First Time Out of State Investor

11 Replies

Hi BP Community,

Hope all is well with you. I'm new to BP and a first time investor looking to do my first deal in Missouri. I wanted to get your thoughts on something as it is rather unconventional to me (due to my lack of experience) and wanted some feedback. 

I've reached out to agents in that area and spoke with property managers, but have received fairly vague answers. Why are agents referring me to property management company that (owns)/have properties in the area that they want to sell to investors and saying to deal directly with the PM company? I thought the normal conventional route would be to get an agent to write offers on the property, rather than going straight and purchasing from a PM company. Would I also need to pay an agent to write an offer or could I purchase directly from the PM company and they get a buyer's commission? The PM company would also be charging a finders fee (if you will) for each property I close with them (for approximately half/one month's rent) for initial efforts and research.

The pros that I see to this would be the streamlined process and speaking to primarily one entity/person, and if I'm buying from the PM company, it would be an obvious route to also hire them to manage the property as a courtesy. The con I see is that this is an added fee on top of purchase price.

Updated over 2 years ago

Completed

Updated over 2 years ago

Thanks for the feedbacks

It's a little strange to have an agent refer you to a PM company but I kind of like the idea because their whole inventory are rentals. Some owners may have some deferred maintenance or problems and be tired of owning the properties. A likely cause is the competitive market and the agent not willing to put in a ton of effort to weed through 100 properties with you and negotiate a good price. But to answer your questions.

1) You don't pay the agent to purchase a property; the seller does

2) Half a months rent (about $500-$1000) isn't much. Just add it into the numbers. It's much less than a wholesale fee.

Additionally, I would not assume the PM company is any good. Due diligence needs to be performed even if the buying process is going smooth.

I invest in Missouri. Property management license holds also hold a real estate license for sale as well. That means every Property manager have a license. So if you want the pocket listings the managers have that. It’s a win for the agent and manager for the agents you’ve had put to the pm. They get backside pay with no work other than the lead. I didn’t understand it either at first. We have bought five complexes this year in Missouri and we were punted from an agent to another one. When I asked why it was because the first agent wasn’t comfortable with the size of the deals. As an out of stater I didn’t see them as big but they did. It’s a great market but strongly different then what we see on the west coast. It’s a different way of doing business but surprisingly this works. 

@Frank Geiger Hi Frank, thanks for the feedback! Could you clarify what you mean by "you don't pay the agent to purchase the property; the seller does"? Wouldn't I (as buyer) need to pay a ~3% commission to have the buyer's agent to write the offer? I get that the seller will also be paying the selling agent as well.

@Nigel Guisinger Thanks Nigel for sharing your experience! Based on that, would the fee structure for the PM be the finders fee + acting as the seller and buyer's agent (~6% commission)? It was strange for me to keep getting punted...from agent to PM companies.

@Joey Ly the agents are probably referring you to a turnkey provider. My guess is because they don't want to work with investors who typically are looking to throw what they call "lowball" offers in. In KCMO, it's very difficult to complete traditional BRRRRs in solid B areas. A lot of owner-occupied buyers here bidding prices up. Therefore, they're probably sending you to a company with inventory. Just my thoughts...

@Logan Freeman Thanks Logan! I think that's probably exactly why. I am indeed looking for more-or-less turnkey properties with little to no work and can be occupied immediately. It was just weird since my friends have invested in the area through an agent but I'm the only one who has been referred to PM companies.

Originally posted by @Joey Ly :

Hi BP Community,

Hope all is well with you. I'm new to BP and a first time investor looking to do my first deal in Missouri. I wanted to get your thoughts on something as it is rather unconventional to me (due to my lack of experience) and wanted some feedback. 

I've reached out to agents in that area and spoke with property managers, but have received fairly vague answers. Why are agents referring me to property management company that (owns)/have properties in the area that they want to sell to investors and saying to deal directly with the PM company? I thought the normal conventional route would be to get an agent to write offers on the property, rather than going straight and purchasing from a PM company. Would I also need to pay an agent to write an offer or could I purchase directly from the PM company and they get a buyer's commission? The PM company would also be charging a finders fee (if you will) for each property I close with them (for approximately half/one month's rent) for initial efforts and research.

The pros that I see to this would be the streamlined process and speaking to primarily one entity/person, and if I'm buying from the PM company, it would be an obvious route to also hire them to manage the property as a courtesy. The con I see is that this is an added fee on top of purchase price.

 Sounds like the agents you contacted aren't in the rental business. They probably don't want to deal with you or other investors. Very small subset of licensed agents work with investors, most focus on traditional residential real estate. Odds are good that those who do focus on investors are working at brokerages that have a Property Management Division. Those are the folks you want to speak with.