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Let’s face it. It would be tough to become a local expert in every market where you are interested in buying an investment property. It takes a great deal of time and effort to become an expert in your own neighborhood.
You need to build relationships with contractors and real estate agents and learn about zoning, permitting, city ordinances, development rules, and short-term rental regulations– this is all in addition to constantly staying up to date on what homes are selling for in your neighborhoods.
It’s time well spent on your business. And investors looking to expand and grow their fix-and-flip or buy-and-hold rental business eventually realize that building a team becomes crucial for sustainable growth. And sanity, of course.
Hiring a CPA, real estate attorney, and virtual assistant are pretty straightforward additions to help you organize and operate your business.
But there are seven crucial relationships you need to develop to truly become a local market expert. How they can help you, however, might not be obvious.
City and County officials
Why do you need to know city and county employees who just pass laws, require permits and lengthen timelines?
Those city and county officials live in the community and care enough about their city or county to participate in the management and growth of that community. They also look out for their neighbors. They are not the evil, unseen “man behind the curtain” pounding a gavel and finding pure joy in crushing your investment goals.
City and county officials know everything about zoning, ordinances, and development. Before you consider investing, city and county officials can let you know if you are even allowed to do that type of project and, even better, how you can do it. Imagine how much time and money you could save if you knew that the zoning and regulations don’t allow short-term rentals, that city water isn’t available, or that the property next to your cute little rental home was just zoned for commercial use and a Walmart is being built.
Why do you need to build a relationship with a lender? Will they give you more money if you do?
Not likely. But the more types of lenders you do business with will allow you to do more business in general. Your lender doesn’t have to be a big national bank. Local banks and credit unions loan money in their communities and often can get creative with their loan options and offer better rates than big banks. They also know land owners, business owners, and people in the community who are looking to buy and sell their homes or may be headed to foreclosure.
You’ll find out about more deals when you work with multiple lending partners, especially if you start using creative financing strategies. When you work with private money lenders, transactional lenders, and syndicates who pool money together, you open yourself up to more opportunities. You can build a partnership, gain equity in a project, take on a piece of an investment property, and grow your portfolio and reputation.
Real Estate Agents
Why would you need to spend time developing a relationship with a real estate agent?
Not all real estate agents work with investors. In fact, even if they’ve worked with investors, that doesn’t mean they have enough knowledge to support your business strategy. You need a real estate agent that only works with investors and is an expert in the market you are looking to purchase in.
Not only do investor-focused agents know home values and have access to the MLS–but they also have specialized local data, know how to calculate after-repair value, have access to off-market properties, and have relationships with everyone. A real estate agent might be the most important relationship to have in a local market because they are constantly transacting and working with every type of vendor you could possibly need, from contractors to attorneys, title companies, lenders, and of course, buyers and sellers.
Why do you need a relationship with a local title company when title companies basically do the exact same thing in every city?
Not all title insurance companies are created equal. On the surface, it might look like title companies provide the same services. They are a neutral third party that researches and insures the title on a property and helps facilitate the closing process between buyers and sellers.
But, not all title companies work with investors or have experience closing on investment properties where buyers and sellers have multiple strategies. A traditional home transaction usually involves one buyer, one seller, and one lender with standard escrow instructions. Investors often deal with properties that have complicated title issues, not to mention they also have partners, business entities, creative financing, double closes, varying inspection periods, and specific escrow instructions. The documents and amendments involved in an investor transaction can get very detailed, and every deal is different.
You can build relationships with multiple title companies that know how to work with investors and grow your business with them. In fact, they will even call you when they need a reliable investor to get a deal done rather than letting it fall apart and missing out on their fee.
Why do you need a relationship with a surveyor at all? Aren’t they just licensed, neutral third-party vendors who cost a lot of money?
Yes, surveyors are licensed and regulated, and the documentation they create on a property is filed, recorded, and becomes a living legal document. That document protects your investment whether you are buying or selling because a current survey will represent boundary lines, improvements, utilities, easements, and right-of-ways. It is the legal road map of a property.
Surveyors also know people. They know property owners, neighbors, real estate agents and have personal relationships with city and county employees and officials. They also know the zoning and ordinance laws and what’s happening with the city council and local development projects. They know the history of a city and county and also where that city and county are headed when it comes to highways, new businesses, and planned communities.
Why would you want a connection with an unlicensed wholesaler who never actually owns the property he is selling?
A better way to define wholesaling is that it’s an investment strategy, not just a person’s profession. Wholesaling a deal is just one way to approach buying and selling real estate. And wholesale investors can’t take on every deal they come across and often have deals to pass on to other investors.
And one step further—the investors, real estate agents, business owners, or entrepreneurs who wholesale will also have a deal to sell, are looking to buy, partner, recommend vendors, and contractors. When you do business and build relationships with people who wholesale as a career or as a strategy, you can do more business and get better deals just by helping each other out.
Why would you ever need to be friends or business associates of your direct competitors?
Other investors are your competition and could snag your deals and steal your contractors. That’s one way of looking at it but also extremely short-sighted. Investors who come together have more resources. A newer investor could partner with an experienced investor to gain knowledge, and that experienced investor could gain equity or profit in the deal. Some experienced investors are exiting the market and need to offload properties. Rather than pass on a property, an investor could give that deal to another investor. One investor may be looking to park cash in a project, while another is looking for funding. The greatest network you could build is one with like-minded professionals who can help each other achieve larger goals and ultimately get to financial independence faster.
This article is presented by New Western
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.