What do I make of what my realtor is telling me? Is it normal?

29 Replies

I have been speaking with a realtor for a few weeks now; she was a work colleague's recommendation. We get along well and she is very professional but I'm not exactly sure what's happening here. 

She offered to get together to meet for the first time, we did, we talked for a few hours, and she has forwarded me MLS listings since. She is very familiar and knowledgeable about REI, even recommended neighborhoods that I had already heard great things about. All this is well and good.

However, I'm not sure if she's actually working for me or not, as strange as it sounds. She has been a great mentor, yes, but what constitutes "working" for me? The reason I ask is because she won't straight up tell me cold, hard facts or information. She won't send me properties to consider, just "clues." Is this normal? 

What's happening is I am trying to evaluate deals with the MLS listings (dozens at a time), and then when I send her a property that looks promising, she gives me mysterious replies like, "You're getting closer..." What does this mean? It reminds me of a teacher who wants me to find the answer for myself, rather than simply telling me. But is that what's supposed to happen?


Is this normal? I'm not trying to disrespect her time or make more work for her, I simply don't know. Is it "bad form" to want your realtor to just lead you directly to properties that match what you want (in this case, cash-flowing and in my price range)? 

I have no problem evaluating deals myself but she seems to hold all the information -- she knows what expenses are for that area, what places will rent for, what makes a low but competitive offer, etc, but won't tell me. I'm just wondering why such mystery. What am I expected to do and what portion does she do?

First thing I can think of is her being hesitant to tell you "cash flow" or expenses because if she doesn't get them correct and you end up with a bad deal, the blame could be on her. Are you finding properties, running your numbers and then asking her opinion? The best thing to do is discuss your expectations and hers with each other...

@Brian Pulaski Thanks for the quick reply. Yes, I've been finding properties and then asking her opinion to which she has given the mysterious answers I mentioned. One of my main issues is that I'm not completely confident on those numbers (since I'm working with ranges) - so I've just been running as conservative numbers as possible. I think she can help me refine my ranges so that they're more accurate, since she's familiar with the neighborhoods. But she isn't really answering? She only replies every 3 days or so, with just a couple of sentences. I have no idea if this is normal or not. Again, not trying to make more work for her. It just seems odd that I should be guessing the numbers in my evaluations when she knows them from years of experience and can tell me where I'm right or wrong?

DC folks (east coast in general) tend to be much more formal/by the book on contracts/legal type things. It's most likely she doesn't want give you a number rather she would comment on numbers YOU provide.

This is probably so she can stay within her role of a agent and not get herself into trouble by giving advice/numbers/promises etc outside her authority.

Also agents are busy and don't have time to deep dive everything.... It tends to work better with specific questions.

Example 

Do you think house (mls#) could rent for (price range) 

Vs 

What's the typical price range for 2bd 2ba in zip code 1234...

Use hotpads/Craigslist and prop mgmt company to fine tune rents...not an agent.

if your going to buy rentals this is very vanilla basic real estate.

you need to not rely on others to give you market rents.. ( call a PM if your curious) or look at the adds in the paper or on line.

then its just all working it backwards you should already be pre approved for a loan.. no reason to even look if you dont have that in hand.. most realtors ( my wife included) wont work with a client without a pre approval form a trusted lender.

do some of your own work and research this simply is not that hard..  the realtors are not your investment advisors.. 

talk to your CPA as well.. so on and so froth educate yourself.

@Matt K. @Jay Hinrichs Thanks for the thorough answers. I'm definitely running evaluations myself, I think my confusion comes in the ranges I've been using, which I have gathered from all the sources you've mentioned. Using the upper versus lower bounds of these ranges seems to give me wildly different results in the calculator, leading me to many "potential maybes" -- so many that it seems like too much to ask for her opinion on. For example, simply adding $50 in rent per bedroom or estimating $1000 more per year for maintenance can completely change my outcomes. Not to mention knocking $10,000 off the price of the property. I don't know if those substitutions make sense or not. I realize this is beside the point, but that's what I was looking to her for clarification about.

