What are the essential roles in a real estate team? What’s the purpose of a real estate team?
One of the first things to do when purchasing your first rental property is to surround yourself with the right people. In The Book on Rental Property Investing, Brandon Turner argues that the real estate team you choose lends consistency, integrity, and professionalism to your enterprise.
We’ll cover the real estate team roles and their contribution(s) to your team.
1. Your Spouse and Mentors
Your real estate team will likely benefit from including people much closer to home. Your spouse in particular can offer indispensable morale and emotional support. In some cases—as in Turner’s—they can become a vital business partner and fulfill a crucial real estate team role.
(Shortform note: Turner mainly stresses the moral support advantages of including your spouse in real estate endeavors. But what are some of the specific business advantages of this arrangement? For one, your common goals and close relationship significantly limit the risks of taking on less familiar business partners who may prove unreliable or unscrupulous. Further, being married to your business partner means fewer legal and tax documents, as you can file jointly. It’s also easier to pool your common finances, putting more investment capital at your immediate disposal.)
Turner also stresses finding a person to act as an industry mentor, perhaps a successful property investor who can offer guidance and advice.
(Shortform note: Once you’ve found that great real estate mentor, iron out a plan for organizing your meetings. Chances are that you’re both very busy, so deliberately planning when and how often you’ll meet, and making sure this suits both of you, can keep the arrangement mutually convenient and the relationship healthy.)
2. Management and Upkeep Members
Next, let’s explore the team members who’ll help you manage and upkeep your property. Many rental property investors opt to use property managers or management companies: individuals or businesses that handle many on- and off-site property tasks for you (for example, rent collection and handling contractors). They do so in exchange for a percentage of your profit. Turner cautions that property managers generally have less personally at stake in a property than you do and less concern over spending your money on expenses and repairs. So, gauge whether they’re truly necessary and, if they are, how much oversight you’ll have over their work.
(Shortform note: In Buy, Rehab, Rent, Refinance, Repeat, David M. Greene agrees with Turner that there are both pros and cons of using property management. However, he’s slightly more optimistic about managers than Turner. He notes that a manager can bring helpful expertise early on in your rental property investing career, when you may lack practical know-how. Greene also argues that eventually, if you’re successful in the field, you’ll likely own so many properties that using a property manager becomes essential.)
Unless you can fix every possible structural issue with a house, you’ll also likely need a contractor at some point during your rental property journey (for instance, an electrician or carpenter). Turner recommends being proactive in finding reliable contractors; don’t assume you’ll chance upon them. Be sure to research both contractors’ prices and their reputations, as their work seriously affects your bottom line and reputation with tenants.
(Shortform note: To increase your chances of hiring reliable contractors, always check their qualifications prior to using them. Review their critical documentation: This includes their insurance policies and required licensing (with effective dates). Also, check their bonding information. Surety bonds protect consumers from unethical or incompetent business practices by ensuring that, if the contractor fails to execute the job properly, the bond distributor (known as the surety) can penalize them. In some cases, the bond provider must also provide the consumer with a substitute contractor to finish the job.)
Real estate agents are also necessary management team members. They’ll guide you toward the best deals on property sales and serve as your representative in negotiating with the seller. Turner advises using individuals who show exemplary professionalism, understand your particular market, and are tech literate (since many property listings and real estate tools are now online). He advises interviewing prospective agents to make sure they’re a great fit.
|Further Advice on Interviewing Your Prospective Agents|
When interviewing prospective real estate agents, as well as ascertaining their specific skills (like their tech-savviness and market knowledge) and general professionalism, consider asking questions about the following topics:
Payment: Usually, real estate agents are paid by commission—and this commission comes from the seller’s fees, not from the buyer. However, it’s worth checking this in advance to avoid unexpected fees.
Their record: Make sure an agent’s successful purchase or sale record isn’t below the average. A typical real estate agent is involved in 12 successful transactions per year.
Their current client roster: Make sure the agent isn’t so busy that they’ll neglect you. Equally, make sure they have at least some other clients—if they don’t, they may have a bad reputation.
References: See if you can get in contact with the agent’s previous happy clients. If they don’t have any, that’s a warning sign.
3. Financial Members
The first financial teammate Turner suggests including in your team is a certified public accountant (CPA) to help navigate the complexities of real estate tax filing.
(Shortform note: Make sure your accountant’s availability fits your REI needs. Many CPAs are extremely busy during April tax season, but they may reduce their working hours for the remainder of the year. Real estate transactions can occur in all 12 months of the year, so your chosen CPA’s business hours must align with this.)
Turner adds that a bookkeeper is useful for calculating your diverse expenses and income streams. Consider hiring an insurance expert, too. They can hunt down the best insurance deals so you can minimize costs. Common types of insurance you’ll need include landlord, flood, fire, liability, and loss of rent.
(Shortform note: When shopping for an insurance agent or broker, expect the following characteristics from a solid applicant: They should be client-centered, upbeat, energetic, and responsive. You shouldn’t have to wait for thorough answers to your policy questions. Similarly, the agent should know their product inside and out—not just the insurance mechanics, but the legal and tax dimensions as well.)
4. Legal Members
Finally, don’t forget to hire a lawyer. Turner says every landlord needs one at some point, whether it’s to ensure the legitimacy of your legal documents or oversee eviction processes. Though lawyers are expensive, Turner asserts that you likely won’t need one that often. Find one who specializes in real estate to expedite legal processes and ultimately save money.
|When to Call a Property Attorney|
Why is having a skilled lawyer particularly useful in eviction cases? In general, judges demand higher burdens of proof from landlords seeking evictions, to avoid tenants losing their housing unnecessarily. Consequently, having precise documentation and strong legal representation in these cases is vital.
Beyond evictions and documentary needs, there are a number of circumstances in which a landlord might need a lawyer:
Cases where the tenant claims to have sustained an injury or illness due to your negligence, such as poor property maintenance.
Cases where the tenant’s own property (for instance, their personal belongings) incurs damage due to landlord negligence.
Accusations of discrimination in your application or approval policies for tenants (more on this later)IRS or other tax audits related to your rental properties