I’m guessing you’re not reading this article to buy one house, and then exit. You want to grow a portfolio that’ll eventually support your lifestyle. I get it, same here. Real estate investing is hard, but not impossible. If you are trying to build a real estate empire, I’d say you probably aren’t looking for something easy to do. Real estate investing requires an initial investment of personal effort and time, and things will go wrong, but will you stick with it? Or will you give up when you face the first tough challenge?
1. Choosing the right house.
You will have to dig through many listings, view and analyze a ton of properties, but it’s important to do this to find a property worth investing in. You will initially spend a lot of time doing analysis, but this gets easier over time. I created a rental property analysis calculator to help streamline this process, because location matters, property type matters, cash flow matters, finding the right property matters!
Good, hard part over, you’ve secured your egg (house)…
Nice try, we’re just getting started!
2. How you structure your entities from the start matters. Do your due diligence!
If you have a house or any assets, you need to protect them. After combing through blog after blog, channel after channel I discovered series LLCs as a form of protection. A series LLC is an LLC that is set up to hold several properties / interests underneath one LLC.
Here’s a few things I did and would suggest you do as well:
- Form a LLC for the holding company / parent company
- Form separate LLCs for your entities
- Obtain EINs for your LLCs
- Open a bank account to manage all business expenses (Do NOT mix personal and business funds)
- If you have multiple members create operating agreements
The first 2–4 bullets can be done alone, BUT I’d highly suggest consulting and / or hiring a lawyer even if you decide to form the LLCs and request the EINs by yourself.
3. Be Organized
You will potentially own hundreds of units some day so how you manage one or even two units will tell you a lot about your ability to scale. Hint, if you have systems in place you will be able to scale more easily. When everything is organized, you’ll rarely feel overwhelmed.
- Organize your income / expenses. You need financial reporting, which means an accurate profit and loss statement. Use software or use an online platform like Google sheets, just make sure it’s being tracked somewhere
- Record contact information for all of your tenants, contractors and maintenance workers
- Keep insurance, invoices, receipts, maintenance records, and tenant complaints
- Have extra copies of keys to access apartments, basements, building etc. or alternatively, go keyless and setup keyless locks!
- Create templates: lease templates, rent increase templates, eviction notice, etc.
4. Aim To Be Fully Remote
Having the ability to send a maintenance worker to a house / property, have rent deposits hit your bank account, renew leases electronically all while not having to physically be there is what will allow you to scale more easily. If you are physically trying to meet a maintenance person, collecting rents in person etc. there will be a limit to the number of deals you can manage. The more hands off your processes are the better .
- Consider smart locks where you can create temporary codes that you can given to maintenance workers to access your units. Not only can they be used for letting in maintenance workers, but you no longer have to track / collect keys as tenants move out
- Sign your tenants up with electronic payments, provide incentive for them to pay electronically. Something as simple as a $5 gift card for them to sign up for the service can work. If you still have tenants that insist on paying with cash, have them make deposits into your business bank account
- Sign leases electronically. You can use services such as apartments.com to handle rent collection and manage leases
- Hire a property manager / building supervisor. If the idea of researching smart locks, signing your tenants up for electronic payments, sounds like too much of hassle, hire a property management company. They will handle all of this for you, in addition to potential late night tenant calls. Have a point person to deal with minor issues while you focus on making investment decisions
5. Network And Keep Learning
Real estate is a singles game but it doesn’t mean you have to do it alone. Attend events, join online groups, listen to podcasts, and talk real estate. Chances are someone else is trying to do the exact same thing you’re doing or something similar. Even if they aren’t, they might know someone else who is. I’ve met a lot of great people at networking events that have lead to other contacts and connections. When you work in real estate, you are often faced with issues that require expert assistance. You might need a good contractor because your primary contractor is busy, having multiple connections helps you have someone to reach out to during those times.
There’s no right way to reach your goals but there are many paths. In the meantime, just live, enjoy the journey, make friends along the way and stay focused.