I read your article on “five ways to protect yourself from a bad property manager“. I have a dream to invest into Real Estate as I believe this is the best vehicle to get me out of the rat race. As I am still a dreamer, I read a lot of articles on the subject before I take the plunge.This is how I intend to go about it:
- Set up a company (Real Estate) even before I buy a property;
- Recruit a long experienced manager(poached from existing reputable management company);
- Buy property in the name of my company(as opposed to in my own name);
- Engage a reputable firm of Accountants to foresee the financial management of my company.They will do this through quarterly interim audit reports.
Thank you for your e-mail! I think your dream is fantastic and I wish you all the best of success with it. Without knowing your experience level, I am going to assume that you are a relatively new real estate investor. If that is not the case much of what I have to say may not be necessary feedback. But assuming you’re fairly new to investing I’d like to say: ..
1) Set your goals. This is a great vision for what you want to achieve, but quantify things. For example, in the next five years I want to be making $1000/month from my real estate investments. This year, I want to buy one property that will generate $100/month in cashflow. This month, I will begin researching the market that I plan to buy in, and will meet 3 potential real estate agents to work with. Basically take your longer term goal and start breaking it up into smaller goals.
2) Put first things first – and to me the first thing is not a company, it’s goal setting and then finding a property to buy that meets your goals. (We live in Canada so I speak from a Canadian perspective. I am not sure where you live?). Dave set up two corporations when we began to get serious about investing and we have not yet been able to buy any real estate inside of those companies. Banks really make this difficult for investors to start this way. And even if you do convince a bank to provide you with financing on your property that your company owns they will probably still make you sign a personal guarantee so you now have the extra costs and work of a corporation and still have the liability. It can be done – but I would worry about it later. Get the property first.
3) Property managers won’t need to be poached – they will often just take on your properties in addition to the ones they have. Just make sure you’ve taken the time to research the one you are looking to hire.
4) A good accountant is absolutely essential for annual tax returns and advice on the best way to structure deals to minimize your taxes, but when you first begin, you will not need quarterly reports. That would be expensive and really isn’t going to tell you much more than you can figure out for yourself using a few simple Excel spreadsheets. Once you have dozens of properties you will probably have someone that will run these reports for you quarterly and you will need them.
Keep things simple so you get started. Once you get started and have bought a property or two – then you can start worrying about the details.
I wish you all the best with your investments.
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