I get the ethics involved with the realtor industry. So, do most investors have more than one realtor or just one? If one, at what point do you move on from that one?
I have one now. He is not an investment realtor, but I have used him for my personal residence purchases in the past and he did good. So, I thought I would try him for my first investment property. I sensed trouble when he showed me a calculation if PITI versus rent and I'm cash flow positive. Well, that's not true because there are other expenses like vacancy, maintenance, and other variables.
He gave me a ton of listings (week one) to educate me on neighborhoods. I did my boots on the ground homework (week two) and got smarter. Then, he recommended to send me all new MLS listings (week 3). I said no, send me listings that will cash flow. If I'm going to pay a commission then he should work a little bit for it in my opinion.
I have yet to see or hear anything since then. To be fair, it's only been four days, but I am pretty sure in my area there are oppurtunities. I am not trying to rush the purchase, but I am finding myself doubting if I made the right decision. He has never done anything wrong and always had my best interests at heart. But, I fear this May be out of his league (especially when I talk about the 50% or 2% rule and he's never heard of it).
Anyway, just soliciting input form the BP community.
Thanks as always
"Send me listings that will cash flow...he should work for it". That's your decision, and what parameters you want to use. Finding properties for possible rehab is one thing, you can plug in a $/sf for a neighborhood. But wanting the agent to look at each different property and figure out if it cash flows, is a bit much. Good luck finding multiple agents to do that for you.
I have worked with 3 great agents in 3 different cities. They all send me the mls in my parameters and "I" run all the numbers. Personally as an investor That is my job not the agents. I personally believe that attitude is going to make it hard to find an agent to work with you!
That's why I asked the question.
I do that for clients with special software I use but it's commercial real estate and my deals tend to be 2 million and up on average.
Bryan are you trying to buy value add rehab and flip or a buy and hold rental??
To expect an agent on small properties to do that might be a little much. Are you paying all cash with your bank account money, hml for flips, or some down for a regular buy and hold loan??
My clients trust me on the commercial side but we work as a team and go over everything together. It helps that I am a principal broker, only do commercial real estate investments, and I am an investor myself. preservation of capital and buying right is key to long term success.
I think your agent sounds like they want to help but lack the experience to do so.
A newbie investor and a newbie investor agent is trouble.
Buy and hold for passive income. I understand I might be asking a little much. My conservative side demands more when I am not confident in the abilities with someone I'm working with. Anyway, thanks for the advice.
I would look for a broker/agent that understands investments.
It's kind of like a contractor that builds you a great deck outside. So you call them next time to redo your kitchen. They are a contractor but it doesn't mean they have the skills to do a great job on your kitchen the same way they did the deck. They might be able to do both but to assume they can is when problems happen.
@Joel Owens my thoughts are the same. I appreciate the feedback.
@Bryan N. it's hard to find a real estate agent who understands investment property variables and cash flow. It comes with direct experience. I don't know what your criteria are, but I would try to be as specific as possible with your agent. He sounds like he's trying to help, and it's valuable to have MLS feeds and work with someone you can trust.
I've worked with local agents who aren't investors, but they know my target neighborhoods extremely well. They can tell me the neighborhoods that sell faster, common red flags (flooded basements to stucco issues), the features and upgrades that most matter from a renter/buyer perspective, etc. In short, they have great local expertise.
Be specific with your realtor, but don't waste his time or burn your bridges. As another approach, find a realtor who's an investment property owner. But I wouldn't string your realtor along if you go that route.
I wrote a post on the topic based on my own experience - this might help: http://beta.biggerpockets.com/blogs/4518/blog_posts/33002-how-to-find-an-investor-friendly-real-estate-agent-part-1-of-2
Have you & or the Realtor targeted a specific city or neighborhood?
Have you both targeted what a specific product will rent for?
For Example a 1200 sq ft 3 bed home with neutral decor will rent for x amount of dollars.
After you have figured out the rent and the product you want, factor in the 50% rule and then set the auto MLS search parameters for a low enough price point that it cash flows.
@Bryan N. - This is something I have struggled with myself. I am in Los Angeles, so the market is a bit different, I assume, but the issues are similar.
I have one agent who sends me good deals and a lot who send me crap. But I am happy to have anyone send me stuff, and I have made it clear I am not working exclusively with any one agent, but will buy from whomever brings a good deal. If I find it myself, I will usually use the listing agent. In any case, the seller is paying the commission, so I am not worried about how hard the agent is working.
