Looking for a new realtor, maybe...
So recently I backed out of a property that I had under contract and I'm not sure if I made the right decision. I'm also not sure if I should be pointing some of the blame at my realtor. But this situation has brought to mind the possibility that maybe I should be looking for a more experienced realtor who knows the Phoenix and great Phoenix markets, who is investor friendly, who is more experienced, who has more time, and who can advise me better on deals. My current realtor just got his license and although he works for a very well known and established firm here in AZ (part time), and he was a rental property investor back east for some time, he is new out here and he doesn't really strike me a "go-getter".
The deal I backed out of was a 4-plex that was going to cash-flow about $700/mo total net (without any rehab or rent raising, which I could have done). After some thinking about that deal now I'm starting to question whether my realtor did me wrong. The property inspection showed some mold in one of the units but we weren't sure how extensive it was. Apparently it was due to a pipe bursting (the property was built in 1979 and hadn't been upgraded that much). The lady who owned the place didn't put much money into it at all (besides A/C units and a roof years back). Anyways, I keep thinking to myself, "Shouldn't he (my realtor) have recommended and/or mentioned for me to just buy the place, rehab, and raise the rents since there didn't seem to be that much that was needed?" Since it was my first deal I was uncertain (i.e. - I was on the fence). The lady next door was doing just that with her 4-plex (bought from the same seller) but the inspector told me not to do it (because it was a "ticking time bomb"), though I wasn't sure about his assessment since there didn't seem to be a ton wrong with the property. He did mention that the foundation was "settling" and that some rooms in the units were sloping but it was all stucco construction with all tile inside.
That being said, I'm having second thoughts about my realtor. What qualifications should I look for in a realtor? Are you a realtor who is interested in helping me with my deals and/or find great deals (including off market deals)? Are you a go-getter who is sharp, experienced, and who is currently making money from cash-flowing rental properties? If so, please inquiry within!
Thanks all!
For what it's worth, a lot of properties in Phoenix have settling. There are very few properties I've seen where it's bad enough to need extensive work.
For the mold too, there are quick fixes where you can get rid of it and have the air tested for a fraction of the cost of what the mold remediation companies will charge (And they're just doing the same thing you would be)
Realtors are there to advise you but ultimately you shouldn't expect the realtor to push you into buying it. If you experienced issues down the road you would be on here blaming the realtor and saying how the inspector cautioned you against it, but the realtor told you to just buy it.
You have to get comfortable making these decisions on your own I guess is what I'm saying. Take all the information you can from the realtor / inspector / contractors and decide whether it's going to meet your needs or not.
In terms of looking for a realtor though, I will say that there are pros and cons to working with experienced vs. inexperienced.
Inexperienced realtors may take some coaching and won't be the greatest at negotiating right off the bat. However, you will likely be one of their better clients, so any deal they do come across is going straight to you.
Experienced realtors will have the coaching and the market knowledge down, but there will be a pecking order. An investor that has bought 10 deals with them and who they know is a solid closer is going to get the great deal before a newbie they've never worked with before who may back out at the last second.
Gotta weigh the pros vs. cons of both
@Aaron Lietz all of the multi-family deals I do around town tend to have lengthy inspection reports. It's really a combination of factors: more systems in a fourplex (4x ACs, 4x appliances, 4x bathroom fixtures, 4x kitchens, etc). It's also totally expected that non-owner occupied investment properties have some degree of deferred maintenance. After all, tenants can be tough on properties and the landlord/PM is only there a fraction of the time to see the issues and make repairs. I advise my clients that they need to be prepared for this reality, and then I do my best to negotiate repairs/credits/warranties on their behalf.
You didn't mention it, but I'd be surprised if your agent didn't encourage you to at least negotiate some repairs or credits with the seller. EVERYTHING in real estate can be negotiated. I personally would have only cancelled if the seller was unwilling to negotiate and I deemed the repairs too difficult/costly in relation to the acquisition price.
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Real Estate Agent AZ (#SA661174000)
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The seller was extremely difficult to work with, and not a very nice person. We would ask for things like documentation showing what kind of work she had done to the property and she wouldn't get them to us for over a week sometimes. We would then have to send a "cure" notice, etc. And even when she did get the stuff over to us it was hand written! No receipts, no nothing. It was like she just had a tenant do the work on the cheap (no contractor, no handyman, nada).
The property was in Casa Grande and I have heard there is going to be a huge theme park going in there (i.e. - big growth). So I was looking and had found that property. It wasn't the greatest neighborhood/area though. I know there will be other opportunities. It was just very strange. Something wasn't sitting right with me and I couldn't put my finger on it. I kept thinking to myself that maybe it was my newbie realtor that wasn't making me feel that comfortable. I'm still not sure but since my current realtor is both new with his license and is new to the AZ valley (combined with the fact that he currently does not own any investments properties here) I was just thinking maybe it's time to find someone better who is doing it full time.
