In this three-part series about Building the Right Team, we’ll guide you through a thought process that will help you research, gather and sustain resources that allow you to achieve the most success in your real estate investment efforts.

Why do people invest in real estate?

Investors get “into the game” for a variety of different reasons. Some follow in a family member’s footsteps and take over rental properties passed to them by a parent or relative. Others are motivated by people who earned their path to wealth using fix-and-flip practices. There are also those who decide to become investors and take the time to study, learn and watch the market before deciding to dive in. In the end, however, building the right team, resources and foundation for a long-term real estate strategy is what will yield the best results.

However you got into (or are moving toward) real estate investing, it can be a highly lucrative venture that yields more diversity to your financial security. The pros include:

• Leverage—real estate is a tangible asset

• Tax advantages

• Forced appreciation

• Consistent cash flow

• Provides equity for more purchases

• Can pass properties down to heirs

There are also cons to real estate investing such as:

• No guarantees on income

• Securing high-potential properties can be difficult

• Legal risks with tenant issues

• Multiple costs and expenses to manage

• Financing can be challenging

• Maintaining properties is an ongoing expense and effort

• Legislation that prohibits evictions or rent increases during times of crisis (such as a pandemic or economic downturn)

Where is your real estate investing tolerance today?

Your investing tolerance evolves over time. It’s beneficial to reassess your tolerance regardless of where you are in your investment journey. Grade yourself on a scale of 1-10, 10 being high tolerance and 1 being low tolerance for the following:

• Managing tenant issues and late payments

• Coordinating construction improvements whether substantial or cosmetic

• Marketing and leasing your property’s availability to new tenants

• Refinancing or leveraging equity to purchase new properties

• Minimizing tax liability

• Finding that first or next property that’s an ideal fit for your portfolio

• Securing the right financing

• Competing with other investors or hedge funds to find properties

• Negotiating purchases

• Repairs, maintenance and improvements to properties

• Forcing appreciation and assessing marketability of your property

• Navigating leases, title insurance, settlement and other legal responsibilities

• Managing cash flow through your portfolio

Depending on where you grade yourself as having the lowest tolerance for, meaning you really don’t have the acumen, experience or desire to deal with or do, are areas you need to shore up with the right people and resources to do it for you. If you have high tolerance for any of these areas, you’re main choice then is whether or not you want to be hands-on in dealing with these issues. For example, if you are a tax attorney with extensive experience in tax law regarding real estate investing and are familiar with 1031 exchanges, statutory trusts and other legal aspects of real estate investing, your tolerance may be a 10. And, your willingness to manage your own tax implications likely will be something you can manage if you have the time and desire to do so. However, if you’re not an expert in real estate tax issues nor have the desire to become an expert, you need to bring in an expert who will be there to be part of your team.

Is your current strategy working?

When you take the time to asses your tolerance against these (and many other) aspects that are involved with real estate investments, you will quickly see where the right team becomes an important factor in your success as an investor. The next step is to assess your current strategy against the prior assessments of desire and tolerance. If you started out as a fix-and-flipper, you may have grown weary of the work involved in finding the right foreclosure, going through construction, rehabbing and selling a property for a profit. If this is true, know that there are other options. You can be an active investor who builds a team to leverage the work involved or even taking it as far as becoming a passive investor and letting your money work for you in a fund such as the Empire Capital Fund.

Regardless, you evolve as an investor and your strategy should evolve as well. Taking into account the prior tolerance assessment, are there changes you may want to make to how you invest and manage your properties now versus before? Are there aspects of how you’ve managed your own properties in the past that you no longer want to do anymore? Are you sick of hassling with tenants? Are you fatigued by the market conditions and watching all of the best properties get snagged by nameless hedge funds out of Wall Street?

It may be time to shift your strategy to accommodate how you want to approach investing. What may have worked for you a few years ago may not be the best strategy today, especially with how volatile the economy and global climates are right now. Once you’ve taken the time to reassess your strategy, you will be better equipped to attract and retain the right team to support your investment goals.

Next week, part two of the Building the Right Team series: We’ll get into the details around executing your revisited strategy so you can find the resources and build the team that works best with what you’re trying to accomplish with real estate.