What should you be looking for in a good investment REALTOR®? In the first of this 2-part series, we looked at tips for finding the right REALTOR® with regards to their hustle and communication skills. In the second part, A.J. Plant, 25-year veteran real estate investor, REALTOR®, and the Regional Owner of EXIT Realty Eastern Ontario, offers his insight on creativity, strategy and more:
6. An agent who thinks outside the box is a vital and important asset. A great REALTOR® will be able to find solutions, not only to finance an investment, but also to put a dying deal back together.
Financing is one area in which your agent could offer creative suggestions, for example a vendor take back mortgage. Other creative opportunities present themselves when the agent understands the motivation of the buyer or seller, which could involve timing, terms, a desired location or severance or rezoning opportunities. Sometimes the buyer may not be aware of an existing plan, which allows for rezoning, or a new plan that will be coming into effect that may impact the property.
7. A good agent must understand the paperwork and not be afraid to write up the offer and negotiate.
The paperwork for a traditional residential sale can be complicated, but the difference between that and an investment deal lies in the clauses and those offers should be reviewed by a lawyer. A good investment agent should have knowledge of clauses that cover issues like soil samples, environment, site plans and zoning. On the other hand, an inexperienced agent could draw up an offer that is too complicated and scare the seller or omit essential clauses like who pays the HST. A good agent will be able to find the right balance. Once the paperwork is prepared, a good agent will be skilled in how to present the offer including building a relationship with the agent representing the other party. There are multiple groups the agent is trying to satisfy: you, the other agent and the other party, not to mention the lawyers, the city and so on. He or she must be able to sell the offer to everyone.
Good negotiation skills are paramount. Price isn’t the only factor; there’s also timing, terms or financing. For example, you may pay full price or higher, but the terms are such that over the next twenty years, you’ve made your money back three times over.
8. Know the lay of the land. Your REALTOR® should know about zoning and what the city wants. They should also have an idea of tenancy, vacancy rates and which real estate investments are appropriate.
Your agent should have his or her pulse on what’s happening in the city. For example, here in Ottawa, the transit system is being expanded and affecting the bylaw concerning parking requirements. I have a client who owns a restaurant who wanted to apply to the city to use the basement for party space, but he couldn’t because under the old bylaw he didn’t have enough parking. With the bylaw change, he’s able to get approval even though he doesn’t have any additional parking. Your agent should know the local councillors and their particular focus.
9. Strategy-centric. A great REALTOR® can turn on a dime if the current strategy isn’t working.
A good agent will be nimble and able to help you take advantage of opportunities that may spring from the current project as well as having contingency plans in place. Let’s say you want to buy a house and convert it into a triplex. If you commit to buying the house, what happens if you can’t get approval for the triplex? Are you going to tear the house down and build something else? Turn it into student housing? In addition, your agent should be accessible. If something unforeseen happens at 6:00 pm on a Friday at a city council meeting, you don’t want to have to bite your nails all weekend before you talk it over with your agent.
10. Experience
Ideally your agent will be an experienced real estate investor and able to share his or her personal experiences. My first investment properties were in a tough area of town and because I’ve owned property there, I can provide realistic expectations for my clients.
Your REALTOR® is really the quarterback of the deal. The key is being able to coordinate all the moving parts (like zoning) and bring all the right people together (like accountants and property managers). For example, I was the agent on a $2.4 million deal. There was a well-known commercial agent on the other side and the deal was stalled. It was a complicated transaction with issues involving water, sewage, zoning, etc. Although it’s atypical for the parties to meet, I arranged one to discuss what we were all trying to accomplish. Being together helped ensure we were using the same language and working towards the same goal—the successful completion of the transaction. It took 7 months to reach a successful conclusion, but everyone got a good deal. That’s the job.
In summary, you and your agent must both understand that the process of buying investment property is not just a business transaction, it involves prolonged relationship management. It may take six months, a year, two years or longer to find the right investment. The right REALTOR® is someone who will work to protect your business interests now and in the future.