Originally posted by @Jared G. :

@Matt K. @Jay Hinrichs Thanks for the thorough answers. I'm definitely running evaluations myself, I think my confusion comes in the ranges I've been using, which I have gathered from all the sources you've mentioned. Using the upper versus lower bounds of these ranges seems to give me wildly different results in the calculator, leading me to many "potential maybes" -- so many that it seems like too much to ask for her opinion on. For example, simply adding $50 in rent per bedroom or estimating $1000 more per year for maintenance can completely change my outcomes and I don't know if those substitutions make sense or not. I realize this is beside the point, but that's what I was looking to her for clarification about.

 you never will know till you own it and run it. your can run all the projections and models you want.. but each property is different all it takes is one lousy tenant to do 5k in damage and not move out for 6 months then where are your projections..  this is real world.

for me you either have high touch rental area and use 50% of gross rents for running cost and back out mortgage from the other 50% or you have 40%... in easier areas.. you do better great and if you do worse you bought a lemon..  no way to protect yourself 100% if your looking for that then you should look at notes or syndication or some other form of investing not owning rentals..

@Jay Hinrichs What happens to me is sometimes I will evaluate using the 50% rule as you mentioned and the property will be cash flow positive. But then I'll evaluate using the more specific Baltimore area numbers I've gotten from other investors and it will be negative. That is being conservative. But tinkering with the monthly rent, purchase price, and maintenance numbers even a little bit (all still within the ranges given to me) yields both positive and negative cash flows depending on what I alter and so I don't know which of those adjustments are "right" to make or not.

There is no right or wrong. Life is not the end result of a calculator. Youve got a better chance of making money though in DC and its suburbs than you do in Baltimore. DC is forgiving on mistakes while Baltimore is not.

As a REALTOR, I don't get the cryptic stuff your agent is doing/saying.  I set expectations up front to make sure we're on the same page and discuss my communication and work style too (I'm very direct, its a NY'er thing, and that doesn't work for some people.)  I share whatever real estate facts/historical data I have with a client and avoid speculation AND offering opinions in areas outside of my expertise (but I will tell you where YOU can get the answers.) So, if you're not getting basic real estate info from this agent in a timely fashion, it may be time to reset expectations...or move on.

@Russell Brazil Thank you, Russell. What confuses me about your reply is that I thought the whole idea in learning about REI is evaluating deals. I've read and heard that over and over -- evaluate hundreds of deals. So, I am trying to do that every day. But my evaluations lead to various results as I tweak numbers while still being reasonable. If there's no right or wrong, then what is there? How does one know what makes a good deal, or a property worth buying, when the calculations can change significantly with slightly different information?

I dont need to know anything beyond what the property costs, where its located,  and what the rent is to know if Ill buy a property. No property ever performs to the proforma. Some come out way worse than you expect, some way better...rarely does a property perform as expected. The numbers always lie.

Thats why owning multiple properties helps to spread your risk out just like owning multiple stocks spreads the risk out in your stock portfolio. 

But several properties with either enough free cash flow, or in strong rent growth areas so the free cash flow grows over time and you should be ok. (Unless its in an area that requires expert knowledge like Baltimore. ) People get slammed in Baltimore because they dont know what they are doing. A $50k Baltimore property carries aboit 10 times the risk of a $500k DC property.

Originally posted by @Jared G. :

@Russell Brazil Thank you, Russell. What confuses me about your reply is that I thought the whole idea in learning about REI is evaluating deals. I've read and heard that over and over -- evaluate hundreds of deals. So, I am trying to do that every day. But my evaluations lead to various results as I tweak numbers while still being reasonable. If there's no right or wrong, then what is there? How does one know what makes a good deal, or a property worth buying, when the calculations can change significantly with slightly different information?

