The Right Game Plan For Investing
In many ways, investing in Real Estate is like playing a team sport. Without a strong team behind you, you might be able to make it through the first few innings, but when it gets late in the game and a pitching change is required, you might find yourself in trouble. I was reminded of this while watching a little league baseball game yesterday. My brother, a heck of an athlete, was able to make it through 7 innings with a 6 to 2 lead, giving up just 2 hits and striking out a majority of the batters he faced. But when the pitching changed, the defense disappeared and the 6 to 2 lead quickly turned to an 18 to 6 massacre. Yes, it was even more painful to experience the loss first-hand than to write about it.
The actions on the field caused me to quickly identify parallels between the athletic world and the business world. Fortunately for my brother this is little league baseball and the repercussions of having an inadequate team to support each other does not bring the same consequences that receiving ill-guidance with regard to a real estate investment can bring. The seasoned investor knows this can include a plethora of issues: code enforcement violations, tenant complaints, negative cash flow, partnership disagreements and dissolutions, etc. Having a game plan is important, but more so is having a strong team in place to carry out the plan.
Essential components of a Real Estate investment “team” would include: acquisitions, due diligence, finance, legal and accounting, property management, asset management and disposition. Have you assembled your Real Estate Investment Team? Do you have solid support behind you? Are you part of an all-star team that is creating wealth for you and your family for generations to come?
One thing I hear from investors is that they have to “micro manage” their teammates (managerial staff). To the point you have to repeatedly aide, assist and ultimately perform the tasks of your teammates, it might be beneficial to evaluate your team and make some changes. Remember, it is called investment real estate for the purpose that you are allocating assets for the purpose of earning income or profits. Unless you are actively employed in the Real Estate industry, the income you earn from said investments is passive income, secondary to your primary source of income. Having to “mind the shop” too much can turn into babysitting and certainly removes the word passive from the term “passive income”.
Evaluate your team’s strong points and weaknesses. For example, if you find an asset manager to be unaware of the current trends in the debt and equity market, you might want to work with a lending institution directly as opposed to relying on their guidance. Similarly, you might want to rely on a Property/Asset Manager to assist in the composition of a realistic and property-specific pro-forma as opposed to simply relying on a Real Estate broker to put together a deal.
Align yourself with key professionals to ensure that you and your team will go strong through 9 innings and emerge victorious.