad idea to save money here (assuming you have the coverage you need). It's easy to keep track of multiple policies on a few doors, but it becomes essential to have a centralized POC for all of your policies as you scale.

When building this relationship, look for someone who works quickly and can close the loop. You don't want insurance to hold up your closing. Our preferred method is typically to work with a broker who provides us several quotes for the best possible blend of coverage and pricing. But more importantly, we look for someone who follows through - and does what they say they'll do. Then, when issues arise with any single policy - we can reach out to one single POC to resolve them.

What Don't We Mean By "Partner" and Team?

As a quick, but serious aside - when we reference Partner and Team - we use these words carefully. These are deliberately chosen over "friend" or "family."

You should absolutely enjoy working with every team member, and they might grow to be friends in time. That said, they should be partners first - allies in building a mutually rewarding business. In some cases, close friendships with partners have temporarily blinded us to hard truths - and made tough conversations even tougher. This is a line you have to find for yourself, and it's a tricky one to hold. Make sure you continue to take an objective look at how your team performs every few months - and adjust accordingly.

At a minimum, we recommend checks and balances with multiple parties, separately incentivized and looking over each other's shoulders. It's tempting to combine some of these roles - but you want checks and balances built into the system. Things will inevitably go wrong, and you want redundancies in place when that happens.

A Final Thought

Investing is a marathon, not a sprint - and really, it's a Tough Mudder - you're going to get beat up along the way. Early on, it might be tempting to go alone - after all - all of these teammates don't come cheap. But if you're in it to go the distance - start finding these foundational pillars of your business today - it's too late once you know you need them.