If you’re reading this, you’ve probably heard about how you can achieve financial freedom using real estate investing as the vehicle to get there. So maybe you’ve listened to some podcasts like the BiggerPockets Podcast or maybe you’ve just read Rich Dad Poor Dad and you’re ready to change your financial life.
What you’re probably finding (like I did many years ago) is that real estate is an entire world of its own and it can seem like a feast of information that you’ll never be able to fully digest.
The good news is that you’ve started on the road to financial freedom just by discovering real estate investing and even more good news is that leverage is a major key to becoming successful at it. What do I mean by leverage?
I mean that you can use your relationships with other people as leverage to get your real estate investing career going.
This leverage will be like a lever that will help you move the boulder that is the beginning of your real estate investing career; once that boulder gets momentum, it isn’t going to stop rolling.
We’re going to go into depth about the top six types of people you need to make relationships with to start getting some real estate investing momentum and who can help you avoid making fatal mistakes as you continue along this journey.
In his book, How To Create Wealth Investing In Real Estate: How To Build Wealth With Multi-Family Real Estate, Grant Cardone says, “Some people say they learn more from their mistakes than their successes; I highly suggest you don’t try that in real estate.”
Realtors are great resources to have on your team as an investor. Most realtors are driving around town all the time, showing houses, researching neighborhoods to find out the average price per square foot of the houses, and see what activity is going on in the area such as a lot of flips.
As you can imagine, with all of this work comes a deep understanding of the local real estate market that the realtor works in. Any experienced investor will tell you that the first step to success is knowing the market that you invest in.
While there is a huge trend of virtual real estate right now, a lot of investors will recommend starting to invest in your own town because you probably know the real estate market much better than a market across the country.
Realtors are also a great resource because they are the only people who have access to the MLS. The MLS is the Multiple Listing Service; this is the platform where most of the houses that are for sale are listed. Even if you’re not planning on buying properties that are “on the market,” this is still a great tool to learn about the market and what’s going on in your neighborhood.
For example, if you’re planning on flipping a house to gain capital to reinvest in your investing business, it may be a good idea to get a realtor that you have a relationship with to put you on an automatic email for houses that come on the market that are similar to what you’re planning on selling and in a similar area.
This will allow you to see what price per square foot those houses are selling for, how long it’s taking them to sell, and what style of houses they are. Having access to this information will help you plan for your flips.
Realtors can also be a good source of off-market properties.
Usually, the first person a seller will call to list their house is a realtor. Sometimes, those sellers are motivated sellers and their realtors will advise them to accept a cash offer instead of listing the house. This is when the realtor will reach out to their database of cash buyers to try to sell that house as soon as possible. If you’re on the list, you will be the one getting the call!
It’s important to talk to a lot of realtors until you meet someone compatible with your personality and your particular needs.
There’s nothing worse than doing business with someone that you don’t enjoy being around. It’s also important that your realtor either is someone who is also an investor or who actively works with investors. This way, they understand what you’re looking for and why you’re looking for it.
Take your local realtors out for coffee and try to identify something you can help them with as well as what they can do for you. I find BiggerPockets to be a good place to start finding realtors in your area that are also familiar with investing.
So, picture this: you’ve received a lead from your local realtor about an off-market property in the neighborhood you want to invest in. You run your numbers and it looks like it’s going to be a great investment. You make an offer, and, with a bit of negotiation and a pinch of luck, your offer is accepted. Now what?
The first person you’re going to call is your trusted inspector.
An inspector is going to come out and do a detailed inspection of the house to look for any serious issues such as plumbing, electrical, structural issues, roofing issues, termites, and a whole lot more. As you can imagine, it’s important that your inspector is experienced and trustworthy.
Realtors are great resources to find quality inspectors.
They work with inspectors every day and experienced realtors have probably worked with the same one or two inspectors for years. Building a relationship with a good inspector also helps when you’re on a time crunch; most good inspectors are extremely busy and when your offer is accepted, and you have a five-day option period– it’s gone time. You might have trouble getting an inspector to come out within a five-day notice who doesn’t know you from Adam.
