Real Estate Investment Team
Successful investing requires an expert advisory team. In this article we explain the roles, responsibilities and typical costs of an investment team.
Why Do You Need a Team?
Real estate seminars, books, podcasts and almost every other information source provide “general” knowledge. Such information channels are designed to be applicable to investors in Maine, California and everywhere in between. But you do not buy properties in a “general” area; you buy specific properties in specific locations. While the general knowledge you gain from general sources can be very valuable, you need highly specific local knowledge. You can only get the local information you need from people who do business in that market every day. Plus, you need team members with specific skill sets that can only be gained by repeatedly performing the same task over an extended period of time. The minimum team members you need include:
- Property manager
- Property inspector
- Loan broker
Many new investors think of property managers as the entity that collects the rent after you purchase an investment property. This is totally wrong. The property manager is the key member of any investment team. They have the detailed local knowledge you need to know. Below is an image that shows the value a property manager provides during each of the investment phases.
The Realtor is the second key member on your team. Realtors spend every day with people who want to buy properties. And, the properties people want to buy are the same properties people want to rent. A good Realtor knows what features delight buyers and what features turn buyers off. If home buyers do not like a floor plan, renters will not like it either. Realtors also know property trends, planned developments and much more about the area in which they focus.
What you should not expect from a Realtor is investment advice. Few Realtors know much about real estate investments. They may sell many properties to investors but they rarely actively select the properties for their clients. Investment real estate is a very small niche market and very few Realtors have the training, software, technical expertise or experience to offer worthwhile investment advice.
A good property inspector can save you a fortune by finding problems during the due-diligence period when you can still negotiate who pays for repairs or you can terminate the contract.
Unless you can pay cash for your properties you are going to need financing. You need to find a loan broker who does investor loans on a regular basis because investor loans are a niche market. Why a loan broker and not a bank? Our experience with banks providing investor loans has not been good. On multiple occasions clients have been close to closing only to hear something like, "Sorry, we just stopped offering that loan program. You are welcome to reapply for this other program." At that point they were basically starting over again and the seller, in all cases but one, was unwilling to wait another 20 or 30 days to close. In contrast, loan brokers work with multiple lenders so if one lender stops a specific loan program, they can quickly switch you to another. Also, banks have very limited programs. For example, in Las Vegas we know of no bank that will provide financing for more than four properties. We know loan brokers who will finance up to ten properties.
Typical service costs are listed below. However, costs may vary by location so below is only intended to provide an idea of the costs involved.
- Property manager - Between 8% and 10% of collected rent.
- Realtor - The Realtor gets paid through the commission of a normal sales transaction.
- Property inspector - Typical costs for a single-family home are between $250 to $300 (in Las Vegas).
- Loan broker - The fees loan brokers charge are comparable to bank fees. In general, 1% to 2% of the financed amount.
The cost to gain the local expertise you need is minimal compared to the benefits you receive. Trying to do it without an investment team can cost you far more.
One sure way to fail in investment is to work without an investment team. In this article we covered the minimum members you need on your team, as well as the roles and costs of each team member.
Want to know more about investing in Las Vegas real estate? Contact us today. You will be glad you did.
Eric Fernwood, Realtor | 702-358-8884 | EricFernwood@gmail.com
Cleo Li, Realtor | 512-296-0425 | CleoYLi@gmail.com
Vegas International Properties Group (VIP Realty Group)
7570 Norman Rockwell, Suite 140
Las Vegas NV 89143