@Aaron Lietz It may or may not have been a good deal. It all really depends on the numbers and the strategy that you want to use.
Before purchasing the property, it’s really important to run the numbers correctly. There are always unforeseen events that occur with a property but that is to expect. So as long as the realistic numbers make sense, and you have a reserve account, then buying the property will help you get into the game and there is a lot of learning that comes along the way.
Aaron understand that until a project is actually being constructed a lot of what is proposed for commercial development is just talk. Even then the project can stall if an economic downturn happens for many years or even a decade. So it is critical on those type of projects to see where it is in the process and WHO is backing it to completion and the different tranches of debt and stages for funding.
I used to do commercial assemblage for developers when I first started out over a decade ago and there are many steps and pitfalls to it. Lot's of projects get planned and hyped up because the city or county councils and boards want to get the communities behind them. Very few actually materialize and become a reality.
You mentioned specifically an experienced broker with LOTS OF TIME and EXPERIENCE. Those 2 things do not go hand in hand. Experienced brokers and agents can struggle to find enough hours in the day to service their clients because they are in so much demand and business is growing so much. Constant upgrading of systems and structure can be put in to help manage the business growth.
It appears right now you might be more green with the buying process. That can take a lot of time for a broker. I do that on the commercial retail properties side but my clients are buying multi-million dollar properties and can keep buying because of their deeper pockets.
Experienced brokers for the product you are seeking tend to have all cash buyers and do lot's of volume. Many would rather go back to that same well over and over again and do a property hand off to their cash buyer and it closes quickly. That buyer has their own DD process because they have been doing it so many years already. This agent you are working with likely has a split with their brokerage so they probably only get a marginal amount of commission.
Sounds like your inspector said "This place is a time bomb". You decided you didn't want it and the agent complied with your wishes.
I'm not going to override your inspector on condition. That's why you hired him, he is your "condition expert". You received counsel from him and you wanted the agent to act on your wishes. Going back and saying he should have convinced you to buy a property that a professional called a "time bomb" would be something I expect out of a agent looking out for themselves and just a commission check. You have to decide if a deal is right for you, agents can point you to stuff that fits your criteria, show you off market gems that may or may not be perfect for you. In the end you have final say on what works for you. If you want someone to push you into an investment there are plenty willing to spend your money.
Just my 2 cents.
Those new to the business of real estate as agents tend to be HUNGRY for any deal. So not always but a lot of times they are willing to sell anything to anyone because that need that closing TODAY to pay their bills and survive. I am not going to debate the ethics of it or what one should do but it's just the reality as about 90% of agents do not survive the first year in business. After that about only 20% of the remaining 10% that survived the first year make it past 5 years.
Those that do make it full time can do very, very well for themselves. The brokers and agents have often by then built substantial investments and reserves to where they do not have to (live off the deals) anymore. With the pressure off financially the broker/agent can spend time and really look out for the buyers interests more and not struggle with needing the closing today and thinking about having to SELL the buyer something immediately.
Now another item however is that now that the broker/agent is very successful and established they likely have a polished and well defined business model. So they tend to be much more selective in what type of buyer they work with which eliminates a lot of potential buyers that are flaky, indecisive, no integrity, working with multiple brokers/agents at a time, etc.
So what is a new buyer to do that needs help? Don't be afraid to approach an established broker/agent but have a thought out plan up front and ask if a long term mutually beneficial relationship is possible. Ask for what you need and if the broker/agent can meet that requirement. If they can't it is understandable. Some buyers new to a space with limited funds might have the hard task of finding a newer agent with lots of time but has integrity where they grow together over time versus the ones just selling them something in the moment.
I have clients worth millions to over a hundred million that are individuals. I look at the relationship as a lifetime one where we both prosper and achieve goals together. Maybe if you attend an real estate investor chapter local to you then you might find an investor who wants to get together for lunch or dinner and share notes. You just have to get out there, try things, and see what happens.
It is NOT your Realtor's job to give you investment advice, in fact, he could get into a lot of trouble with his broker if you decide to complain or sue him for bad investment advice!
It is considered out of his purview as an agent to give investment advice.
It is YOUR job as an investor to do your own due diligence. YOU need to know what you're doing.
And if the home inspector says the property is "a ticking time bomb", LISTEN!!! ;))
That advice is within the home inspectors purview and expertise!
Yes, you should definitely hire an investor/agent, they'll speak your language and can empathize with you.
I run the investment numbers on properties before I suggest them to my clients so that I know whether they're a good deal or not or what is needed to make them a good deal in terms of negotiations...which IS within my purview as an agent.
But don't expect your agent to advise you on investment matters unless of course, they're also licensed, financial advisors! ;)
Good luck Aaron, cheers to your prosperity!!