Creative Finance 101: The Ultimate Guide To Building Your Creative Finance Team in Real Estate
They key to any success is relationships. No one on planet earth is successful only because of themselves. Self-made millionaires don’t exist. Sorry. Every transaction requires another human being. This is doubly true for real estate. EVERYTHING is built or broken over the quality of the relationships and the trust within those relationships. In this article we are going to go over the key members of your creative finance real estate team and ideas of where to find them. The real secret to finding high-quality, amazing team members will always be through word of mouth from trusted sources. You can only obtain those sources is through community, hard work, and integrity. If you don’t have those three, no one is going to give you up their A-list for fear of you flaking and hurting their relationship.
To succeed in this field, you need to have a team of professionals who can assist you with various aspects of your transactions, from legal matters to paperwork to inspections.
But who are the essential members of your creative finance team and what do they do? Keep reading to find out!
Transaction Coordinator
A transaction coordinator is in expert in creative finance who manages the paperwork, communication, and deadlines of your deals. A transaction coordinator is essential for creative financing deals, as they often involve multiple documents, parties, and steps that need to be completed in a timely and accurate manner. At The Evergreen TC, we often save our clients 20-30 hours per transaction and increase the close rate from 30% to 70%. We have many resources here to help you better understand the role of a TC in your transactions and how we can save you money. Here are a few of them:
What is a Transaction Coordinator in Creative Finance and What Do TCs Do?
How a Transaction Coordinator Can Help You Streamline Your Creative Finance Real Estate Deal
What is SubTo and How Can a Transaction Coordinator Can Make it Easier?
Top 10 Benefits of Hiring a Transaction Coordinator for Your Creative Finance Business
4 Ways A Transaction Coordinator Can Help Streamline Your Business:
Organize and track all the documents and tasks required for your deals
Communicate and coordinate with sellers, buyers, lenders, title companies, inspectors, and other parties involved
Ensure that all the contingencies and conditions are met and cleared
Facilitate the closing process and handle the escrow and disbursement of funds
Accountant (CPA)
An accountant is a person who handles the financial aspects of your deals, such as bookkeeping, taxes, and cash flow analysis. An accountant can be a certified public accountant (CPA), a bookkeeper, or a tax preparer. An accountant is vital for creative financing deals, as they often have unique and varied financial implications that need to be accounted for and reported. In creative finance accounting, it is imperative to find an accountant who is familiar with creative finance. Ideally, your accountant will have done several creative transactions and someone in your network has had a good experience with them already.
5 Ways an Accountant Can Help You:
Record and track your income and expenses
Prepare and file your tax returns and deductions
Analyze and optimize your cash flow and profitability
Plan and budget for your future goals and projects
Advise you on financial strategies and opportunities
Attorney
An attorney is a licensed legal professional who can draft and review contracts, advise you on legal matters, and protect your interests in case of disputes or lawsuits. An attorney is especially important for creative financing deals, as they often involve complex and unconventional arrangements that may not be covered by standard contracts or laws. It is essential to find an attorney who is familiar with creative finance and who understands the complexities of these transactions.
5 Ways An Attorney Can Help You:
Understand the legal implications and risks of your deals
Ensure compliance with federal, state, and local regulations
Customize contracts to suit your specific needs and goals
Avoid or resolve conflicts with sellers, buyers, or other parties
Represent you in court if necessary
Escrow Agent
An escrow agent is a person who acts as a neutral third party in the closing process. An escrow agent can be a title company, an attorney, or a bank. An escrow agent is essential for creative financing deals, as they can ensure the security and transparency of the transactions. These are critical to any real estate transaction.
An escrow agent can help you:
Hold and disburse the funds and documents in a secure, neutral account
Verify and record deeds and other closing documents
Facilitate the closing process
Handle disbursement of funds
Resolve any issues or disputes that may arise during the closing process
Inspector, Appraiser, or Contractor
These roles often overlap, however there are differences in their focus and expertise. These professionals asses the condition and value of a property and can provide recommendations for updates needed before the property can be rented or sold. They are crucial for creative financing deals, as they often involve properties that are distressed, outdated, or in need of repairs or renovations.
