Real estate can provide an excellent income stream and build wealth, but it doesn't come without risks. If you are thinking of purchasing an investment property, a good Realtor can help you pick the right property. So how do you find a good agent? I've tried to list the qualities that have made my Realtor so valuable to me over the years and why I have used him to buy all of my rental homes.
In Depth Knowledge of Investment Real Estate
This may seem like I’m stating the obvious, but you need a real estate agent who regularly helps clients buy the type of investment property that you are looking to buy. If you want to purchase foreclosures to turn into rental homes, then find a Realtor who makes his bread and butter doing just that. Similarly, if you are looking to buy a retail strip mall, find a real estate agent whose main area of knowledge is in commercial real estate.
I found our Realtor by searching the Internet for Houston investment real estate. However, I wasn’t comfortable until I talked with him extensively over the phone and followed that up with a face to face meeting.
Understands What Makes a Property a Money Maker
A good investment Realtor will consider your goals and will guide you toward the right property to meet those goals. Depending on the goal, it might mean buying a foreclosure to capture equity, finding a property to maximize cash flow, or purchasing new properties to reduce upfront maintenance costs and perhaps offer a better long-term gain through appreciation.
Mainly, I invest in bank owned foreclosures that I rehab and rent out. However, my real estate agent often finds deals on Housing and Urban Development (HUD) homes, new construction, and non-foreclosure homes. As long as the numbers work, I'm interested.
Backs up Recommendations With Numbers
Ask to see an income/expense breakdown for the properties that are on your short list to buy. Don’t just accept an opinion as to whether the property will make money. Instead have your Realtor show you on paper the return on your investment after you pay taxes, HOA fees, closing costs, insurance, rehab costs, etc.
For the rehab costs my Realtor uses a standard $5000 when looking for potential properties. Then, once we visit the property, I decide whether the specific property needs more or fewer repairs. Hopefully, your realtor has enough experience to help calculate the actual repair cost of common items such as paint, carpet, and tile, if not, you may want to bring a general contractor to the house for an estimate.
Knows How to Close the Deal
Purchasing a good investment property typically means you will have competition. If you have determined that the property is a good investment, it’s likely that others will have come to the same conclusion as well. Your Realtor will need to structure your offer so that it is competitive and yet still a good investment. For instance, many large banks will not offer closing costs to an investor. If you are dealing with one of these banks, then it’s better to ask for a lower price instead.
Competition also comes from families looking to buy a home as well as other investors. Often, someone who plans to live in the house can offer a higher list price for a property; however, they are also probably expecting closing costs and a home warranty. You can gain an advantage by not asking for these extras, paying cash, or being ready to close quickly.
I have found that bank owned foreclosures are especially frustrating as many banks tend to sit on an offer keeping you in limbo while they see if anything better comes along. Even with the best Realtor, mentally prepare yourself to lose out on several properties before sealing the deal.
It’s almost inevitable that some issue will come up in your pursuit of purchasing investment properties. It might be a delay in the closing date, problems turning on utilities, something odd in the inspection report, or finding the right contractor for a repair. In these situations, a good real estate agent will make sure that all the problems get solved. The better your real estate agent helps guide you through the process is what ultimately makes you want to buy another property or run for the hills.
Hopefully, defining these qualities will help you find a Realtor that helps you meet your investment goals. The best real estate agents want you to succeed so that you will continue to use them for your next property. This means that you can depend on them from the beginning through leasing your property and well into the future.