By Ken McElroy
From Chapter Three...
It Takes a Team
Who was it that said, "No man is an island?" Whoever he was, he could have been living in the twenty-first century because today we don't do anything without the help of other people. Even when movie stars win Academy Awards, they never walk up to the podium, face the crowd, smile, and say, "Thank you. I am quite wonderful for having done this all by myself." Instead, it practically takes a vaudeville cane to yank them off the stage as they thank the hundreds of people who helped them along the way. Everyone has a team. Even the Lone Ranger had Tonto and Silver!
Well, in the business of investment real estate, you can't afford to be a lone ranger. In fact, it's impossible to accomplish your goal on your own no matter what your goal is. And no one is expecting you to. Quite the opposite. We're expecting you to build an extensive network and a close-knit team that will be your most valuable resource.
Why Have a Team?
Having a team of experts on call is not free and it is not cheap. Those are the two biggest reasons why many inexperienced investors make a rookie mistake: They try to do almost everything themselves. Sure, they my save a few dollars in the short run, but they usually lose in the long run. Without experts on your team, deals take longer to find, evaluate, and close, so there's the value of your time and the loss of valuable opportunities. Do-it-yourselfers miss details that experts would see in a minute, like clauses missing in contracts, obvious defects in construction, and hundreds if not thousands of other issues experts would point out up front.
An expert team on your side means you'll have fewer surprises as you wade through the sometimes turbulent waters of purchasing and managing a property. Surprises are wonderful on birthdays, but the kinds of surprises that come from investment property are usually not very welcome.
Real-World Case
One investor who decided to go it along alone is a man from Seattle who called us right after he purchased a 100-unit property and asked us to help him manage it. The key word here is "after." The property is in Phoenix and he had absolutely no plan for it. He had never walked any of the units; he never called anyone to inquire what the resident mix was like. He never even checked what kind of neighborhood the property was in. When we talked it was obvious he had not done any research at all on the property; he bought it sight unseen. The property was in massive disrepair -- a nice way of saying it should have been condemned -- and worse than that, it was full of gang members. Even the Phoenix police department was instructed to never enter the premises without backup.
This man's laziness on the front end cost him tons of money. I wonder why now, but we did take on the management contract for this property and the price tag was pretty steep to get this place back in shape. Outside contractors of every kind, lawyers, you name it, we hired them all. We sent eviction notices that nearly evacuated the entire place just to get rid of the riffraff. That meant the owner endured months of significantly reduced income and sky-high marketing costs to get the property leased. It was a mess that took the better part of a year. If this man had taken the time to establish a network of people in Phoenix before buying the property, they would have either steered him clear of this property or flushed out all the issues so he could have established a plan to turn the property around.
This is just one example. There are thousands of others. The point here is simply that the wise investor pays on the front end and reaps the rewards on the back end. The fees it would have cost the property owner from Seattle to have his Phoenix team visit the property and file a report or two were a pittance when compared with what it cost him out of his own pocket to get his investment in shape. Had the work been identified up front, the cost of the property improvements would have been factored into the seller's listing price. Build your team now. You'll save money and be prepared for whatever you encounter along the way.
And here's one more bonus. Often it is the team you establish that becomes the foundation for your entire network. Think of your network as your lifeline. Not only will they help you with the deals you're working on now, they are usually the ones who will bring you your second, third, and fourth property opportunities -- particularly if you have voiced your goal to them clearly, as discussed in the previous chapter. There's no need to do all the work yourself. You need experts. I've been doing this for years and I still rely on my team of experts. I wouldn't do a deal without them.
Also in this chapter:
The Pros and Cons of Working with Family Members
Partners - A Good Thing or a Bad Idea
Copyright 2003-2004 Azlan Adnan Legal Notice
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