House Flipping 101: Building Your Team
Everyone is getting in on house flipping these days. But the most successful flippers know that the secret to success is to build a great team. Mike LaCava, president of House Flipping School, has the scoop on the 5 people you must have on your power team.
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Team Member #3: General Contractor
Many real estate investors choose to go it alone when it comes to the renovation of a property - whether it’s a quick fix up to get tenants in or a complete home remodel, many choose the DIY route.
If you are a general contractor or have extensive building experience, then obviously you can do it yourself. But depending on your skill level, this can be a major mistake. If the fixes are a matter of painting and cleaning, then you likely won’t need a general contractor. But if you are buying, extensively renovating, then selling, a qualified general contractor is a must.
A general contractor is the single individual who oversees all the work on a real estate project while earning a small percentage of the overall work as his fee. They manage all the plumbers, electricians, carpenters, and drywall guys and pull all the permits so you don’t have to manage the day to day operations of the renovation.
If the work is extensive and you're not a professional, doing it yourself may end up costing you more in the long run. When I first started, I did a lot of the rehab work myself - which although I learned a lot, it slowed down my career. The interesting thing is that as soon as I made the decision to hire a contractor, that's when my real estate business really took off.
Team Member #4: CPA
The more taxes you pay, the more money you should be making, right? A good CPA will be able to help minimize your tax burden, as well as advise you on the tax rules of real estate investing. Just like any member of your team, get the best CPA you can afford. The accounting that's involved in real estate investing is complex - so you want to make sure you not only stay on the right side of the real estate laws but also minimize your tax burden at the same time.
A good CPA will know which expenses can be deducted, what can be outright expensed as well as what needs to be capitalized. This can get tricky if you're new and don’t know the laws.
A good CPA can also advise you on the proper structure of your business with your attorney as well. They will also advise you on how you should declare the income you make from your investments. There is much to know here, so make sure you get it right the first time.
Team Member #5: Insurance Agent
Insurance is an oftentimes overlooked expense in real estate investing - and operating without a good policy can leave you open to liability - not to mention personally damage your reputation. A good insurance agent should have a full knowledge of your business structure, and a solid understanding of how your properties should be insured depending on your business plan and business goals. They will be able to guide you on which types of insurance you need in the context of geography, other real estate investments, and personal property.
Depending on what kind of real estate investing you're dong, the type of insurance is highly variable and a good insurance agent will know exactly which kind is appropriate for your investments. This can range from homeowners to builders risk to general liability to umbrella policies, as well as flood or even earthquake insurance. Trying to figure this all out on your own (or worse yet, not getting any insurance at all) can be disasterous.
Whatever you do, make sure you get ample insurance coverage from a qualified and knowledgeable agent. Paying the premium may seem like a huge unnecessary expense, but it’s minor in comparison to the real headaches you’ll have if something catastrophic happens.
Mike LaCava is the President of Hold Em Realty and of House Flipping School, both located in southeastern Massachusetts. Mike is a full time real estate investor and a house flipping coach. To learn more about Mike LaCava, visit houseflippingschool.com. Connect with Mike on Facebook, Pinterest, and YouTube.