How to be Successful Investing in Real Estate
“There is no such thing as a self-made man. You will reach your goals only with the help of others.” – George Shinn
Those are some very wise words from a famous entrepreneur by the name of George Shinn. Nobody achieves success (whatever you deem success to be) without a great group of people helping, either directly on the frontlines or indirectly behind the scenes. Whether it be mentors, people for spiritual support or building business relationships, success is an accumulation of work and effort from more than one person.
The same concept applies when you are an investor in real estate. You need a group of people around you that will support you because real estate investing is by no means an easy journey. Like they say, nothing worth having comes easy. Plus, 97% of the people will think you’re crazy or tell you to be careful to not lose all of your money in the market. We’ve all been there in one way or another!
Building Pillars of Success – Mental and emotional support is one aspect, but there is also a strategic group of professionals that you need to surround and align yourself with in order to find success in real estate investing. It will tremendously help you in the long-run to have this group be there to support you for every move that you make in the real estate playing field.
So who should you connect with early on and who should you enlist? The following is a list of professionals to have on your team, or what we like to call your Power Team:
1) Investment-centric Realtor
2) Portfolio Planning Mortgage Broker
3) Real Estate Lawyer
4) Real Estate Specific Tax Accountant
5) Responsive Property Management
6) Reliable Contractor
You may think that the list above is fairly standard but do not undermine the importance of finding quality contacts. It’s often said that Realtors are a dime a dozen and mortgage brokers are aplenty, but have you found someone who you truly trust for the job? You see, it’s not as easy as picking the first name that pops up, taking a recommendation from a friend or even hiring a friend. Sometimes, working with the person directly will either make or break the relationship. In our own real estate journey, we’ve come across really good professional contacts who we’ve personally used and if you are a client of ours, we’re happy to share our million dollar Rolodex with you.
Depending on your investment strategy, #4, #5 and #6 above are somewhat optional, but you definitely need the first 3 professionals on your winning team. More on each of these professionals below.
Words of Wisdom – Before we break down the importance of each professional listed above, there are 2 really good pieces of advice that many investors wish they knew before they started investing in real estate:
1) Work with full-time professionals – If the professional you’re working with is not working in the respective profession on a full-time basis, then you will never be their top priority. For instance, there are many Realtors who have went to get their real estate license in order to trade on the side. However, many of these Realtors are working 9-5 jobs. How much time do you think they can realistically set aside to service you and attend to your needs and questions? As a result, make sure every member on your Power Team is dedicated full-time to their craft.
2) Build relationship equity with your Power Team – When you find a deal, who will you call first – the person you have a good relationship with or just a random stranger who gave you their business card that one time?
Relationships matter and building trust is the fundamental piece that holds it all together. Make sure you treat every person on your Power Team with the same level of care and respect that you would want for yourself. In return, they will gladly keep your best interests in mind and have you as their top priority when you need it most.
Now that you have that advice in mind, and without further adieu, here’s a break down of each profession and why each of these professionals plays an important part in determining your success in real estate investing.
Investment-centric Realtor – You may think this one is fairly obvious but many investors actually make the costly mistake of working with a Realtor who does not specialize in buying and selling for investment purposes.
Any Realtor can have a license to transact, but not every Realtor can lead you down the right path, especially for complex nuances of real estate investing.
If you’re working with the PPTO Team, then we will be constantly working to find you stellar investment opportunities and deals to help build your portfolio. A good investment-centric Realtor should also understand the dynamics of and relationships between all of the other professionals on your Power Team, especially if you are trying to create a portfolio with multiple properties. Plus, a good investment-centric Realtor should be your go-to person for everything else. Ultimately, you want to choose a Realtor who also invests and has their own Power Team. Hey, that’s us!
Portfolio Planning Mortgage Broker – In order to invest in real estate, you need to have the funds. While these funds may come from different sources and avenues, the majority of it will typically come via mortgage funds from the bank. A good mortgage broker should be able to take into account your real estate goals and financial situation, especially if you plan to own multiple properties. They should also be able to recommend the mortgage product that works for you and line you up with the best rates.
Further, a great mortgage broker will know which bank to send you to first because they want to plan accordingly and set you up right for your next property, not just the current one at hand. For instance, if your strategy is to buy and hold, then you definitely should not have your first mortgage with TD because they will collateralize your mortgage, which will affect your ability to buy properties in the future. So make sure you are connected with a great mortgage broker.
Real Estate Lawyer – This professional is required for any real estate transaction. They are needed to help you close your property, formalize the transaction in writing, facilitate the funds transfer with the banks, and arranging for keys transfer. Do yourself a favour and don’t just go knocking on any lawyer’s door. Find a lawyer who specializes in real estate, and further, find a real estate lawyer who is knowledgeable with real estate investing.
It should be noted here that you need a real estate lawyer to transact, but a great real estate lawyer should also be able to help you with joint venture agreements and be available via phone without billing you every single time you need to have a quick chat with them. You won’t find lawyers who won’t bill you for their hours, but if you put in enough “relationship equity” and have that business relationship going, this could go very far in your real estate investment journey.
Real Estate Specific Tax Accountant – As your portfolio grows, you’ll very likely pay more taxes (it’s inevitable unfortunately). Speaking to a tax accountant who specializes in real estate will set you up for success, so that you are making the most tax efficient decisions for your real estate portfolio. Tax efficiency is key when it comes to tax because who doesn’t want to reduce their taxes owing to the government? Paying for a great tax accountant should save you money via tax efficiencies, so don’t cheap out!
To help you along in your real estate journey, we’ve put together a comprehensive Tax Tips Guide for Real Estate Investors that identifies and breaks down the Top 10 Expenses that investors should claim and write-off on their next tax return.
Responsive Property Management – Some investors opt to self-manage their properties, and that’s completely fine if they are up for the task. However, for those who want a truly passive, hands-off experience, a property management company is hired to manage the units. Your property manager will help with everything from screening and filling your unit with a tenant to maintenance of your property to answering clogged toilet calls from your tenant.
There are many property management companies out there to choose from. However, as with all of the other professions, finding a good property management company may not be easy. What you want to do is find a responsive property management company who is great with transparent lines of communication (with you and your tenants). A responsive property management company will save you from all of the headaches that you think you will or may have as a landlord. These are the people who give you peace of mind to enjoy your investments without worrying about tenant problems. Once you find a responsive management company, filling and managing tenants will become a breeze.
Reliable Contractor – Depending on your investment strategy, you may need to go through renovations on your investment property. If you’ve gone through renovations, then you’ll understand how difficult it is to get a reliable contractor who shows up and will complete the task at hand and on time. Unfortunately (and not to be stereotypical), this industry of professionals is notorious for tardiness, lack of transparency and poor communication. Even if the end product looks great, there always seems to be challenges and roadblocks in getting to the finish line.
This profession becomes especially critical if you are carrying your investment property, that is, paying down the mortgage out of your own pocket while you wait for your property to be tenant-ready. If the contractor you’ve hired keeps delaying your project, then this becomes worrisome as it is a financial burden for you to keep paying your investment property’s mortgage out-of-pocket. This is a why good, reliable contractor is worth every penny!
The Wrap – With all of that said, and despite the knowledge that someone may have, you ultimately need to choose someone who you can work with. Growing this Power Team is certainly not an overnight task and it is not a simple feat.
Realistically, your Power Team will go through ebbs and flows before you arrive at your winning team. But success starts now and success starts here. Reach out to the PPTO Team so that we can help you start building your winning team today!
Your Move. Your Future.