More and more readers are considering setting up a business to invest in real estate … I know these things because of all the e-mails I receive asking about how to do just that. Over the last few weeks, I’ve received various e-mails asking for more information regarding the surface piece I did on the steps to take to launch your real estate investing business, so here are explanations on those depths, but more in-depth.
First of all, since you’re setting up a business you may want to consider establishing a limited liability corporation. This means contacting an attorney who has established these type of corporations before. They will help you conduct business and protect your private assets — such as your personal residence — in case you are sued by a tenant, owner, seller or other entity. You’ll find some online services as well, but if you’re looking at processing contracts, leases, and other legal-binding papers back and forth — have an attorney look over your business setup from step one. Here are a few online resources to get started:
While you’re waiting for the paperwork to clear on the LLC, start looking for a Realtor who can walk you through the processes. The agent should have an intimate knowledge of the investing world. You don’t want a novice when it comes to your investing schemes. You’re looking for a professional who not only has helped other investors get into their first, second, etc., property, but also someone who has invested in real estate themselves. The agent is the primary person to work with in your investments on the searching, inspecting, fixing, maintenance and financing side of things. This professional acts as the central figure in most transactions — especially if you are employed full time elsewhere. You’ll need a professional to track down and complete all the necessary tasks required in purchasing house after house while you still have your day job. You especially want an agent to help you on the back side as well. I can’t tell you how many pitfalls a professional will help you avoid in this process. I’ve seen a lot of investor wannabes make huge mistakes (read — lost money) when trying to go down this road alone.
The agent also knows a lot of the other residual professionals you’ll need in this process — inspectors, contractors, insurance providers, title services, etc. Make your life simple — don’t worry about all these providers to start with. As a buyer, most likely, the agent will get paid from the transaction — not from your back pocket — so the return on investment is worth their expertise.
It’s a small industry once you get down to the brass tacks, and you’ll find that the real estate investing industry is even smaller. There are Realtors who work in what I call the “retail” market — that’s where most of us find our primary residence — then there are those who know how to navigate the investor world. They both have their place in the world of real estate — and many times, they are the same person.
The Loan Officer
The first referral you want from your agent is a great loan officer (LO) who will hunt down the cheapest, best financing available to investors. Keep in mind, you’re looking to get into properties for as little money out of your pocket (if any at all) because you want your renters to make your monthly payments over the long-haul. In your first interview, find out what kind of financing they offer — if they don’t have a large supply (or at least creative packages) of investor programs — find another LO.
If you’re looking for the nuances of the real estate investing world in your small corner of the globe, search out a real estate investing club in your area. Here are some sites that have listings of such clubs:
- Creative Real Estate Online (click Real Estate Clubs)
- RealEstateLink.net — The Resource for Real Estate Investors
- Real Estate Investment Club
Written by M. Anthony Carr