4 Reasons Why You Need Them on Your Team:
To identify and evaluate the physical and functional defects of the properties
To help estimate the market value and the after repair value (ARV) of the property
To provide recommendations and cost estimates for repairs or improvements
Provide data so you can better negotiate prices or terms based on the inspection results
Insurance Agent
An insurance agent is a person who provides insurance coverage to parties, such as property insurance, liability insurance, title insurance, etc. An insurance agent can be an independent agent, a captive agent, or a broker. An insurance agent is important for creative financing deals, as they help protect your assets and interests from unforeseen events or claims. This role also need to be creative finance friendly.
4 Ways An Insurance Agent Can Help You:
Assess your risks and liabilities and recommend the appropriate insurance policies
Compare and negotiate the best rates and terms from different insurance companies
Handle the claims and settlements in case of damages or losses
Update and renew your insurance policies as needed
Mentor
A mentor guides you through the learning curves naturally present for those new to creative real estate investing. They will often share their experiences and insights, and help you avoid mistakes. A mentor can be a seasoned investor, a coach, or a teacher. A mentor is useful for creative financing deals, as they can help you navigate the complex and unconventional arrangements that may not be familiar to you.
A mentor can help you:
Learn the fundamentals and best practices of creative financing
Find and analyze potential deals and opportunities
Develop and implement effective strategies and exit plans
Overcome challenges and obstacles that may arise
Expand your network and connections in the industry
Guidelines for Finding and Having a Mentor:
Don’t: Expect your mentor to do everything for you, or to have all the answers. Be proactive and responsible for your own learning and growth.
Do: Research and network with people in your field, and reach out to potential mentors who share your interests and values.
Don’t: Be afraid to ask for a meeting, or to follow up with your mentor. Show your enthusiasm and initiative, and respect their time and availability.
Do: Add value and respect to your mentorship relationship, and find ways to reciprocate their generosity.
Don’t: Take your mentor for granted, or abuse their trust and goodwill. Show your gratitude and appreciation, and follow their advice.
Do: Communicate and learn from your mentor, and set clear expectations and goals for your mentorship. Be open and honest, and share your challenges and successes.
Don’t: Be defensive or resistant to your mentor’s guidance, or ignore their suggestions and recommendations. Be receptive and adaptable, and apply their lessons to your own situations.
Partner
A partner shares the risks and rewards, can provide additional capital and skills, and can expand your network and opportunities. A partner can be a fellow investor, a friend, or a family member. A partner is beneficial for creative financing deals, as they can help you leverage your strengths. We wrote an extensive article on Partnership Agreements that you can read to get a more in depth understanding of the structure of this agreement.
A Partner Can Help You:
Finance your deals without the hassle and delay of conventional loans
Leverage your existing equity or assets as collateral
Customize your loan terms and repayment schedule to suit your cash flow and exit strategy
Build a long-term relationship and trust for future deals
Private Money Lender
A private money lender is a person who lends money to investors. The private money lender is not affiliated with banks or other licensed lenders, and offers faster, more flexible financing options. The private money lender charges higher interest rates and fees than traditional lenders, and has different qualification criteria and loan terms. A private money lender is beneficial for creative financing deals, as they can provide you with the capital you need to close your deals quickly and easily. This can take the form of a hard money lender, private money lender, JV partner, transactional lender, and more.
5 Ways a PML Can Help You:
Finance your deals without the hassle and delay of conventional loans
Leverage your existing equity or assets as collateral
Customize your loan terms and repayment schedule to suit your cash flow and exit strategy
Build a long-term relationship and trust for future deals
Access today’s opportunity
Property Manager
A property manager is a person or a company that takes care of the day-to-day operations of your properties, such as marketing, leasing, maintenance, repairs, tenant relations, rent collection, accounting, and legal compliance. A property manager can be a valuable partner for your real estate business. They do not need to be familiar with creative financing, but you do need to properly vet them.
A Property Manager:
Sets and collects rent from tenants
Markets and fills vacant units
Handles maintenance and repair requests
Manages tenant relations and complaints
Assists with taxes and accounting
Title Company
A title company is a company that verifies the ownership and liens of the properties and facilitates the closing process. A title company can provide title insurance, escrow services, and closing services. A title company is indispensable for creative financing deals, as they often involve properties that have existing mortgages, liens, or encumbrances that need to be cleared and transferred. Many title companies do not provide services for creative finance deals. Your creative TC can provide recommendations for creative-friendly title companies.