I think it may be a little much to ask an agent to run financial calculations on a property, but maybe you can give a simple rough calculation for him, like a gross rent multiplier ceiling ("I don't want to buy anything that has more than a 8 GRM" or whatever your limit is). That is a very simple calculation for an agent to do and doesn't involve any estimation of expenses.
Then you can take this filtered list of properties and run a more in depth calculation and figure out if anything is good.
Finally, I don't think there is any harm in letting other agents in the area know that you are a buyer and that if they send you something good, you will move on it - if that is in fact true. Tell them you don't need an automatic MLS search, you already have that, but if they want to send you individual listings, you will definitely take a look, and with them, you can be very specific about what areas or what qualities you want.
Good luck, and I will be interested to hear what happens.
As an agent, I run preliminary numbers in an attempt to filter out the garbage. Each of my clients understands that in the end they must run the numbers and see if it works for them. It takes time for an agent to go through listings and run calculations on each one. @James Wise gave some good advice to narrow down the search. You may want to find an agent who invests in rentals to assist you. Before I became an agent, the agent I used was an investor-agent who solely focuses on investors. I took the same route to become an agent, invest, and assist other investors.
I understand the difficulty. For years i worked with agents who would push the appreciation as part of the reason to purchase (during the boom) i explained the numbers dont make sense and i am a buy and hold guy... I found it very difficult to find an agent that understands that. Basically what i did was create relationships with a few agents in different areas that i am interested in. I gave them the basic idea of what i am interested in. Essentially don't send me ... or many times i will say look out and high light for me a property that may scare others away and is priced accordingly or a property that seems to be priced a certain amount below market. Also to some to simplify it ...keep me informed when some thing new comes on the market just in a price range. But i dont expect them to run numbers and i dont mind getting auto send from the mls but i do hope if something pops up they contact me and say hey this may be something good for you.
Like others said give them as much info as possible but at the end of the day you dont want them not sending you something because they dont think its a good deal and you may have thought it was so better to get more properties sent to you.
@Bryan N. I recommend looking for agents who are BP members. They are more likely to understand the same real estate calculations that you use to evaluate deals. As a BP Pro member, you (and/or your agent) is able to evaluate potential deals and create a PDF report that can be given to a lender. DISCLOSURE: I am a BP PRO member and a real estate agent. I would bet that my investor clients (some are BP members) would agree.
I'm a Realtor and an investor, so from my perspective it doesn't matter if the agent is experienced in investing or not. I actually think a new agent will work harder for you as he/she doesn't have that many clients and they are more eager to learn.
And the agent should definitely do the numbers for you!
The key is to sit down with your agent, go over all the things you want him or her focus on and create an excel spreadsheet together. This way preliminary evaluation won't take much time for your agent and you'll be only getting the deals that pass that first stage, so you don't waste your time.
And never work with multiple agents in the same area. It's not only unethical but als bad for business in a long run.
Just want to say I am using a computer at work and the browser is outdated. So, I am not sure if the "mention" feature is working because it does not show up in the browser.
***Pretending to work while BP'ing is so satisfying.
He does know the areas and I would never string someone along. Time is a valuable commodity and I wouldn't waste his.
I gave specific areas and cities. As for targeting rents, I was handed a year’s worth of data on what other properties rented for. He admitted he would have to learn what properties rent for in areas. I am confident he will learn that. I also will use a property management service in the area to verify the rent amounts.
I did ask him today to go ahead and send me the MLS listings. I never asked to run all the numbers. I asked him to only send properties that would cash flow. So, he should be able to run basic numbers and filter. Of course, if the listing lies about expenses etc that is not his fault if ends up being incorrect after I run everything.
"As an agent, I run preliminary numbers in an attempt to filter out the garbage. Each of my clients understands that in the end they must run the numbers and see if it works for them. It takes time for an agent to go through listings and run calculations on each one” 100% agree.
I agree; I don't want him “not” sending me listings.
They may not like me after this forum :)
Just having fun with that one, but thank you for the advice.
I have sat down and gone over the numbers.
At the end of the day, I do believe he will represent my interests well. I can run numbers and figure out if the deal is worth pursuing or not. He checks the MLS daily to see if anything meets my criteria. I found out today that he is running rough numbers for cash flow (solved one problem). I asked him today to start forwarding the MLS to me.