 You should operate in a range... The better you understand the market the tighter your range.

Maybe your range is 1500-2k...then 1700-2k then 18-2k... Then you adjust to fit you goals.

Also buy based on condition of property, maybe it's worth paying more for something if it'd cost you less than doing it yourself even if it's a few years old. This might seem obvious but some people over look it.

But when it comes down to it you should have a min/max. Min should be lowest rents you'd be happy with and max being the most you can qualify for in a loan. Then you can tweak as needed to adjust to your refined goals...

Originally posted by @Russell Brazil :

I dont need to know anything beyond what the property costs, where its located,  and what the rent is to know if Ill buy a property. No property ever performs to the proforma. Some come out way worse than you expect, some way better...rarely does a property perform as expected. The numbers always lie.

Thats why owning multiple properties helps to spread your risk out just like owning multiple stocks spreads the risk out in your stock portfolio. 

But several properties with either enough free cash flow, or in strong rent growth areas so the free cash flow grows over time and you should be ok. (Unless its in an area that requires expert knowledge like Baltimore. ) People get slammed in Baltimore because they dont know what they are doing. A $50k Baltimore property carries aboit 10 times the risk of a $500k DC property.

 fine minds think alike.. its all big numbers and then your skill in management and picking the right area will fill in the blanks.. there is no way to proforma these rentals down to a tee to make a micro decision.. simply not possible.. bad winter... bad tenant.. state raises prop tax's  new bond issue who knows what..   USE big numbers then do the best you can to do better.. its really as simple as that

@Jared G. - having read this thread, I'll share several thoughts:

1. Lots of good advice, particularly from @Jay Hinrichs . One of the best parts of BP is learning from others as they respond to questions!

2. I'm from Arlington, if your agent doesn't meet your needs, PM me and I'll provide a list of capable agents. That said, I agree with @Matt K. 's assessment. A friend who owns a brokerage up there used to never give a direct number, always a range. What's not good is the several day lag before responding. A good agent needs to be more attentive.

3. Not sure what you meant by "Baltimore area numbers"...care to explain?
Keep in mind that those are 2 very different cities. One is good for cashflow (DC will never beat Bal'more) and the other is much more steady, significantly less risky and considerably more expensive (DC area). I never mixed the two. Unlike Russell, I wasn't afraid of Baltimore....hell, I remember once looking at a gorgeous place on Federal Hill for under $300k that would have been $800k on Capitol Hill. Not all Baltimore is slum (maybe just 80% of it). 

4. If you're running numbers in DC and frequently getting positive cashflow, you might want to check them again. Prices are such that breaking even is not so bad. Or are you buying in Anacostia?   

@Jared G. , I have 2 points: 

1.) Yes the cryptic messages from your realtor are strange, maybe do a little more background checking on her before you move forward.

2.) Take pride in your investing, because in the end, the realtor is going to do some of the work for you, but in 20-30 years that property/rental is going to be in your portfolio.  So like many have said on this thread, educate yourself, and then when you have good specific questions ask the realtor for their best possible advice, and then EDUCATE YOURSELF MORE!  IF you want to scale this business you ultimately have to bet and invest in yourself and that begins with the education piece!

Good luck! 

@Jared G. It would be best, as others have suggested, if you ask your agent for specific information.  For example:

- What are rents for 3/1 MFR units within a half mile over the last 12 months? (I can answer this in a few minutes)

- What are similar MFRs in similar condition selling for within a half mile in the last 12 months?  (This might take 20 minutes, depending on how much data is out there). 

I'm more than happy to do that kind of work for my clients. 

What I will NOT do is to answer questions like:

- What's the rehab budget?

- Will this property cash flow?

- What's the NOI? ROI? IRR?

- Do I need a building permit to ...?

- Is this a load-bearing wall?

The basic principle is that Realtors must not practice outside their training.  Questions like that second group are a fast track to getting sued.

