Buy a Rental Property for Business | Automatic Investing to Live the Dream Life

When investing in real estate, there is something you MUST do. And that is you must build the business first. Anyone can buy a property. But to have a successful real estate investing business takes work.

I created a rental property for business before I even know what that was or that was even a thing you needed to do.

Back in 2006, while living in California, I started investing in Ohio. The catch was that I needed to create a rental property as business. To do that, I needed to hire many people for my rental property for business.

In order to run your rental property business well, you need to have a team. Not employees but contractors that will do the work for you. To have a successful rental property business, you need to hire at minimum, these people and put them in your business:

• Property managers
• Realtors
• Contractors
• Plumbers
• Electricians
• Inspectors
• Bankers
• Wholesalers
• etc.

All of these people will help you to run your rental property as business. Without them, I would lose money because I would not fly to my property whenever there was something wrong.

You need to have boots on the ground there as a rental property business.

The rental property business is what you should work toward if you are investing in rental properties. One that you do nothing and yet still get paid every month. 

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Investing in Rental Property Business is Team Development.

Like all other team sports, you are only as good as the team around you. Real estate investing takes a team of people to do it well. I think of myself as a coach that has multiple players on my team, and I am the one keeping them focused on the vision that I have given them.

I also give them the resources and responsibility to do what they are best at and get out of their way. Being a coach running the rental property as business, I am not the one doing the work, my team is.

They are the ones who find properties, inspect them, rehab them, get them rented, manage them, and make sure the goals are being reached.

“Teamwork is the ability to work together toward a common vision. The ability to direct individual accomplishments toward organizational objectives. It is the fuel that allows common people to attain uncommon results.”                                                                                – Andrew Carnegie

There are many different types of team members you need when you first start out investing in real estate.

I suggest getting to work networking and finding the right team members for your team.

If the team member doesn’t fit into your rental property for business team, move on and find someone else.

Here is the list of team member you should have on your team.

Team Members For Your Rental Property As A Business

Must Have Team Members

Property Managers (PM) for your Rental Property Business

If you decide to manage your properties yourself, you don’t need to have a PM because you manage the property.

Trust me, you do not want to have a rental property as business without a property manager.

Here are some other great articles about property managers:

I personally do not like to manage my own properties so I hire a PM.

If you do decide to have a PM, you must make take your time and find one that you feel comfortable with and can trust.

Realtors

Realtors can be your best way to find good investment properties that bring in passive income in monthly cash flow.

You should find realtors that understand how investment properties work and not just how to sell an owner occupied property.

When I go into a new city to find investment properties, I usually meet with at least five different realtors. What you need to do is interview them to see if they know how to find and make offers on investment properties.

If the realtor is explaining to me about how nice the window coverings are and not how much money it would take to get the property rented, I usually move on to the next realtor.

Contractors

When you find a property you want to buy and hold as a rental there usually is rehab that needs to go into the property.

Everything from painting and flooring to re-roofing and foundation work can be assessed by the contractor to get a quote for the repairs.

This quote is important because your offer to purchase the house depends on how much money you need to put into the property to get it rented.

If you need to put $5,000 into the property before you can rent it, your offer price should reflect that expense.

Make your offer $5,000 lower than you would if it was 100% ready to be rented.

It is very important to know that you MAKE your profit when you BUY the house. You REALIZE the profit when you SELL it.

Mortgage Brokers

It is good to have two or three mortgage brokers on your team since funding is the life blood of the business.

Without funding/leverage you would not be able to buy a home and rent it out unless you get owner financing, pay all cash, or get investors to put all the money into the deal.

For most investment properties, 10%-20% would be adequate for the purchase of your rental home.

If you buy a home for $80,000, your down payment would be anywhere from $8,000 to $16,000.

If you shop around, you may be able to find a good broker who can get you into a home for only 10%. Plus, you will get around the Private Mortgage Insurance (PMI) because of the way they structure the mortgage.

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Insurance Agents

Insurance agents are the members who will be protecting you in case there are any issues or problems that may arise on your property.

Everything from fires, theft, liability, and any other possible issue with your property, your insurance agent is the one who’s going to help you get through all of it.

You need to make sure that you have a good agent who knows about rental properties and not just owner-occupied single-family homes.

