Below is the meeting summary from our 5th San Mateo Real Estate Meetup, where our small group of investors discussed how to find a deal. In short, our conclusion was that you had to have a great team.
How to find and build a great team? Here are some questions every real estate investor should ask themselves:
Let's use baseball as a metaphor to walk through these questions.
How much time do I have?
Some investors want to jump into the major leagues before they've ever truly stood in a batter's box. There is always a few naturals with no fear, but most of us going from a spectator to feeling a 90+ miles per hour fastball fly by at bone-crushing speed realize this can be terrifying! One bad pitch/ deal could end with you "broke" in more ways than one. Every professional ball player spends years honing their craft and every investor needs to hone their craft through education. The investor needs to be competent enough to analyze the pitch/ deal, patiently watch the bad ones go by and swing hard at the good ones in the sweet spot. This education will also provide you with what position you want to play, which leads into the next question.
How much control am I willing to give up?
Team players are those who commit full-time to real estate; the wholesalers are our first basemen, the flippers are on second, the private lender is the short stop, financial institutions are our 3rd basemen and landlords act as the catcher at home plate. There's many other players as well but these are the positions who see the most action and what most investors end up becoming. Which position gets paid the most? The pitcher, i.e. the syndicator who coordinates the entire team and has the most responsibility. Is this a passive income role? No.
Are any of these roles passive? It depends on how you set up your processes and your ability to find talented professionals. A topic for another post. If you want to play every role (find, negotiate, fund, rehab, list, property manage, etc.), you will have all the control yet realize each role could and should be a fully qualified resource. If you trust and rely on others on the team to be professional in every respect and play their position, then you will ultimately have less control.
NOTE: Beware the mascots (i.e. "I represent a turn key solution where we buy/ fix/ rent. Easy money") and the merchandisers (i.e."buy my course and get rich instantly").
Many successful investors start like bench warmers, who occasionally play once the team has a solid margin of winning. This allows them to slowly grow their confidence and learn from the seasoned professionals. If the investors join a great team, they can shadow other great players and review their deals, eventually becoming the star player and build their own team.
How do I find qualified professionals for my team(s)?
In the movie "Moneyball", rather than relying on the typical scouts' gut feeling, the real life general manager, played by Brad Pitt, instead used metrics and average on base percentages to pick one of the winningest teams in history. (NOTE: beware the scammers). Before getting into any deal, build up solid relationships and leverage your network, ask for references, examine HUD1 statements, and above all, trust but verify.
Be ready for some disappointments as you can't win every game, but realize that with the right team(s) and processes in place, you will be on your way to the World Series before you know it!
Do you have a great team in place? What position do you play on your team? What is keeping you from getting to the "World Series"? Feel free to write in the comments below.
Kevin + Kiri