Just because I have E&O insurance doesn't mean I want to use it.

There is a difference between being a real estate agent and actually knowing how investment works. 

Big percentage of the regular agents either don't know the details of investment analysis or they don't want to give you information that might turn bad and you will blame them for it.

If she exactly know Baltimore she should be giving you  more explanation than just "you are getting closer". In Baltimore where a block matters, you are getting closer doesn't mean anything to me :)) 

Also, you might be asking too many questions to buy a 70K house, and she might be sick of it. At the end of the say she might be just wasting her time, so she might not believe you will be buying a house too.

I don't know which scenario works here, but I personally never wanted daily MLS listings that has nothing specific for me,so I became an agent.

I see alot of good advice here, and will add in my own 2 cents. 

Unless a property is already rented out and you are buying it with tenants in place and set rents established your agent can only give you ranges. The rental market can fluctuate easily and quickly, so she can't give you exact figures on rents without setting it up for possible failure. 

There are many factors in what a property can rent for, so until it is rented you can only work with 'potential' numbers. You can't expect her to give you hard specific numbers as narrowed down as adding $50 per bedroom.  If your asking her those kinds of questions your asking her to predict the future basically.  So without seeing exactly what your asking her for, it sounds like the kinds of questions your asking are ones that have fluid answers. 

Also, do you have a timeline to buy ? If your just using her for information and don't have a set time frame (such as within the next 3 months), your not going to be a priority for any agent. They have people that need help now and are looking to close soon in the immediate future. A good agent is busy, and if your just running scenarios by her she might not have time for that. 

Have you actually seen any properties yet ? Looking at paper scenarios isn't enough. Go out on weekends and tour as many open houses as you can and have conversations with those agents. A more experienced investor can work off paper scenarios, but if your starting out you need to see what that housing looks like in that area. 

Only you can decide if a property is a good investment for you. You are confused about what the role of the realtor is.

@Jared G. Who knows? Maybe it’s just her style? As for me, maybe you’ll find this odd, or refreshing; I tell my clients which deals they are going to buy and for how much without their input. As a seasoned pro agent who actually owns property, I know what works and what doesn’t so I sit down with clients understand who they are and they’re desires, we define an investing strategy that suits their skills/mind/etc, and then I go to work and bring them a few deals on the market now and they buy those. If they don’t, I don’t work with them. Just get real with your agent. She ain’t going to earn a commission playing footsy and you won’t make an equity happen if you don’t. Go get em!

I'm a newbie, and I wouldn't be working with someone who responded in that manner. There are better ways she could phrase things: "I can't say for sure, but this is what I tend to see..." "I'm not 100% certain, but in my experience, houses in that neighborhood sell in the ____ range..." 

Not only do her answers seem strange to me, but they almost sound condescending. 

Try asking her yes/no questions that don't give her much wiggle room to be vague. And start looking for a member of your REIA to mentor you rather than an agent, ESPECIALLY if she isn't an investor herself.

Wow -- great answers from everyone. I really appreciate it. I think (to answer almost all of you) I'm getting paralysis by analysis in a way, because I've heard and read about all the little things that can go wrong. Or, to not be as pessimistic, all of the little things that can make a property cash flow negative. I'm weary because I feel like one simple miscalculation can completely change an evaluation.

@Jared G. Honestly, it sounds to me like your realtor feels like she could be making more money putting her efforts towards other things. I would never let a realtor (or anyone) make my investment decisions for me anyways- I would figure out what's missing from your deal-analysis skills and learn up a bit more. Then you could just look at the MLS feed you're getting from her and jump on a deal when you're ready.

Simply put, once you know which submarkets and asset classes you're willing to invest in.... it really comes down to three things for me- income, expenses, and condition. 

Or just get online and contact the listing agent to do your due diligence directly. That's my approach, but I would make sure you have adequate knowledge of the market, properties, and what you're looking for before doing that.

Thanks!

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