More and more readers are considering setting up a business to invest in real estate.
I know because of all the e-mails I receive asking about how to do just that. Over the past few weeks, I’ve received various queries for more details regarding my April 30 column on the steps to take to start your real estate investing business. Here goes:
The corporation. Since you’re setting up a business, consider establishing a limited-liability corporation (LLC). This means contacting an attorney who has established these type of corporations before. The attorney will help you conduct business and protect your private assets, such as your personal residence, in case you are sued by a tenant, owner or seller.
If you’re looking at processing contracts, leases, and other legally binding papers, have an attorney look over your business setup from step one.
Here are a few online resources to get started:
Companies Incorporated: www.companiesinc.com
Nolo — Law for All: www.nolo.com
The agent. 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 and second properties but also has invested in real estate himself.
The agent is the primary person to work with for searching, inspecting, fixing, arranging maintenance and financing. 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.
I can’t tell you how many pitfalls a professional will help you avoid in this process.
I’ve seen a lot of potential investors make huge mistakes — read that “losing money” — when trying to go this road alone.
The agent also knows the other residual professionals you’ll need in this process — inspectors, contractors, insurance providers, title services. Make your life simple: Don’t worry about all these providers to start with. As a buyer’s agent, most likely, the agent will get paid from the transaction, not from your back pocket, so the return on investment is worth the 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 — where most of us find our primary residence. Then there are those who know how to navigate the investor world. They both have their places in the world of real estate. Often, they are the same person.
The loan officer. The first referral you want from your agent is a great loan officer who will hunt down the cheapest, best financing available to investors.
Keep in mind that you’re looking to get into properties for as little money out of your pocket as possible — 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 the lender offers. If he or she doesn’t have a large supply of investor programs, or at least creative packages, find another loan officer.
The club. 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: www.creonline.com (click Real Estate Clubs on the left)
Real Estate Investment Club: www.reiclub.com
M. Anthony Carr has written about real estate for more than 15 years. Contact him by e-mail (firstname.lastname@example.org).