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Do You Need a Real Estate Agent to Invest in Real Estate Long Term?

by Erion Shehaj on March 14, 2013 · 8 comments

  
Real Estate Agent

Real estate investors are an entrepreneurial and fiercely independent tribe. When they put their mind to blazing their own path in the vast investing jungle, they spend countless hours (and dollars) relentlessly researching investing strategies, reading books and blogs and attending seminars and investment clubs. Then, depending on the strategy they decided to use, they step out of the cave on a mission to “kill something and drag it home”. To tell you the truth, it’s hard not to admire that spirit and conviction to make something happen.

So then it’s not a surprise that as a tribe, investors don’t want someone that just comes along for the ride only to enjoy a share of the spoils if they don’t bring value to the “hunt”. Just like it was no surprise to me to find this question in the BiggerPockets forums: Do I need a real estate agent to help me or should I go at it alone?

The implicit skepticism is understandable as times have changed. Long gone are the days where you needed an agent simply because they had the keys to the forest. If you needed properties, they were the gateway. These days, that “contribution” has been substituted by a phone/tablet and a free app. Pretty much every property in every market at your fingertips. Speaking of apps, now you can use them to run a complete cash flow analysis before you even step out of the property you just saw.

Do investors need a real estate agent?

Every time I’m presented with this question, I offer the following analogy. If you were going to invest in the stock market, and you have the strategy and asset allocation figured out plus you know exactly which securities to buy, you don’t go to an expensive broker. You go to a Schwab/Fidelity/TD, pay your seven bucks and execute the trade. However, if you need help with your overall gameplan and its specific execution, you find a pro. One that preferably has forgotten more things about stocks than you know. And most importantly, you don’t expect to pay seven bucks.

Here’s what real estate investors don’t need:

  1. A cheerleader agent that thinks every house you walk into is a great investment
  2. A run of the mill house agent that thinks investors are just people buying houses for different reasons
  3. A psychotherapist agent that answers every one of your questions with the same question because they don’t know the answer
  4. A generalist agent who tries to sell you on a property using vague and pointless investment references (i.e. you’re gonna make a killing in this one)

And here are the contributions that can be invaluable from the right agent:

  1. Market Knowledge – The right agent knows the best locations with the best school districts for the money and can point you in the right direction. Most new investors think their knowledge of the market is a lot more vast than what it truly is. Bringing a professional agent to provide these insights for you, can save you hundreds of hours of time and thousands of dollars of losses from potential mistakes. For instance, the right agent can focus your attention to a handful of areas that make the most sense to avoid endless analyses on properties that don’t meet the location criteria in the first place. 
  2. Growth Patterns – When you invest in real estate long term, it is crucial to acquire assets in the path of growth. But most importantly, it is absolutely vital to make those acquisitions before the neighborhood reaches its full potential and prices rise beyond your reach. The right agent has seen successful neighborhoods come to life in the past plus they see the level of demand at the ground level. They can help point you in the right direction with respect to growth patterns in your local market.
  3. Finding great tenants – Your ability to consistently place great tenants in great properties is of paramount importance to your investing success. The right agent can market your property aggressively and syndicate listing information to all real estate portals. They must take their fiduciary duty seriously and place your interest ahead of their own instead of leasing to the first applicant whose only qualification is that they can fog a mirror. The only way this works is if your interests are well aligned with those of the agent. In other words, the agent would spend more time than leasing a property is worth in financial terms because they value the long term business they will do with you over time.

Mind you, these contributions are merely a starting point. If you are to work with a real pro, they must bring to the table much more. Namely, they should help you formulate an overarching strategy and gameplan and provide in-depth analysis of each acquisition. In my experience, 99% percent of agents don’t know how and are not willing to provide such help as investors are at best, a tiny branch of their client tree. But there’s that rare breed that lives and breathes real estate investing and that shares that same entrepreneurial spirit found in each and every investor.

As a parting thought, I’ll leave you with a jewel from Jeff Brown – Those who do it by themselves, often do it to themselves.

Photo: woodleywonderworks

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{ 8 comments… read them below or add one }

Julie Oldham March 14, 2013 at 7:03 pm

I use a realtor. Every time I think I know everything about this business, she teaches me something new! Especially since, as an investor, I’m not usually interested in the “normal” listings with normal sellers. (She and I joke that we only look at smelly houses!) Another added benefit, at least for my area, is the ability to bid on HUD homes. The rules changed a year or so ago, licensed agents are no longer allowed to buy these properties. This was the main reason I decided not to pursue my own license.

Great article, thanks for writing it!

Reply

Erion Shehaj March 15, 2013 at 12:51 pm

Hi Julie

Looks like you’re working with a true pro.

Reply

Jeff Brown March 15, 2013 at 10:47 am

Hey Erion — I first made that observation when in a relatively short period of time two clients decided they’d learned enough with me to go the DIY route. Both of ‘em ended up with a ravaged portfolio in less than three years. It makes me glassy eyed just thinkin’ about it. Good people.

This post says it best when advising investors to look to pros when it comes to their overall plans and the strategies used to make them happen.

Reply

Angie April 15, 2013 at 8:17 pm

Any suggestions on how to find a rock star real estate agent? I expect one to dig up details on the properties I’m interested in and make recommendations concerning the location and current rental market for starters, but the two I tested the waters with today (after being assured they are experienced investment property agents) merely sent me current MLS listings. How disappointing.

Reply

Erion Shehaj April 16, 2013 at 4:40 pm

Hi Angie

I feel your pain.

Unfortunately, the only way to find a great agent is to seek out referrals from people in the area (investors, acquaintances etc) then talking to a few to see if they’re the real deal.

What part of the country are you looking to invest in?

Reply

Angie April 16, 2013 at 5:26 pm

I’m investing in Maryland. I have looked into attending a meeting or two at a local real estate investment group. There is one close by that seems fairly legit. I know networking is important as a new investor, but I’m concerned about connecting with the right people. Do sharks loom in the waters at these events? …probably a topic for another discussion. Thanks for your help, Erion!

Reply

Erion Shehaj April 17, 2013 at 7:52 am

Sharks have been known to loom those waters but some great resources have been sighted too. The trick is to figure out which is which. :-)

Dale Bowrin October 2, 2013 at 3:55 pm

I totally agree with your article. As a licensed real estate broker and an investor (based out of NY) I always utilized the services & knowledge of brokers especially when investing in other states. Currently I have several cash investors that I’m working with in NY and they too are amazed by the benefits of working with a broker, after all I work at no expense to them.

Thanks

Dale Bowrin

Reply

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