Building your “Power Team”
Building your “Power Team”
- without ever leaving your house -
Our company buys houses in several states and we don’t leave the office. The most frequent question I am asked is, “How do I handle the rehab … so far away?” You must build a team of people that you trust.
- Attorneys
- Sign Companies
- Printers
- Lenders
- Real Estate Agents
- Residents & BUYERS!!!
- Property Managers
- Appraisers
- Handymen
- Contractors
This can take several weeks to identify this group and it may take months to sort through the ones you like and the ones you don’t. As you buy more houses, you will need more people on your team and the best place to find these people is referrals. However, you can’t rely on other people to decide whom you will use.
Due Diligence is Your Responsibility – Just because another investor recommends someone, doesn’t mean they are the best person to use. References should be required of all “Team” members.
We’ll start with the easiest people to find; attorneys, sign companies, printers, lenders and real estate agents.
Attorneys – (When Wholesaling to other Investors). Let’s not get into the legalities and tax issues of “double closings”. This is where you use your buyer’s funds to pay the seller. You don’t spend any money out of your pocket. Your buyer writes a check to the attorney, the attorney pays the seller and writes you a check for the difference. Some attorneys will do this, some will not. If you don’t have the cash to fund the purchase, it’s nice to identify an attorney who will allow this. It can be as simple as asking. “Will they do a double close? And can you use buyers funds for your deal?” I recommend the honest approach, tell the attorney what you do.
If you are honest, with your attorney and your buyer there is no reason this can’t work. I take a very open approach. If my buyers want to know how much I am making, I tell them. I let them know, this is a double closing and how it works.
Some buyers have questions the amount that I make ($3000-$5000) but I ask them if the deal is a good one. If they say “Yes”, the amount I make should not matter. If they say “No”, then I may need to find another buyer. Either way, be honest with everyone involved in the transaction.
If you have the cash to fund the purchase or if the purchase is for your personal inventory, then the attorney relationship is not as vital. You simply need someone you can trust and get along with.
Before you decide whom you are going to use, ask to meet speak with the attorney in person or by phone. Make sure they understand you goals and are familiar with investment properties. Although this is not a requirement, if the attorney understands what you are trying to do, he or she can better protect you.
Sign Companies – This can be an easy one. All you have to have is Joe Sign Guy, but you can get more. I have used sign companies to put out and pick up signs in addition to showing properties to prospective tenants.
If you choose to manage your own properties, from a distance, you will need someone to show the house to tenants and make sure it is clean when they leave. Realtors, Appraisers and Contractors are great people to use for this, but sign companies are putting out your signs, at the house anyway. They may be willing (for a small fee) to let someone in to see the house.
Don’t use a large company or a national chain. Call a local one-man shop. You can find him through referrals from other investors or realtors in the area. This small shop will be more inclined to help you and easier to work with.
Printers – This is another easy one. Ask for referrals. Find a small shop that is local. Try to find someone who may have a part time employee who would be willing to put out your printed material. Your realtor and appraiser will be able to recommend someone local.
Lenders – This can be difficult. In North and South Carolina I recommend Financial Help Services (803-831-0056). They only handle investor loans and can provide Hard Money to purchase and rehab, then provide the convention 30-year financing. They are a great company and I use them for my personal deals in the Carolinas.
If you are buying outside the Carolinas, you will need to find someone that can loan in that area. Hard Money Lenders are available in most states and are the easiest way to buy and rehab a house without using your own cash. Most charge 4-6 points to originate the loan and 12-18% interest. This is not a bad price to pay for the convenience of having money in 24-48 hours, if needed.
Hard Money Lenders are quick, but expensive. They provide a service that mortgage lenders will not and banks do reluctantly. They give you the money to purchase the house, then provide the money to complete the rehab.
Convention Lenders are much less expensive but require better credit, more documentation and take a lot longer to complete a deal. However, you can’t keep a hard money loan on your property and expect to make any money.
