Posted over 5 years ago

Buying an Investment Property? Find a Real Estate Agent that Understan

According to the Association of American Realtors, more than 90% of all real estate agents in the United States specialize solely in finding residential properties for buyers to live in. Home buying makes up the majority of the real estate market, so it is no surprise that most real estate agents enter the profession to help home buyers with their particular needs. For investors, however, using a real estate agent that doesn't understand the vagaries of investment properties can be a nightmare. Investment real estate requires a quantitative approach to property selection, a pragmatic attitude towards financing, and an aggressive negotiation skill that most standard real estate companies lack.

Experience with Investments

Your realtor needs to have practical experience with investment properties, since the buying and funding process is considerably different than the process for residential homes. It helps if your real estate agent has been active in their own real estate investments as well – since they will be especially attuned to the financial considerations unique to investors.

Aggressive Negotiating

In traditional real estate, a family puts an offer on one home at a time – usually after a significant time investment in determining whether the home is good for them. In investment real estate, however, the buying process is rapid and accompanied by little emotional fanfare. An investment real estate agent should be prepared to send dozens of offers – sometimes within the same day – and they should fight tooth and nail to secure the lowest purchase price possible.Since low purchase prices are vital to protecting the slim profit margins of real estate investors, your investment real estate agent will face plenty of rejection before they break through with a deal.

Transparency

As an investor, you need the “complete” factual picture before you make a buying decision – and emotional components of your purchase can't get in the way of your financial statement. Your agent should be completely honest with you – explaining their approach upfront and being realistic about their experience with investment properties. If your real estate agent doesn't feel comfortable recommending properties in a particular area of your region, perhaps because of their inexperience or different focus, they should refer you to an agent that can.

Numbers First

Real estate agents that deal with residential property are all-too used to dealing in the gray area between financial necessity and the desires of families. Since residential mortgage financing stretches house payments over such a long payoff horizon, families can afford to 'ignore' questions of value and pricing if a home has enough curb appeal and wow-factor. For investment real estate, however, the numbers mean everything. The average real estate investor looks to secure an annual return of around 10% for each property that they purchase a stake in – and this means doing everything in their power to increase profit margins by reducing down payments and bartering for property improvements and better interest rates.


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