Prosper Newsletter: November 2006 > Real Estate

You understand that the following information is educational in nature and is not intended to be legal, accounting, or tax advice. You are responsible for your own financial decisions and should consult your own legal, accounting, and tax advisors before making your financial decisions.

Real Estate Coach Shares Techniques To Minimize Vacancy, Maximize Cash-Flow

I wanted to let you know, and thank you for your help and advise you gave me on how to get my apartments rented out. Like we discussed, I was having dry spell with my apartments, and was having a very hard time getting them rented out, as they weren't in the best part of town. With the strategies you gave me to try, I was able to get 2 apartments rented out in just shy of 2 weeks, and more calls on the remaining apartments. I really appreciate your help.

- Steve H.
Simi Valley, CA


Tip of the Month

Try getting a little more creative than just using the paper and the MLS when looking for property. One effective approach can be seeking out landlords that are currently evicting tenants. There are filings that are part of the public record when an eviction takes place. You'll need to seek out the proper place in your market to research these filings, but in many areas you'll need to go to your local district court. Remember that landlords probably have higher costs and much higher frustration levels when they are in the process of evicting a rotten tenant. This may be a GREAT time for you to approach them with an offer to end all their management headaches with a quick purchase.

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Building Your Professional Team

Your professional team is the network of people that work you to help you succeed. Your professional team will be made up of many people. Because you will be working closely with your professional team, make sure you are comfortable working with them. It is also a good idea to look to friends and family when assembling your professional team. The idea of a professional team is to make money for all involved. Remember to use referrals to find all members of your professional team. There are eight essential elements to your real estate professional team.

Elements of a Professional Team

  1. Real Estate Club-One of the best ways to find out what clubs are near you is to go to Creative Real Estate Online www.creonline.com. There are a lot of different articles and links that you can check out. In the left column, towards the bottom, you will find a heading called resources there is a link labeled "Real Estate Clubs". Next select the state you live in and a list will open with all of the real estate investing clubs in the state.

    It is a good idea to visit more than one real estate club. On the website the date, time and address of the clubs are listed. Generally there is also contact information. The key is finding a real estate club that you enjoy attending. Some charge monthly or annual dues, others are free. Some real estate clubs have guest speakers and some just meet and talk about real estate investing. Choose a club based on what is best for you.

    The real estate club can also be a pool of buyers and sellers. You can work with other investors and have it be a profitable experience. Through a real estate club, you can find out who are the best people in the area to contact for the different services you will need in your investing. Learn to talk to and interview the different people in the clubs to see who fits your style of investing and your personality and work with those people. Make business cards and give them to the contacts you meet, it is an excellent way to help them remember you. Be creative with finding other investors to work with.
  2. Title Company-In some states they have Title Attorneys instead of title companies but they function in basically the same way. Just one thing to remember is, when you ask for information from a title company, do not refer to it as a title search. Title searches cost a significant sum of money and you don't need it until just before closing.

    One title company that usually works well with investors is First American Title and they are nationwide. Your best option will be to find a title company that you feel comfortable with. Visit the title companies, check them out and talk to a couple of the title officers. Don't forget to talk to the assistants of the title officers because they are the ones that do most of the work and will likely be your point of contact. Develop a relationship with more than one so that you can always find someone to get you the information in a timely manner. Find out up front if they are going to charge you for the information they give you. Remember, if they give you a rate per page, most of the information you need may be found on one page.
  3. Accountant-Accounts become more important the more you invest in real estate. Accountants can help you take advantage of the different tax advantages in real estate investing. Find a real estate accountant who is familiar with the tax codes and federal and state laws. One thing to consider is to create a corporation. An accountant could help you know how to set up your business. Your accountant should be able to help you find ways to save on taxes.
  4. Appraiser-Have at least a couple of different appraisers that you can call on. Requirements vary from state to state on appraisers. Some states require a license others only require permits. The education of the appraiser could be an important factor in who you choose. In some instances, an inspection and an appraisal are required; if that is the case, make sure the inspector and the appraiser do not cross lines. Use referrals from your real estate club and realtors to find qualified appraisers. Make sure that you interview the appraiser to find out what they look for. One thing to remember is that the appraiser is working for you so set the specifications that you want.
  5. Contractor-When selecting a contractor, it is important to rely on references you receive to select one that will work for you. Take the time to learn how to deal with contractors. There are many horror stories told about experiences with contractors taking money without doing work. Check with the Better Business Bureau and get references of previous clients.

    Keep in mind, contracting is seasonal work; there are busy times and slow times. Be aware of the slow times and the busy times. This information can be critical when determining how fast you can rehab a property. Before choosing to sub-contract the work on your own, check the local laws and customs.
  6. Attorney-Use referrals from your real estate investor club to find a credible attorney. Interview the attorneys; make sure they are willing and able to handle real estate contracts and disputes as well as anything else that you get involved with. Remember, everything you do in real estate has to be in writing. Nothing counts until it is on paper. If your state allows it, you can use a paralegal instead, which would be quite a bit less expensive. Find out if real estate documents need to be notarized in your state. You can usually find a notary at banks, credit unions, attorneys' offices, title companies, etc.

    It may also be possible to negotiate with attorneys and obtain lower rates by placing the attorney on retainer. Remember, everything in real estate is negotiable. Remember to check local laws to determine what you are required to have checked by an attorney. Find an attorney that you like and that will be there when you need help. Make sure your attorney has an assistant that can help you when the attorney is not available.
  7. Realtor-A realtor is usually necessary. If a property is for sale by owner, you do not need a realtor. If the property is listed, then you want to have a realtor to represent you. One major reason for this is the contracts. Use your real estate club to find referrals. Make sure to interview realtors to find out how much they know about investing. Good real estate agents can be extremely valuable. Remember, the realtor works for you. A realtor should realize the benefits of working with an investor. Realtors should be willing to present any offer that you wish to make. There are many realtors, find a couple that will work well with you.
  8. Mortgage Companies-Mortgage companies or lenders are the final part of your professional team. Once again, referrals are important to find a quality lender. A mortgage company should have at least 100 lenders that they work with because only about 30 percent of lenders will work with investors. Find out how creative the mortgage company can be in finding financing for you. Find out if the mortgage company is up to the minute on lending strategies. You don't want to have to wait on financing.

    An important element of any mortgage company is someone that finds a way to get the financing instead of looking for ways not to get you the financing you need. Be wary of a mortgage company that emphasizes the problems with getting financing. Some mortgage companies will tell you that they have to have their loans seasoned. Seasoned means that it will take time, generally a seasoned loan is at least six months old and up to two years. Seasoned loans may send up a red flag and you may want to avoid doing too much business with a mortgage company that requires a seasoned loan. Try to find a lender that makes the decision on lending based on the property being purchased.

While these are the eight elements of your professional team that are most important, you can add to it. For example, find a furniture salesperson that is willing to give discounts to people that you refer to them. You can help people get products and services and seek to work with you in the future. The more people you have in your network, the more leads you will find. Open up and have fun in your investing, increase your network.

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