How to deal with a REALTOR® when buying investment property?

When I first started out as an investor I didn’t realize there was a difference in a Realtor helping me buy my first home versus buying my first rental property. I assumed they had the same training and knew all the answers, but I assumed very wrong.

After going through many different Realtors until we found one who understood what we were doing, we often wondered what the problem was. Well, looking back there were several very obvious problems.

The first was us not realizing what we needed and the second was the Realtor not being aware of our specific needs. Because of this we actually drove some of our first Realtors away and others we became too much work for, so they essentially dropped us.

To help you avoid some of the headaches and problems we went through I went to someone with some answers from the other side of the table. A friend, fellow investor and a Realtor Joe Samson who was gracious enough to write the following article which I am sure many of you will find not just helpful, but also insightful to you as you move forward.

So take it away Joe!

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So you’re confused and left wondering why your REALTOR® never called you back when you had plenty of money in your bank account to buy several investment properties.

You were very serious when you asked him to “call me when you find a good deal”.

I’ve been a real estate agent and investor for over a decade now, and these are some of the most irritating words that an investor’s agent can hear from a client. Here’s an insider’s look into what it takes for a real estate investor to have a good relationship with a REALTOR®.

So your REALTOR® never called! You’d waited patiently and watched others how they’ve been scooping up prime real estate one after another and you’re wondering what happened to all those real estate agents that you have recently told about your plans?

Don’t get me wrong, since we only get paid after a transaction is completed, I appreciate every opportunity I can get to help a client with their real estate purchase. But in this case I have to say: “Thanks, but no thanks”. Read on to find out why this awkward scenario is not ideal to anyone.

REALTORS® and investors need to find the common ground on which they can work together. Just like the example given above there are hundreds of other pitfalls or opportunities where a relationship can easily end up in the gutter or go sour due to a bad decision that you should have approached differently.

Working with a REALTOR® during your search is the cornerstone of your journey. Selecting the wrong type of property or if your real estate agent is not fully understanding your plans during the process, then it could be devastating to your investment or you could end up wasting significant amount of your time.

There must be hundreds of opportunities where a REALTOR® – Investor relationship can go wrong. To avoid heated conversations, let’s take a look at some of the obvious, but often ignored causes of failures when working with your agent.

Taking Responsibility

As always, everything is a matter of perspective and someone else will need to be blamed for sure if the investment goes belly up.

Let’s admit it, we have all said this before: “…it ain’t my fault”!

Then who’s fault is it? Once we start pointing fingers at others, the damage is most likely already done, regardless if it’s your advisor’s fault or not.

When you hear these words: “Taking Responsibility”, it may bring back memories to you from the days when your parents were trying to beat this message into your head. Back then we have just shrugged our shoulders, but let’s face it, they were right about it.

As a business owner we’re faced making decision every minute of the day. Some of the decisions we make may be as little as answering an e-mail to a tenant, hiring the right cleaning crew or writing a cheque for hundreds of thousands of dollars.

At the end of the day, we need to realize that it was us in the first place who has decided to engage the services of our team members. The ultimate conclusion is that we opened the door for them to do business with us, therefore we need to be very diligent with whom we decide to work with.

Hiring The Wrong REALTOR®

The truth is that there are thousands of real estate agents out there right now who are waiting for your phone call. Almost any one of them is capable of filling out a standard purchase agreement after opening a door for you to a house that you are interested in. But in this case you’re not interested in buying A house, rather you are looking for THE house that is going to bring you positive cashflow with very little maintenance headaches, aka: investment property.

Asking lots of questions about the real estate agent’s past experience is a very crucial step that you can take. Working with the “new kid on the block” may not necessarily be to your best advantage. The key question to ask your future agent is if he owns any investment properties on his own. Make sure you get some details as well to verify the depth of his experience.

Find out from exactly how many properties he owns as you don’t want him qualifying his personal residence as his investment property just to give you the impression that he is the guru whom you have been looking for. Next, ask when did he purchase his properties, what were his biggest challenges as a landlord and so on. I believe that these question are vital to verifying the agent’s experience.

You may run into some individuals who might be reluctant to share these details with you. They could be claiming that it’s private information and there might be all other sorts of excuses that they could come up with for not sharing. I think that’s just baloney and it may be a red flag to me personally. Most real estate investors whom I came across were very proud about their achievements and they are usually excited to talk about their experiences.

In the housing business a word of recommendation is as good as gold. I was a little bit hesitant sharing this advise in the first place, but you can also ask your real estate network if they can recommend anyone whom they worked with in the past. Just be cautious and ask the agent good questions about how is he going to prioritize his clients when the “good deal” shows up.

Thanks to technology, service providers are becoming more transparent of their performance then ever before. Spend 10 minutes online and see if you can find any reviews or testimonials of the person you are meeting with. Someone who’s been around the block a few times should have plenty of reviews available.

