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Writer's pictureWes Purvis
Apr 2, 20225 min read

Your Investment Real Estate Team



What expert advisors do you need for a successful real estate investment portfolio?

 

In the professional world, teams are used for everything from medical treatment to large scale construction projects. It's the very rare individual that possesses all the necessary skills and education needed to complete complex assignments. From New York City to Silicon Valley, the right mix of talented individuals are key to success.


Why should commercial real estate investment be any different?


Whether you are a passive investor, syndicator, family office, pension fund, or REIT assembling the best equipped team will further the odds of long term, profitable real estate endeavors. So which professionals should absolutely be included in your team?


CPA/ACCOUNTANT


As with most of this list, a CPA specializing in real estate or having at least a deep understanding ought to be fairly obvious. Unfortunately, during my two decades of working with real estate investors, this may be the the specialty many choose to cut. These investors believe, erroneously, they can be their own accountant. They are more likely than not incorrect.


Do you have any idea how many changes to federal, to say nothing of state and local, tax code there are every year? I don't because there are too many. What good is it to have a highly profitable real estate investment if all the profits are devoured by a tax bill? From depreciation, amortization, interest expenses, repairs, Section 179, 1031 Exchanges, and cost segregation, a highly knowledgable accountant will help more of those profits remain with the investor. It's quite literally their job.


Lastly, clearly understandable financials such as tax returns and P&Ls are vastly important when selling an investment asset. Buyers will attempt to poke holes in all financial reports in order to obtain a lower price. Lenders will most likely have questions that will require concise, coherent answers. So why try to save a few thousand dollars every year while risking hundreds, if not millions, of dollars at disposition?


Property Manager


Unless you exclusively invest in absolute net lease properties, a skilled and reputable property manager should be on your real estate investment team. Is it your dream to one day be on constant call for tenant issues? Do you want to spend weeks negotiating with a medical tenant's lease? Do you have the necessary skills, knowledge, and time to successfully coordinate trades' schedules to complete a renovation or construction project? How about filling a multifamily vacancy and staying within Fair Housing compliance?


Or, do you prefer the dream of collecting income while paying skilled professionals to manage the day-to-day operations while you enjoy life? I know which I'd choose. Most professional property managers will also keep detailed financial records. These should be reviewed with you on a quarterly basis. Also, detailed record keeping will help investors save money on accounting services.



Real Estate Attorney


Of all the members of your commercial real estate investment team, a real estate attorney should be a no-brainer. Why spend millions of dollars on a long-term real estate investment without ensuring you're protected legally? As an investor, not having a real estate attorney is like not carrying property insurance.


Purchase contracts, title work, evictions, tenant leases, staying on top of local law changes, entity formation, and lawsuits are just some of the most common reasons you absolutely must have a skilled real estate attorney. No one individual investor has the time nor expertise in all of these areas. Real estate attorneys go through years of education and associate work prior to gaining the requisite expertise many commercial real estate investors require.


Commercial Banker/Lender


Unless your plan is to buy and maintain your entire portfolio with cash, you're definently going to need a commercial lender. To take it a step further, even those investors with a vast cash reserve will likely need this team member.


Here's the thing about cash....once you spend it that cash is gone. Those fifties and hundreds are no longer in your pocket or bank account. They are no longer useful to you.


Obviously with real estate investment, cashflow can compensate and even be budgeted for repairs and renovations. However, some projects will outstrip your ability to come out of pocket. Maintaining a strong cash reserve is vital for commercial real estate investing.


Depending on your overall strategy and mindset, debt may be a detriment. However, debt can allow you to leverage your liquidity to acquire multiple properties or larger, more stable assets for long-term hold periods. Having a strong working relationship with your lender can gain you favored terms and interest rates thus affecting annual cash flow. As importantly and often overlooked, a long relationship with you lender can help to mitigate weaknesses in an otherwise attractive transaction. Perhaps the DSCR is a little short or the vacancy rate is higher than the market average. A long standing relationship with a particular client is an argument I have used countless times as a commercial lender when an underwriter pushed back on a transaction.


Commercial Real Estate Broker


Before you jump straight to the assumption this part is completely self serving, hear me out on this member of your team. In commercial real estate investing, there are three areas where you make your property profitable: Acquisition period, operational period, and the disposition period. A great commercial real estate broker can assist in all three stages.


As the saying goes, "An investor makes their sales profit when the property is purchased." The commercial real estate broker you work with ought to be an asset class specialist. Unlike most residential transactions, there are simply too many variables across asset classes in commercial real estate. As a specialist, your broker will be able to keep you knowledgable of properties that meet your investment criteria whether on or off the active market. They will know the current market dynamics such as average capitalization rate, GRM, IRR, local vs out-of-state buyer activity, new business development, job market, vacancy rates and more. All of these variables should play a part in helping investors determine the potential purchase price of a given asset.


During the operational period, your commercial real estate broker can keep you updated on valuable insights. What is current tenant activity? What are market tenant expectations? Do you have a vacancy that needs filled? Is a potential ideal tenant seeking a new location?


Lastly, during the disposition phase, a knowledgable commercial broker can make an investment really pay off. Unfortunately, this is also the step many real estate investors don't see the value of a commercial broker. Selling a commercial real estate asset takes more than just determining the market value or letting people know a property may be for sale. Often times, services will include marketing the property to qualified and willing buyers (not just random "investors" on social media), vetting the prospective buyers, negotiating, working with the lender/appraiser/inspector, performing during due diligence, dealing with zoning boards and helping to ensure compliance with the agreed upon purchase agreement. Each of these steps can take many days, weeks or even months depending on the assignment.




Assembling Your Team


A few final thoughts as you assemble your ultimate commercial real estate investment team of advisors. First, keep in mind that not all advisors are created equal. You should opt for knowledge, quality, and relationship development over saving the most money. Each of these advisors brings valuable skills and knowledge to the group.


Second, an investor should be very clear about their objectives. Whether it's maximazing monthly or annual profit, sound long-term operations, value at disposition, or tax advantages. Without clear communication amoungst the team, your goals will not be achieved.


Lastly, keep in mind these are relationship minded advisors. This means if you cut them out of one transaction, don't expect them to perform backflips the next time you have an urgent need. You are clearly demonstrating that you're serious about the relationship so long as it only benefits you. Behaving in such a way will leave you performing all these roles in short order.





Wes Purvis

Director & Founder

Purvis Commercial Group

Coldwell Banker Schmidt Realty






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