House Flipping 101: Building Your Team
Everyone is getting in on house flipping these days. But the most successful flippers know that the secret to success is to build a great team. Mike LaCava, president of House Flipping School, has the scoop on the 5 people you must have on your power team.
Many people would like to think that investing in real estate is a solo act. Most people envision Donald Trump as the consummate investor – with billions and holdings and millions in profit – doing it all on his own.
What people may not realize is that although Trump’s success is due in large part to his skill and experience, he doesn’t operate alone. He has an extensive team of people which he has built over the course of his long career helping him every step of the way.Â
Although Trump may appear to take all the credit for his success – deep down, he knows that it’s the people who work with him and for him that are largely responsible for his profits. So to start your real estate investing career on the right foot, begin by seeking out these 5 essential professionals who will make your house flipping ventures a success:
Team Member #1: Real Estate Agent
A solid real estate agent can not only help you find the property to invest in, but can also teach you which amenities will help sell the home more quickly once its on the market.
Although real estate agents typically take a 5% cut on the sale of a property, the really good ones earn every cent of that money by not only getting you a higher price, but also advising you on how to best sell the property itself.
When you are buying, renovating, and flipping, time is of the essence to lock in profits. A solid real estate agent will help you sell the property more quickly by knowing which aspects of the renovation you should focus on based on the trends in that local market.
Team Member #2: Real Estate Attorney
Nothing is worse than a real estate deal going bad because you’ve received bad legal advice.
You may be tempted to “go it alone” – or you may try to use one of those online lawyer services that are becoming so popular now. Big mistake. A real estate attorney who’s local to your market is an essential part of your team. The good ones both keep you out of trouble and are always on the lookout for your best legal interests.
There’s no way you can possibly know all the laws and regulations associated with real estate investing – so don’t even try to do it on your own. Instead, hire a professional who does. A good real estate attorney will help simplify the myriad of documents which are needed for every transaction and will help guide you through the process quickly and smoothly.Â
When it comes to hiring a real estate attorney, don’t skimp. Find a solid real estate attorney by networking or asking around to other real estate investors and pay them what they’re worth. Although the expense may seem high initially, it’s a small insurance policy to help you sleep soundly at night.
Team Member #3: General Contractor
Many real estate investors choose to go it alone when it comes to the renovation of a property – whether it’s a quick fix up to get tenants in or a complete home remodel, many choose the DIY route.Â
If you are a general contractor or have extensive building experience, then obviously you can do it yourself. But depending on your skill level, this can be a major mistake. If the fixes are a matter of painting and cleaning, then you likely won’t need a general contractor. But if you are buying, extensively renovating, then selling, a qualified general contractor is a must.Â
A general contractor is the single individual who oversees all the work on a real estate project while earning a small percentage of the overall work as his fee. They manage all the plumbers, electricians, carpenters, and drywall guys and pull all the permits so you don’t have to manage the day to day operations of the renovation.
If the work is extensive and you’re not a professional, doing it yourself may end up costing you more in the long run. When I first started, I did a lot of the rehab work myself – which although I learned a lot, it slowed down my career. The interesting thing is that as soon as I made the decision to hire a contractor, that’s when my real estate business really took off.
Team Member #4: CPA
The more taxes you pay, the more money you should be making, right? A good CPA will be able to help minimize your tax burden, as well as advise you on the tax rules of real estate investing. Just like any member of your team, get the best CPA you can afford. The accounting that’s involved in real estate investing is complex – so you want to make sure you not only stay on the right side of the real estate laws but also minimize your tax burden at the same time. Â
A good CPA will know which expenses can be deducted, what can be outright expensed as well as what needs to be capitalized. This can get tricky if you’re new and don’t know the laws.
A good CPA can also advise you on the proper structure of your business with your attorney as well. They will also advise you on how you should declare the income you make from your investments. There is much to know here, so make sure you get it right the first time.
Team Member #5: Insurance Agent
Insuranceis an oftentimes overlooked expense in real estate investing – and operating without a good policy can leave you open to liability – not to mention personally damage your reputation. A good insurance agent should have a full knowledge of your business structure, and a solid understanding of how your properties should be insured depending on your business plan and business goals. They will be able to guide you on which types of insurance you need in the context of geography, other real estate investments, and personal property.Â
Depending on what kind of real estate investing you’re dong, the type of insurance is highly variable and a good insurance agent will know exactly which kind is appropriate for your investments. This can range from homeowners to builders risk to general liability to umbrella policies, as well as flood or even earthquake insurance. Trying to figure this all out on your own (or worse yet, not getting any insurance at all) can be disasterous.
Whatever you do, make sure you get ample insurance coverage from a qualified and knowledgeable agent. Paying the premium may seem like a huge unnecessary expense, but it’s minor in comparison to the real headaches you’ll have if something catastrophic happens.Â
Mike LaCava is the President of Hold Em Realty and of House Flipping School, both located in southeastern Massachusetts. Mike is a full time real estate investor and a house flipping coach. To learn more about Mike LaCava, visit houseflippingschool.com. Connect with Mike on Facebook, Pinterest, and YouTube.