Key tip: randomly select 2-3 reviews before the interview and ask the REALTOR® if you can have those client’s phone number to request a quick feedback of their experience with him. Some people may be dishonest about how they are trying to portray their image to the public, so going the extra step may be worth it.

Once you have purchased your property, part of your learning curve is becoming an impeccable landlord. Surrounding yourself with likeminded people and team members who you can rely on can make your life very easy. Since you have decided to work with an experienced real estate agent, he should be a crucial part of your going forward strategy when you are managing your tenants. Having an experienced advisor available can be a real rock for you when you will be facing some challenges. Find out from your REALTOR® if you can rely on him to ask question even after the sale is completed.

Being Emotional

For most REALTORS® working with real estate investors can be a whole other world than what they might be used to dealign with. The typical residential buyers or “moms & pops” can often go through emotional roller coaster rides before making their lives biggest decision.

On the other hand, real estate investors need to leave their soft feelings at home and they need to become fearless business owners as if they’re going amongst a pack of wolves.

Seriously! This is probably the number one cause of failure why investors loose their shirts in this business.

I’d seen it countless times after spending weeks or months of looking at investment properties and nothing was to the client’s liking. The numbers made sense, the location was great and the property was in good condition as well, yet the buyer just couldn’t pull the trigger. This is a huge turn off for many REALTOR®S when their client cannot look at an opportunity objectively. In the residential area this indecisiveness is an everyday occurrence. But when you are committed to invest in real estate, be sure to step up to the table when it’s your turn and don’t hesitate. Otherwise an unspoken conclusion might be forming in your agent’s head regarding the level of your commitment.

On the flip side of the coin, there are some real naive buyers who may be so hyped up about getting out there and buying anything just to claim their first rental property. They get so emotionally driven that if they end up having the wrong person on their team, they will fall in to this trap very quickly.

You need to educate yourself in advance so that you can make decision on your own and be able to recognize the difference between a good and a bad investment.

Having a Plan

Coming up with buying strategies and crunching the numbers can be overwhelming for the novice investor. Expecting your REALTOR® to serve the opportunities for you on a silver plate is very unlikely to happen. Unless you tell them exactly what you are looking for.

Since every market is different, strategies need to be very adaptive to the local environment. For example: some investment methods might work well in the U.S. while the same strategies may not fly in Canada due to different rules and regulations.

Before you decide to spend hundreds of thousands of dollars on an investment property you should have a pretty good idea about how the entire process works. You can gain knowledge by reading books about real estate investing in a specific market. You can also join networking groups or invite others for lunch who have purchased investment properties before.

Before approaching your REALTOR® to help you find the property that you’re looking for, you will need to be able to understand what is it that you want. Otherwise how are you going to recognize a great buying opportunity if you don’t know what it looks like?

Being a Property Addict

Have you ever caught yourself looking at houses online for hours? Were you jumping from one website to another to see if you can find that gold nugget of opportunity that only seems to be a fairy tale? Perhaps you spent countless hours surfing online at your job when the boss wasn’t around? I’ve done it too.

It’s a completely normal thing to do when you are very interested in finding a solution to a problem. However it’s not necessarily a good thing for you. According to Google, addiction can be defined as a condition of making a habit of a particular activity.

When you are looking at hundreds of irrelevant properties on a daily basis it could push you off track. Wasting your time is one thing, but not having a clear sense of understanding of your goals can trap you in a maze of confusion.

Dealing With Realtors

Being more specific could have been the main thread of my entire point throughout this post. It is imperative to clearly set-up your property targets and identify your niche. Focus your search on a selected area where you intend to become a landlord instead of being all over the city. Decide on the type of property that you are looking for. Ask yourself if the house needs to be a certain size? What is going to be the minimum number of bedrooms that you require? Are you looking for newer or older buildings? Do you like condominiums more than houses?

Having clarity in your vision is going to free you from all the unnecessary activities that you may be doing and it will bring you closer to your goals. Try to resist the urge to look at all sorts of properties all the time and focus on spotting the ones that are relevant to your search criteria. By doing this you are going to soon become an expert in your niche and you’ll be able to weed out the bad investment properties that should have never showed up on your radar.

Being an investor’s agent comes with great responsibilities and I consider it a noble opportunity to work with anyone who is striving to become financially successful. You can reach me, Joe Samson at http://www.JoeSamson.com and I will be happy to guide you along with your investment questions.

Joe is a local Calgary Alberta Realtor, so he may not be able to help everyone as I know many of you come from all over North America and the world, but the advice and information in here should definitely be able to help you with whomever you work with. If you have soem feedback or questions for Joe or myself, we’d love to hear them! – Bill