What should you be looking for in a good investment REALTOR®? Are you wondering if you even need one? In this 2-part series, A.J. Plant, 25-year veteran real estate investor, REALTOR®, and the Regional Owner of EXIT Realty Eastern Ontario, offers his insight.
Why hire a REALTOR® at all?
Simply put, unless you have a family background or a personal history with investment properties, be it in construction, rezoning or buying a multi-unit or rental property, you need the help of someone who is going to act as a kind of “mentor”; someone to help you figure this whole thing out. Investing in real estate involves dealing with dozens of variables and if you don’t have the knowledge and experience to know when to passively or proactively react to them, you’re setting yourself up for potential disaster.
Once you’ve purchased the property, a good REALTOR® can help you determine whether to hire a property management company specific to your needs or go it alone. In some cases, the real estate agent may also offer property management services. Personally, I manage all my own properties and occasionally I use the services of a property management company. As I was preparing notes for this article, I received a text from a tenant advising me that my triplex flooded because another tenant’s laundry hose came apart. Within 6 minutes I had a plumber and clean-up crew on the way to take care of it. Calls like that are a fact of life if you decide to manage the property yourself.
A good REALTOR® will be a resource for you long after the deal closes. It isn’t just about today’s transaction, but about the long-term relationship, before, during and after the signature.
Your Investment REALTOR®: 10 Essential Qualities
1. A good investment REALTOR® is someone who will listen, follow up and will honestly tell you if the deal you want is a bad one. Some of the best deals are no deals.
By referral is the best way to find a real estate agent. I don’t recommend relying on Google or online reviews or recommendations unless you’re new to a city and don’t know anyone. Talk to people at work, your family and friends. The real estate agent who negotiated the successful purchase or sale of your home may not be the right person to help you find an investment property but should be the first person you ask for recommendations.
When you’ve narrowed your search to one or two agents, then utilize technology to find out about deals in which they’ve been involved or if their name appears in the news. Ask your trusted advisors, like your lawyer, if they’ve had any dealings together. Check local licensing authorities for ethics and standards violations. For example, the Real Estate Council of Ontario lists the results of regulatory activities and decisions on its website. It’s all about doing your due diligence.
2. An agent with a great reputation in the market in which you want to invest, not only with their clients and other investors but with finance companies and other REALTORS®, opens doors to great networking opportunities.
3. You need someone who will “hustle”, ie work hard for you. Sometimes the best buys aren’t for sale yet.
Ask effective questions, for example, “Tell me about a time when you helped a client find a property that wasn’t on the market.” Often commercial inventory is not on the MLS®. A savvy agent will ask for specifics of the location in which you want to invest and the type of property and then he or she will hit the streets and door-knock. Many times, this has proven to be the best strategy for my clients. For example, through door-knocking I found two houses side-by-side for a client who bought them, tore them down, and built townhomes. I referred a client to an agent in one of the offices in my region recently who wants to sell two properties, a commercial building and his coffee shop, then he wants to buy a tear-down and build his dream home. That client needs an agent who will hustle and be prepared to go the distance because these transactions may take six months to a year to complete. The mindset of a good, commercial/investment agent is geared to the long term.
4. Effective questioning. Great communication skills. The right REALTOR® needs to know what questions to ask to understand what type of investor you are and your risk tolerance.
It’s not only important for you to ask the right effective questions of your REALTOR® but also that he or she knows the right questions to ask of you. Real estate investing in real life isn’t like it is on TV reality shows. Why is investing in real estate important to you? What do you hope to achieve? Is it about the money? If so, what do you plan to do with the money? Once the agent drills down to your true motivation, he or she will be more able to help you determine the right type of investment and strategy to achieve your goals.
Both the agent and the client must ask the right questions to ensure the relationship is a good fit.
5. Your REALTOR® should understand the terminology and the numbers.
You need a REALTOR® who understands phrases like ROI (return on investment) and cap rate and what it means if the cap rate goes up or down. He or she must be able to hold their own during a negotiation with any other agent or investor.
In the second part of this series, A.J. looks at creativity, paperwork, strategy and more as he outlines the remaining 5 qualities of an investment REALTOR®.