3. General Contractor
A General Contractor (otherwise referred to as a GC) is someone who manages a team of subcontractors that will be doing the labor on the house being renovated.
Finding a good general contractor is hands down one of the most important aspects of investing if you’re planning on using flipping as a strategy in your business.
You’ve probably heard horror stories of someone losing $30,000 on a flip because they paid their contractor upfront and then they never came back to finish the job. I’ve even had water heaters stolen from me (which are one of the higher ticket items in a flip so that really eats into potential profit!).
It’s important to have a contract with your general contractor that clearly lays out the payment schedule and offers the crew incentives to finish in a timely manner. To learn more about this I recommend listening to episode 314 of the BiggerPockets Real Estate Podcast entitled, “How To Find Rockstar Contractors and Manage Like a Boss with Andrea Guidelli.”
Some advice I will give is to not always work with your friends just because they’re your friends in this business.
Do some research for a good general contractor and ask around for referrals.
4. Mortgage Banker
A mortgage banker is defined as “a company, individual or institution that originates mortgages.” These are the guys who are going to lend you money to invest in properties and unless you have a ton of cash in the bank that you’re ready to put down on a few pieces of real estate, you’re going to need a lot of that borrowed money.
A strategy for this is to create relationships with small banks who are more likely to lend to you based on circumstances other than your current assets. Because you’re probably starting with not a lot, you’re going to need to build a relationship based on trust for the bank to consider loaning money to you.
Also, the more they like and trust you, the more they’ll probably be willing to work with you and help you understand what it is you need to do to qualify for the loan that is going to take you to the next step in your investing career.
5. Private Lender
A private lender is different from a mortgage banker in that they do not work for a bank or lending company of any kind.
A private lender is someone you know, maybe a doctor or lawyer friend or a fellow entrepreneur who is doing well, that has cash and is looking for a secure way to invest their hard-earned money that offers great returns.
This can be a good way to start investing because the ball is in your court. When you go to a bank, you’re at the mercy of the lender and their guidelines. On the other hand, when dealing with private investors it’s in your control to network and nourish relationships with potential lenders and find great deals where the money will be put to good use.
It’s extremely important that you find great deals and are not putting your private lender’s money at a major risk. Is there always a risk in investing? Sure. But you can minimize that risk by ensuring you’re offering great investments.
A mentor is probably the most valuable person you can find when you begin your real estate investing journey.
A mentor is someone who has achieved something that you want to achieve and is happy and willing to show you how they did it and how you can replicate it.
It’s a great idea to try to find something that you can do for this person in return for their mentorship. People at this level are usually always being asked for help and are rarely being offered services of value in return.
Use your creativity and leverage your current skill set to offer the value of your skills in exchange for mentorship from this person.
Remember, your skills must be something that will benefit your potential mentor. If you’re great at social media marketing but this person already has a team of marketing specialists, this probably isn’t the value you want to try to offer in return for mentorship.
It’s extremely helpful to have a live mentor that you can get on the other end of the phone. But if you have no idea where to start, an abundance of successful people have written books that are road maps of how they achieved their real estate investing success. This is a good place to start receiving mentorship even though it isn’t face-to-face.
There’s a great quote that says, “The person with the money ends up with experience and the person with experience ends up with the money.” My mentor used to tell me, “I want you to make decisions like you’ve been doing this for ten years instead of ten days.” Finding someone who can offer you this kind of guidance can pay off in dividends.
Make a list of these 6 types of people and start a database of the people you meet.
Track how many times you talk to each person and do your best to nourish the relationships consistently. Identify the people you mesh well with and lean towards doing business with those people. Most importantly, make sure you give more than you ask.
Try to add value to every person you create a relationship with and, as your list of connections grows with these 6 types of people, you will have created a well-rounded team that will help you jumpstart your financial freedom vehicle.