It’s because there aren’t that many of them. Sure, they are out there, but to the untrained eye it may seem like no such thing exists.
What is an investor-friendly real estate agent? It’s one who can actually help investors find properties that match their investing goals. Can’t any agent do that?
They can certainly find properties but they may not know how to find properties that meet the investor’s goals. Why not? Because they work mostly with primary homebuyers and that is what they have been trained to work with.
What’s the difference with what primary homebuyers want to buy and what investors want to buy? Easy- primary homebuyers want location and a house they personally enjoy living in. Investors want a return on their money.
Primary homebuyers will call themselves investors all day long because they think buying a house for themselves is in fact an investment but regardless of whether that is even true or not, the properties that primary homebuyers will buy and the properties investors (should) buy are completely different.
Because real estate agents aren’t trained to understand investment needs, the only real way for an agent to understand (in detail) what it is an investor really needs is to be an investor themselves or have worked closely with investors for long enough that they get it.
What does an agent need to ‘get’ in order to be useful for an investor? Well it depends on what kind of property you are looking for. The two investing methods that you are most likely to be involved with if you are interested in working with a real estate agent are:
- Flipping a property
- Buying a rental property
There are some methods that integrate both of those, but those are the two primary methods that require certain knowledge sets in order to succeed.
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2 Critical Things an Investor-Friendly Agent Must Know
There are various things an agent needs to understand about these investment methods in order to find a profitable property. Each method will require further specific information an agent needs to understand, and I won’t go into those here, but if an agent can at least know these two critical things about an investment property, you will probably be in good shape to work with them.
1. The Market
More specifically, the micro-markets (meaning the more specific areas or neighborhoods of a bigger market). In any big market, there are some areas that will be extremely advantageous for flipping properties but not for holding rental properties. Some areas will be great for holding rental properties but not flipping. Some areas won’t be good for either. Some might be okay for both. An agent needs to understand what about a market (micro-market) creates advantage for each method of investing. Trust me, it’s not as obvious as non-investors think!
2. The Numbers
An investor-friendly agent will know a) what a cap rate is and b) how to calculate one. Even if you don’t personally use cap rates for residential properties, that’s fine, but any agent who is savvy on investing should know this term and the basic workings of it. More specifically, an agent should understand how to calculate a return.
That’s why you are buying an investment property, right? To get a return on your money. Can the agent tell you what that return is anticipated to be and how they determined that return? For rental properties by themselves, do they know how to calculate cash flow? For flipping properties, an agent certainly needs to understand ARV- ‘after repair value’. If an agent can’t talk about the returns on a particular property fairly quickly and intelligent-sounding, they may not be that investor-friendly.
If an agent at least knows these two things, they are already miles ahead of most agents.
Again, nothing wrong with agents who don’t know this stuff, but you need to be working with someone who fully understands what they are talking about in terms of investing or you could end up either with a lot of wasted time or a bad investment property.
Don’t put it all on your agent though. Understand these concepts yourself. When you know what constitutes good markets and good numbers for investment properties, it will be much easier to shop around for a good agent to work with.
If you know what you are talking about, and they know what they are talking about, you will quickly be able to work at a good pace for finding you a great investment property.
Where Can You Find the Investor-Friendly Agents?
The easiest way is probably through referrals.
Now that BiggerPockets exists (thanks, BP!), it is incredibly easy to just post on the forums asking for an investor-friendly agent for a particular location. Regardless of whether you find an agent through a referral or you scour the internet and call random agents, you should ask about their experience working with investors.
What kind of investors do they primarily work with? What do they look for on behalf of the investors in terms of qualities of a potential property? Here is where they should be mentioning location and numbers. If they don’t, be sure to ask.
Is it a requirement to work with an agent who already knows these things? Absolutely not. You’re welcome to train an agent to what you are looking for, but why not just work with someone who already knows what they are talking about?
Some markets may be harder for that if it’s not a known-investing area so you may be forced to train someone, in which case that is okay too. Regardless, just like with finding any other team member, just start asking for referrals and interviewing different people.
On the Business Side
Right now there is a huge gap between how many real estate investors are out there who could benefit from an investor-friendly real estate agent and how many investor-friendly real estate agents currently exist.
If you are a licensed real estate agent, or have had thoughts about becoming one, realize how big this gap really is. There is a huge need for investor-friendly agents!
Well, maybe not a need necessarily because investors are pretty good at figuring things out without one, but having investor-friendly agents could be very beneficial to investors and I think investors would be glad to offload more work onto an agent. And for you, the agent, dominating your local investor market could prove quite profitable!
I believe real estate has been getting bigger over the last however many years and will continue to expand exponentially because of the advent of the internet (which allows information to be so much more readily accessible) and with the continued uncertainty of our national economy.
So if there is already a huge space open for investor-friendly agents, think of how much bigger that space will get as real estate investing continues to expand.
If you work with an investor-friendly real estate agent for your properties, where did you find that agent initially?
Be sure to leave your comments below!