🍲 One Ingredient of My Secret Sauce!
Happy Monday!
Here is an Idea, an Action, and a Question to consider this week.
Idea
If you want to be an effective investor-agent, you need a solid understanding of concepts outside of your scope of practice. This will help you add more value and close more deals.
A common way I guide my investors is through offering insight to their questions on topics such as LLC setup, partnership structures, and connecting with local vendors. No, I’m not a lawyer, CPA, or insurance agent, but I know enough of the basics so I can guide investors through deals.
For instance, I’m often asked, “Should I buy in the name of an LLC so I can’t get sued if someone has an accident on my property?” My answer always starts with, “It depends. Definitely discuss that possibility with your lawyer and CPA to understand the legal and tax ramifications.” However, you can’t just pass the buck on questions like that because your clients might get frustrated at your lack of basic information.
At minimum, you will want to illustrate how purchasing under an LLC may impact lending options and terms. Also, you’ll need to let your clients know that there are other ways to have liability protection outside of just buying property through an LLC. Have them contact your local, friendly insurance representative to discuss umbrella liability coverage.
I emphasize that having an LLC doesn’t mean you won’t get sued––the corporate veil can most definitely be pierced. Unless your client has a massive portfolio and/or tons of assets to protect themselves, they most likely will only create a basic LLC structure, making it very likely a lawyer will be able to find out who’s behind it. If your client does have massive assets to protect, they most likely already have trusts and other entities set up with an estate attorney and won’t ask you about an LLC.
Regarding partnership structures, I’ve actually never closed an investment deal singlehandedly––I’ve always used some form of partnership in my deals. Together we grow, right?
Now when I bring deals to investors, I can speak firsthand about various partnership structures, private lending arrangements, joint venture (JV) opportunities, syndication processes, etc. If you can’t yet, don’t fret––just continue to educate yourself and to network so you can access as many of these partnership solutions as possible.
Recommending local vendors from your network is a third way to guide your investor. Start with essential service providers depending on your client’s niche, like cleaners and handymen for clients buying short-term rentals, and provide them with a list of options. This short list of options will help alleviate a lot of concerns when they’re tackling an investment property purchase.
Bottom line: Learn the basics of real estate law, accounting, and insurance so you can close more deals and add massive value.
Action
Fill any knowledge holes you have when it comes to real estate law, real estate insurance, and taxes. Find books, podcasts, or courses dedicated to the basics of these concepts.
Question
What’s your biggest knowledge gap as a real estate professional?
See you next week,
Matt “Roar” Gardner
Real estate investor-agent, Author of Supersonic Real Estate: Light Your Afterburner to Accelerate Your Investor-Agent Career (Coming Soon!), and keynote speaker.