Remember, this is a business you have, and you need to make sure that you are covered well enough.

It is also good to have a general umbrella policy which is an overall liability policy that’s going to protect you above and beyond your normal homeowners insurance in case there are any liability suits against you.

Nice to Have Rental Property Business Team Members

Wholesalers and other buy-and-sell investors

Wholesalers and other investors are in the real estate business but may not necessarily want to buy and hold the properties they put under contract.

Wholesalers find properties that are usually not on the market and enter into a contract agreement with the homeowner to purchase their home.

These wholesalers can assign the contract to you for a finder’s fee and then they are out of the deal.

The fee you pay the wholesalers depends on the deal and the particular wholesaler.

The wholesalers usually understand how buy and hold investments work so they will bring you deals that are usually cash flow positive and bring you the passive income you need.

Real Estate Investor Groups

These are groups of investors just like you who can help you with your business.

REIG are good to help you find new deals, find creative ways to structure deals, find other investors, and network with others and further build your team. www.nationalreia.com

Mentors

Finding a mentor can be one of you best resource to get started and continue to grow your rental property business.

Find a mentor that is currently where you want to be and is willing to give you an hour or two of their time a once or twice a month.

It is always helpful to have someone that you can reach out to when you get stuck on a deal and you need a little helpful advice on how to get past a roadblock that is stopping you.

Mentors have the experience, the knowledge, contacts, and the willingness to help you in your investing career.

It is crucial that you don’t just focus on yourself when you are looking for a mentor.

Having a mentor is a two-way street and the mentor must be able to get something from you in return.

It would not be wise to go to a potential mentor and ask him or her to give time effort knowledge wisdom into you without offering something in return.

Be sure to think of how you can benefit the mentor as you are looking to get him up on your team. Y

ou are selling yourself to them as a worthwhile investment in their time and experiences.

Investors

Like mortgage brokers, investors are the part of your team that will help you acquire the deal with as little money out of your pocket as possible.

For example, you can structure a deal on a 24 unit apartment building you find with a lead investor and passive investors.

The lead investor is the one who manages the business and does all the work.

Passive investors are there to help contribute their personal funds to the down payment or cash purchase of the deal.

Being the lead investor, you would keep a percentage of the equity for doing all the work.

This includes items like:

• finding the deal
• structuring the deal
• starting/running the business
• finding the investors
• managing the PM
• distributing the monthly/quarterly funds to the passive investors
• dealing with accountants/taxes
• managing the managers of the property.

Basically, the lead investor does all the work and the passive investors get a monthly/quarterly check in the mail.

Title Company

Your title company is the one that’s going to make sure that the property you are buying does not have any problems.

The problems could be leans against the property, back taxes, improper recording of deeds, or a host of other problems that could potentially rise.

They will give you title insurance that protects you from anything they may have missed in the search for any issues with the title.

Appraiser

The appraiser is the one that is going to set a value on your property when you need it.

You cannot always use your own appraiser but it is always good to have someone on your team that can give you some advice on the value of your property.

Lawyers

It is said that in real estate, it’s not IF you get sued, it’s only a matter of WHEN.

It is wise to have a lawyer on your team, not necessarily one that you pay and have as a retainer, but someone that you are able to call when something goes wrong.

Be sure it is the type of lawyer that handles real estate and/or rental property issues.

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Banker

Your banker is someone that will help you get loans that you would probably not normally get.

Bankers don’t just look at your credit score and financial history, they also look at you and see if you are the type of person they want to do business with and someone who can pay off the loan.

If you work with a banker and you are not presentable in a professional way the banker may not feel that you are able to pay off the loan.

Even though the property will bring in money enough to pay for the mortgage and provide you income the banker may think that you would not pay the mortgage but just keep all the money for yourself.

Be sure to get a banker on your team.

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Whenever I go into a new area to invest, I always work on my team before I even start. In each area where I invest, I have a different team.

Some, like mortgage brokers, can be used all over the state or country and be on multiple teams at the same time.

Others, like realtors and PM’s, can only be local because you need the people on the ground in each market where you invest.

They are your eyes and ears for your rental property business, and they keep the business running with you out of the picture.

Find the best players to be on your team.

This is a marathon, not a sprint.

Get the players that will last the long haul and help your team win at the end of the race.