If you are buying multifamily real estate, you need to assemble the right team of industry professionals to maximize your investment. Calling in favors and utilizing family friends to satisfy the positions you need is not an ideal tactic for early-stage investors entering the multifamily real estate market. Whether it’s a broker, lawyer, lender or property manager, each role can add significantly to your investment, and it’s crucial you select the right people for your team. Here is what you should be looking for in each role:
The first member of your team should be a qualified broker with a track record in the market in which you are looking to invest. I see too many investors be penny wise and pound foolish, thinking they should forgo a commission and buy the property without representation. However, a professional broker will provide much more than simply an opportunity. The broker you want on your team will learn your business and goals and then screen and show you properties that fit both. During due diligence and negotiation, a qualified broker can spot flaws in a building and upside in rents, and help coach and navigate you through any rough spots in the escrow period. Good brokers are also a resource to introduce you to other members of your team. A good broker is more consultant than a salesperson.
Too many times I’ve seen people hire a family friend who is a lawyer but does not specialize in real estate law. You need to find a real estate lawyer who is familiar with the market in which you are investing. You don’t solely need a lawyer for purchasing a building; you also need someone to turn to on an ongoing basis with questions about local nuances and tax codes and to set up your entities correctly.
Exuding good debt for the property is key to long-term performance, but you should seek a lender for more than just interest rate and terms. Make sure the loan officer you’re choosing has experience in the product type and will be able to understand issues that come up during the inspection and appraisal process. Having the right lender on your team will also help you act more quickly and confidently when you need to be aggressive in a competitive acquisition environment.
Whether or not you should hire a third-party management company depends on your investment strategy. If you can complete basic repairs, shovel snow, screen applicants, place tenants in your own units and stay in compliance with local ordinances, you can usually add 300 to 400 basis points to your cash-on-cash returns by self-managing your properties. If your strategy is to own but not operate the building, you need a good property manager on your team. In lower-income markets with more vacancies and higher rates of uncollected rent, good property management firms are critical to making your investment perform.
No matter your experience level or portfolio size, having the right professionals on your team will increase your profitability. Always seek out the right broker, lawyer, lender and property manager to advise your investment strategy.