It’s nice to find a source for your funding that can provide both; however, most only do one or the other.
Whoever you use, make sure you have them lined up prior to make your offers. You don’t want to get a property under contract only to find out you can’t get the money to buy. This makes you look bad and delays the sale of the house. The investment market is a small one and you don’t want to develop a reputation for not being prepared. This opinion will travel.
Real Estate Agents – This is a tough one. You should never put all your eggs in one basket; however, you do want to develop relationships where agents know who are and that you are a serious buyer who can close multiple deals. The only way to do that is get to know your agent. Find a buyer’s agent willing to do some legwork.
Many agents are lazy. They may not even take a picture for MLS, if the property is not going to make them much money. If they do get a picture, there may only be one. If you have an agent that knows you can get that house off their desk, they may go the extra mile for you. A good agent will take pictures for you and can answer your questions about the house.
When you call an agent you need to know a couple of things. What work does the house need? What will it be worth, if that work is done? What will it rent for? What is the average time on the market? If they can’t give you this information on their own listing, they may not be the best agent to use.
You need an agent who has been to the house. You need an agent who is not afraid to give you a value. (If they won’t give you and ARV, ask what it could be re-listed for. What would they list it for – fixed) You need an agent who will get you some pictures, if they are not on MLS.
I almost always call the listing agent. Even if another agent brings me the house. I call the listing agent for my information. I make my offer with the agent who found the deal, but he or she may not have the information I need, because they may not have been in the house. If I can’t get the information and/or interior pictures, I need an agent who will go to the house and find out.
They must understand that I am going to buy the house without seeing it. They need to be my eyes and I need them to do a good job.
After I have purchased a couple houses from one agent or office, they are more willing to work with me. They may offer to get pictures or have a contractor look at the house. This is the relationship you are trying to develop.
Next we’ll deal with buyers. If you are going to wholesale some or all of your houses, you need to know who you will sell them to and have a group of people to market to, before you get your house under contract.
Buyers – This can be a subject all by itself. I could write pages on just this subject. It has taken 8 months to build a buyers list of over 10,000 people; however, I was selling houses within a month of starting the wholesale business that I am in now. Although there are 10K people on our investor list, my core list of “real” buyers consists of less than 100 people.
You can find buyers at local REIA Meetings, through realtors and referrals, on Yahoo groups, and much more. You only need one buyer to buy your property.
Talk to your realtor, ask your appraiser and let your contractor know that you want to meet other investors in the area. You can quickly find out who the serious investors are. If you are going to wholesale houses, take the time to get to know other investors in the local market and online.
Yahoo Groups are a great place to meet people that invest in a certain market. There are groups all over the US and many markets have groups that focus on a small area. You can find out about these groups through the local REIA, realtors and appraisers.
As you start to become “known” for buying, you will have people contact you.
Building a database of fellow investors is vital, if your goals include wholesaling.
If your goals don’t include wholesaling, then you need to have tenants and buyers for your houses. For the most part, this is covered in the MyMarketing and RentHigh&KeepTenants documents (available by request from
Residents – For more information on finding tenants, renting your properties and/or selling or lease optioning property, please email me to request the MyMarketing or RentHigh&KeepTenents documents.
If you decide not to manage your own properties, you will need someone local to handle the rental for you.
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.
Make sure you review the contract they use. If it does not fit your needs, make sure they will allow you to add or remove items to build a lease you are comfortable with. Remember, they work for you. They need to represent you.
Find out how they handle repairs and who does those repairs. Make sure the lease they/you use covers minor repairs and damages caused by the tenant. IE: toy cars flushed down toilets, clogged dishwashers and disposals, etc. Some repairs should be paid for, by your tenants not you.
Appraisers, Handymen and Contractors – can be much harder to identify. Not only do you need people that you trust and can work with you need someone that understands investment property and your investment goals. If you are going to retail a house for $175,000, the rehab will be handled different from a $60,000 rental house. Also your appraiser must understand the need to review the house, as if any needed repairs were complete.
