Building your “Power Team”

Our company buys houses in several states and we are constantly asked, “How do you do this from so far away? How are you handling the rehab living so far away?” and “How are you successful at this and living out of state?”  Here is my answer: I have a power team of people that I trust in each and every market we go into. This team includes lenders, contractors, handymen, property managers, appraisers, attorneys, real estate agents and brokers, sign companies, insurance agents, tenants and buyers!  It can sometime take a while to put this team together and yes you are probably going to go through a few not so great ones to get to the ones you like, know and trust.  As your portfolio begins to grow, you will need more people on “your team”. The very BEST place to find these people is by a referral. That referral can come from another investor, a local real estate investment group member, a member of a local landlord association, a realtor, a friend or anyone else that you trust. Just be sure that they are “In the Business” and understand what it is that we do as investors. Now remember, the due diligence end of things is your responsibility. Just because “such and such” investor recommends you to a certain property manager or contractor does not mean they are the best person for the job.  You should always get references from anyone you are even thinking of using.

Property Managers – Like your real estate agent and attorney, you need to find someone you can get along with.  Interview them, as if you were going to rent a property to them.  You want to make sure your property managers will handle your house like a landlord not a slumlord.

                                                                                                          
Insurance Agents- Shop Around to find an agent who can do NOO properties and give you a fair rate! I always look for a broker who can give me a competitive rate and is fair and most importantly, honest. I like to find insurance agents through referrals-that usually seems to be the best!

 Lenders – This can be a tedious process. However, once you find just a couple of lenders in a specific area and they understand Investment property and NOO (Non-owner occupied) loans, you’re set!   First and foremost, you will need to find someone that can loan in the area you are looking at investing in. There are private money and hard money lenders that are available in every state there is  and sometimes  using private money or hard money loans can be the easiest way to buy and rehab a house without using your own cash, especially if you don’t have good credit or much cash to put into the deal.  Most private and hard money lenders charge anywhere from 4-8 points to originate the loan and 10-18% interest. This is not cheap, but it’s not really a horrible price to pay for the convenience of having money in 1-2 days. Sometimes, its not the cost of the money but the availability of the money that is most important. As long ad the yield is higher than the cost….that’s all that matters. In other words, if you are going to make more than what you spent to get into the deal, it should be a no-brainer! Here is the difference between lenders:
Private and Hard Money Lenders are quick and can provide you with the cash you need quickly, but you are going to pay more.  They provide a service that mortgage lenders and banks cannot typically do.  They give you the money to purchase the house as well as provide the money to complete the rehab on the house.   However, you must remember that you can’t keep a hard money loan on your property for any long period of time and expect to make any money-the money is expensive and will eat up your profits quickly. When taking out a private or hard money loan, you should not plan on keeping it more than 90-120 days at the most. If the project cannot be completed in that timeframe, don’t use hard money!

Conventional Lenders are much less expensive but usually require better credit-at least decent credit. There is definitely more documentation and it takes a lot longer to complete a deal-typically 30-45 days to close.  It’s nice to find a funding source that can provide both; however that’s usually not your typical scenario.

Whatever type of lender you decide to use, be sure to always line them up before you go searching for properties. It’s always best to have the money in place BEFORE you need it. Then, when you go to make offers, there I no delay.  The last thing you want to do is get a property under contract only to find out you can’t get the money to purchase it.   The investment market is a very small one and you definitely don’t want to develop a reputation for not being able to close deals! 

Sign Companies – You can pick any sign company out of a phone book or wherever.  I have previously used sign companies to put out and pick up signs in addition to showing my vacant properties to prospective tenants.
If you are going to manage your own properties, while living in another state,  you will need a person to show the property to potential tenants.  Realtors, Handymen and sometimes even appraisers can be great people to use for this, but sign companies are going to put out your signs in front of the house anyway.  For a nominal fee, they may be willing to let someone in and show them the property. Don't try to use a large national company for this.  Call a local one-man type of shop.  You can sometimes find them through referrals from other real estate investors or realtors.

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