4 Reasons Why You Need a Title Company:
Conduct a title search and provide a title report that shows the history and status of the properties
Issue a title insurance policy that protects you from any title defects or claims
Prepare and record the deeds and other closing documents
Unicorn Real Estate Agent & Wholesaler
A unicorn real estate agent is a person who can help you find and negotiate deals, access the multiple listing service (MLS), and market your properties and is a creative finance expert with transactions such as subject to and seller financing. A wholesaler is a person who finds and secures off-market or distressed properties at below market prices, and then assigns the contract to an investor for a profit. The wholesaler makes money by charging a wholesale fee, which is the difference between the price they agreed with the seller and the price they assigned to the investor. They are critical parts of an investor’s business in finding new deals.
A Unicorn Real Estate Agent:
Finds and evaluates properties that match your criteria and goals
Negotiates better prices and terms with sellers and buyers
Access the multiple listing service (MLS) and other databases of properties
Markets your properties to a wider audience and generate more leads
Handles the paperwork and communication of your deals
A Wholesaler:
Finds and secures off-market or distressed properties at below market prices
Provides the investor with leads, referrals, and market insights
Connects the investor with other wholesalers, cash buyers, and sellers
Helps the investor diversify and expand their portfolio
Educates the investor on the local real estate laws and trends
BONUS: Community
A community is a group of individuals who can support you, advise you, and collaborate with you in your real estate endeavors. A creative finance community can include other investors, wholesalers, agents, lenders, contractors, attorneys, or mentors. A network of peers is essential for creative financing deals, as they can help you access more resources, opportunities, and solutions that may not be available otherwise. This is arguably the most important component of any investor. While a community is not part of your team, per se, they are critical to success.
A community can help you:
Find and secure off-market or distressed properties at below market prices
Gain access to opportunities you may never had access to
Open your thinking new ways of thoughts and possibilities
Collaborate and grow with other people who share your interests and goals.
Keep yourself accountable and motivated by setting and tracking your progress.
Provide you with support and advice when you face challenges or difficulties.
Access more resources and opportunities by leveraging other people’s money, skills, or connections.
Optimize your property management by getting tips and best practices from other landlords and property managers.
Negotiate and structure creative financing terms and contracts by learning from other investors.
Enhance your reputation and credibility by building trust and loyalty with your tenants, buyers, sellers, partners, lenders, and service providers.
Finding the Right Team Members
There are only 3 ways to find the right team members for your team:
Ask for referrals from your network of investors, friends, and family that you trust and have been in the business for a long time.
Search online platforms, such as facebook, for real estate groups that are familiar with creative finance deals and ask for connections.
Search online and use a combination of keywords like “subject to attorney near me” and interview a minimum of 3 candidates for each function you need.
There are 3 primary skills your team members need to have:
Compatibility: You should work well together and complement each other’s strengths and weaknesses. You should avoid having team members who are too similar to you and may clash with you. If you are a visionary, you shouldn’t bring another visionary on board. If you are an expert inspector, it may not make sense to hire an inspector - unless that removes you from the day-to-day and allows you to focus on growing your business.
Expertise: You should have team members who are not only knowledgeable in their field, but also in the specific area that you need them to be. You should have team members who can handle the tasks and challenges that you face.
Communication: You should have team members who can communicate effectively and professionally, and who match your personality and needs. You should have team members who can express their ideas, opinions, and feedback clearly and respectfully.
Conclusion
Creative financing is a powerful and flexible way to fund your real estate deals without relying on traditional lenders or mortgages. However, creative financing is not a solo endeavor. To succeed in this field, you need to have a team of professionals who can assist you with various aspects of your transactions, from legal matters to paperwork to inspections.
One of the best places to start is building a relationship with a creative transaction coordinator so when you do obtain a creative deal, you can move quickly and accurately through the process. Take action today by taking the first step and getting a TC on your team! We have a vast network of experts we can connect you with when we partner on deals together to ensure it is a seamless process.