Unfortunately there are appraisers who will give you whatever reasonable number you put on the appraisal request. You don’t need that. You need someone who will tell you, if your house is not worth what you think. There is a little trick to finding this out.
First, make sure your appraiser can do an appraisal “Subject To” repairs. This means that the appraiser goes through the house and does the appraisal, as if all the repairs have already been completed. This is a value the house WILL Appraise for, when the rehab is complete.
Next, make sure you’ve got a good appraiser. If you have a house, the realtor said will be worth $100,000, if repaired, send the appraisal request higher. Tell your appraiser you think the house is worth $120K, repaired. I like to send more than one appraiser to a property, until I know I have someone I trust. Tell your appraiser(s) that you want the house appraised as if “…any needed repairs will be done. If the house needs carpet, we’ll put in carpet, if it needs paint, it gets paint.”
If three appraisers review the house and all come back the same, you probably have three good people. If two come back at $102K and $100K and the last comes back above $115K, then you know you may not want to use the last appraiser.
Occasionally, you should give the appraiser a value that you know is wrong. Give him/her a value that is $10-15K above or below the actual value. You should get a call saying the value is not going to be what you expect. This is a good appraiser. If the appraisal comes in high or low, it may be time to have a talk with your appraiser and find someone new.
The same approach can be taken with your handymen and contractors. Tell them you need the job done for $5000, when you know it will cost $10,000. Make sure they are not cutting cost, just to get the job. Some trimming is fine, but cutting the price in half, just to get the job, will end up giving someone poor work quality.
When identifying a new contractor, be difficult. Ask for the moon. Tell him/her that you want a rehab quote with pictures and estimates broken down room-by-room. If they give you this, then you have someone who will work with you.
Since time is one of the biggest factors when rehabbing a house, make sure your contractor gives estimates of completion time. Also, make sure they complete your quote quickly. If you have a 10 day inspection, tell your contract “We are rushed, our inspection is only 24 hours, can you get this done for us and fax a quote to me in the morning?” You are trying to see if they follow through on what they promise.
Also, send more than one handyman to a job, unless you’ve worked with him before. If you have a new person, make sure they are not the only one to give you a quote. They may be high or may do poor work. If you send three or four people to the same house, you will have a good idea of the scope of work required to complete the house.
Last – make sure you contractor of handyman is on the same page as you. My philosophy is that I will not rent something that I would not spend the night in. If the house has cat pee in the carpet, I don’t care how new it is, I won’t sleep in that house. If the doors are falling off the kitchen cabinets, I would not want to live there, I would want the cabinets to be repaired.
“We want the home in a condition where you would spend 30 days living there, if something were to happen to you own residence. We are not as concerned with the neighborhood, only the condition of the home.” Notice I call it a “home” and not a property. This makes it sound more personal. We say this to any new contractor. When they call to ask about replacing cabinets, flooring or paint, I always respond like this, “Would you live with it as-is?” If they say no, I tell them to replace it.
As a former tenant and renter, I know what it’s like to be where my tenants are. I want to make sure that I provide a home that I can rent to them and still sleep at night. As a further step, I will not wholesale properties that I would not own myself. I would not wholesale a property, just because I don’t want it myself.
It’s okay to pick the best deals for yourself and wholesale the rest, but you don’t want to wholesale deals that are not good enough for you. If you would not own the property, you should not sell the property.
I hope this helps you with finding people outside of your local area to help handle any and all issues you have with your properties. If you have any questions please feel free to contact me, by email.
Thank you,Greg GardnerGreg@InvestorsRehab.comInvestors Rehab, Inc.4341 Charlotte Hwy. Suite 211Lake Wylie, SC 29710
Office: 803.831.0056 (Ext 308)Fax: 803.831.0805
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posted by REISkills - Real Estate Investing Tips and Advice at 5:15 PM
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