I may not have conveyed ALL of my concerns in the initial forum post correctly. Running numbers is being done it just wasn’t communicated to me that it was being done (so that is solved). Additionally, I am skeptical if he is connected enough (to the investment property world) to find the investment deals that an investment agent might find. There are agents here that market to investors. That’s another reason why I asked if it is OK to utilize another agent to bring in more leads or the correct leads.
I second what Ewa states, working with multiple agents in the same area wouldn't give you priority status especially with an experienced agent. I would advise what other have mentioned find a investor friendly agent. We are out here and would be more versed in what your looking for but we are not doing all the work for you, and with a traditional agent you can forget it.
Thanks and I would never expect an agent to do all the work for me.
I agree with others. Don't make relationships with multiple agents in same area. You might consider having one agent for each geographic area, for instance: one for the north half of city and one for south. Hire the person or persons, let them know what you expect, then give them a chance. Communicate with them if they aren't giving you what you expect...maybe your expectations aren't valid. You should educate and help each other. If, after a reasonable chance, the agent doesn't produce for you then find someone else.
@Account Closed "If, after a reasonable chance, the agent doesn't produce for you then find someone else."
That is what I am doing now. Communications and expectations along with a more well defined area to look at have been clearly established. Now, waiting to see what the results are.
First off, never, ever, ever, ever trust someone's numbers that makes money on the sale whether you do or not.
Most agents don't understand what we do. They sure as heck aren't trained to.
I'm a rehabber so it's a bit different, but I work with plenty of agents. They know I'm a buyer and they'll get two sales if they bring me a good deal. (Me buying it wrecked and me selling it pretty). I have one that I work closely with that I buy and sell most through, but I give my buying criteria to every agent I meet. If you're pulling stuff from MLS, they're all going to have access to the same stuff. The only unethical thing is not making them work for free.
If you're doing buy and hold, I usually just look for the gross rent multiplier to see what's worth looking at, then run hard numbers and check schools and area after that. Anything under 50 usually works around here. (A $50k house that rents for $1k). Expecting an agent to do ROI and such isn't realistic IMO, plus I wouldn't trust their math.
If you tell the agent you are a "cash buyer", don't be surprised to hear something like "almost all properties have positive cash flow when paying all cash" ...
My wife and I position ourselves as investor-friendly agents and as such, we work with several investors who are in this exact same position.
Thinking with my agent hat on, no - I don't necessarily want to work for an investor who is working with other agents that are all working towards finding the investor the exact same properties. There's a limited supply of deals (off and on market) and given the amount of work we do to make our clients successful, I want my investor to trust in us and invest in us as we do in them. This is why we often have our investors sign a BRE (Buyer Broker Agreement) which basically ensures we are compensated for any deals we bring to the table. They're still free to work with anyone they want, but if we bring them a deal, they can't use another agent to close the deal.
On the other hand, I can see the appeal to asking several agents to work for me the investor. For starters, there are A LOT of bad agents. In LA County, there are 10K+ licensed agents. That's about 1 for every 300 people. So if I'm an investor who wants to find a deal, I need to diversify who I am working because the odds are that many of the agents I work with aren't going to get the job done.
OK - so where do I stand? Personally, my investors clients may start with working with several other agents, but over time - the other agents who don't perform weed themselves out and we're the last ones standing.
Also, most of our investors don't require us to do detailed financials to see if the deal works. What we do; however, is find properties that have potential based on comps, our knowledge of the market, and our knowledge of what repairs needs to be done. Basically, we try not to waste the investor's time so that by the time they come and look at the property, they already know the property has potential - it is just a matter of the investor working their own numbers to make the final decision.
@James Wise you wrote: After you have figured out the rent and the product you want, factor in the 50% rule and then set the auto MLS search parameters for a low enough price point that it cash flows.
My questions are: (1) do you mean 50% of gross rents should cover PITI and all anticipated expenses or just PITI?
Friends: do most REI finance their debt service over 10 or 15 years (e.g. Investment grade properties per a typical bank loan life); or do they debt service 20 or 30 years (likening it to a residential loan)?
Yeah, Im not sure I agree w/ all of the work with one agent conversation. What I do think is important (and something a lot of people dont do) is communicate and make sure both parties are onboard with what ever the plan or present feelings are. I think an exclusive agreement is unfair and lots of agents expect that. I work with a couple of agents on more of a "if you bring me something I buy, I will give you the commission." I believe that is a win-win. This might not work out for someone starting out, as they may take up may of the agents time or may not provide the agent confidence in a purchase.
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