So you want to start buying apartments… Great for you!
Anyone in the industry will tell you the way to take down apartments is to have a phenomenal team. But how do you know what team members you need, and what qualities each person should possess?
Here is a break down to help you along your journey.
1. Broker- This is probably the number one team member for your business. Brokers bring you off market deals that will often have great opportunities laying inside of them. But if you do not have a great relationship with a broker you are searching Loopnet until your fingers bleed. Find a boutique broker (rather than one that works for the large guys like CBRE). Nothing wrong with the big boys, but the boutique brokers are easier to build a relationship when you are just getting started. For this team member you want to find someone who understand your business plan, goals, and the type of properties you are searching for. Make sure your moral compasses are aligned and that you can speak openly about your needs.
2. Corporate Attorney- This is the lawyer helping keep your business safe. Very important to find someone with experience helping real estate investors build a business. This role helps negotiate the PSA once the LOI is accepted, keeps you on track during the process of buying, and ensures you are in compliance of your docs after closing. A good corporate attorney will cost between $200- $400 per hour. Make sure you do not hire long winded attorneys.. they charge you every time they talk so make sure they get to the point!
3. Securities Attorney- If you plan on doing a syndication you will need a securities attorney. This role will help draft the syndication docs including the PPM, Operating agreement, Subscription agreement, and will file your new llc on your behalf. This person should specialize in securities laws. We do not recommend using your corporate attorney to file your security unless your corporate attorney has extensive experience dealing with securities laws. These laws are specific and your attorney needs to be well versed.
4. Property Manager- This is a company that will do the day to day management of your asset. Very important to check their track record with other properties. Ask them to see the financials of another property (with sensitive info blacked out). Ask them for referrals, and actually call those referrals. One of the best ways to find a great property manager is to ask your broker who they would recommend. Brokers have their fingers on the pulse of the properties in the area and typically know exactly which property managers are great, and which to avoid. Always make sure to read your property managers contract. Some will include unexpected fees that can throw off your projections if you are not careful. A great property manager will work with you before the closing to review due diligence and help guide you with the plan for the properties success. Remember- your job is to manage the property manager so make sure you hire a company with a point of contact that you get along with, trust, and who understand what you are aiming to accomplish. We have found the best property managers are owners of their own properties as well.
5. Cash Raisers- These are people who have private investors that they can call upon during a capital raise. Check with your securities attorney on the laws for splits, and obligations of duty after closing. If you are an analytical person and nervous about raising cash for your deals, start aligning yourself with these types of people now! Cash raisers are often outgoing and professional net-workers. Make sure you review their process for bringing in new investors as this could cause an SEC issue later on if not done properly. Never 100% count on any cash raiser to bring the full amount needed to run the property. You should ALWAYS be raising cash from private investors yourself in addition to working with others to help ensure you have enough money to fund your deal.
6. Insurance- Very important. We all underwrite our deals based on averages for the area. But engaging with an amazing insurance person is a 100% must. They can usually give you a rough quote within a matter of hours or days. This will give you an accurate assumption of cost when you are underwriting your deal. Imagine if something happens and you are not covered in your insurance? Are you prepared to pay for an incident yourself? Make sure you go over every little detail with your insurance agent. They should be asking you a ton of questions regarding the property, and operations. Double check their quote, and maybe ask your corporate attorney to double check it as well, to ensure you are completely covered.
7. Accountants- We love the bean counters! They are the ones letting you know if your projections have been a success, or not! Accountants also help with cost segregation, cash flow projections, taxes, and can assist you determining distributions. Accountants are worth hiring a better, more expensive, professional as almost every penny the charge they earn back in tax savings. Engaging with an accountant from Day One is an absolute must. Make sure they work primarily with real estate investors as there is a lot of complicated but lucrative opportunities available in the tax law. You want to make sure your CPA has a 100% full understanding of all of the available opportunities to save on taxes that exists within Multifamily real estate. Check their credentials and ask for referrals!
8. General Contractors- Make sure you get at least three bids when considering a GC. You don’t necessarily want to go with the highest price, or the lowest price. You do want to consider the GC’s track record. Check online to ensure they are licensed in your state, have great online reviews, and appear professional across the internet. I have personally seen what hiring a bad GC can do… and I am here to tell you that this is a mistake that you do NOT want to make. This is a team member where you should absolutely require at least three referrals, and make sure you actually call those referrals to learn how the job went, what challenges were presented, and how did that GC over come them. Hiring a bad GC means you could potentially spend double on what you projected for construction. Spend the time to find a great one… and never let them go.
9. Marketing- In order to grow a business you have to market yourself! Finding a great digital marketing company can take the heavy load of growth off your shoulders. The faster you reach your target market the faster you get to keep more of your deal and make more money. When looking for a marketing company make sure you get all the details on exactly what they plan to do with your business. You can expect to pay $2000-$10,000 for a great marketing team. They should be able to sit down with you and develop a full marketing plan as well as be able to implement and execute the plan from a technical basis. You should still have some work to do on your end so make sure your marketing company believes in collaboration, not dictatorship.
10. Lender- There are many, many ways to get properties funded. You can go with traditional lending, hard money, private JV partners, or choose one of a variety of many more options. Finding this source of lending is imperative to be able to purchase a property. Lenders are readily available to help you understand the products, interest rates, and terms available in the market. Sometimes it takes working with the lender to really determine if they are your lender for life, or if you need to keep looking. Ask them for their track record on closing, and how they organize their time when funding a property. Look for a highly organized lender with an excellent track record of performing before the final closing date.
These are the most important team members for your Multifamily Acquisitions business. If you have any questions, or need referrals on awesome people in each field please feel free to hit “reply” to this email and let me know which position you are looking for.
Here is to your continued success!