What Real Estate Investors look for in an agent...

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Services for Real Estate Pros with EquityScout.com

5 Tips for RealtorsI've dealt with real estate agents with both my "homebuyer hat" on and my "real estate investor" hat on. Each brings with it a unique set of expectations. 

Real estate investors represent a special group of clients for agents.  As the field gets crowed both with agents (10,000 new Realtors® every year!) and technological innovations, finding a niche will be important for agents who want to thrive as the market evolves. 

Following are five things that I, as an investor, tend to value in an agent.  This is just my opinion, but it's informed by feedback from lots of other investors.

1)  Understand the risks of investing:  Some clients will need some help here.  Generally speaking, investors take two kinds of risks:  speculative risks and operational risks.  Speculative risk is high when an investment relies primarily on future property appreciation in order to be profitable.  Operational risks deal with all of the issues involved in maintaining a cashflow-positive property - vacancies, tenants, repairs, etc.  There are players who think they are investors, but actually they're speculators.  They might not know the difference - but you should. 

2)  Be the investor's eyes and ears:  My real estate agent is valuable to me because she has ways of finding things out.  She's plugged into the community and she's constantly talking to other brokers and agents.  She does this full time, I don't.  Once a property gets to MLS it's old news - I have to compete against all the other investors in my area.  But if I can get to something early - that's a tip that's valuable to me. 

3)  Understand the numbers:  If you're pitching an investment, or helping the investor to understand one that he's found himself, you should be able to answer the questions:  Should I expect this to be a positive cashflow investment?  How much will I be able to charge for rent?  Will that cover my expenses?  What sort of property appreciation will I need in order for this to yield a decent rate of return?  An investor who can't answer these questions (many cant!) is driving blind.  You can help. 

4)  Screen opportunities:  Know what your investor is looking for.  Bring her opportunities where the numbers work out.  Shelve the rest. 

5)  Know the neighborhoods.  This is an area where my agent helps me a lot.  Which areas are generating a lot of interest?  Which ones aren't?  Where are a lot of for-sale signs popping up?  You and your investor will come up with a strategy to decode this information; sometimes a preponderance of for-sale signs means opportunity, other times they signal trouble. 

The playing field is shifting out there; agents who evolve will stay ahead of the curve. 

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Chris,

 

Great post!

"The playing field is shifting out there; agents who evolve will stay ahead of the curve."

Words to live by,always.. 

 

 

Dec 10, 2006 02:21 PM #1
Rainer
115,012
Rich Schiffer
Swarthmore, PA
Referral Agent, e-PRO
I too, appreciate this post.  I represent a couple of clients who are investors, and this information will help me "stay ahead of the curve."  Bookmarked.
Dec 10, 2006 05:48 PM #2
Ambassador
1,452,610
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection
Thank you for sharing; it is good to hear from an actual investor what your expectation of an agent is.
Dec 10, 2006 09:10 PM #3
Rainer
78,048
Vicky Poe
Good Ole Rocky Top - Crossville, TN
Realtor/ Auctioneer
I run into people all the time interested in investing and flipping.  A large number of them think they can do my job better than I can.  I begrudge paying an agent.  It is nice to hear from an investor that realizes a good agents worth and is not ashamed to admit it.
Dec 10, 2006 09:15 PM #4
Rainer
47,586
Jolynne Photography, Creative Wedding Photography, Family Portraits, Bar Mitzvahs
Jolynne Photography - Hemet, CA
Bat Mitzvahs, Senior Pictures, Event Photography

Hey Christopher, you did a great job of delineating what a seasoned investor is looking for in an agent.

What about in a lender?  Anyone?

Dec 10, 2006 11:59 PM #5
Rainmaker
623,209
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645

Aloha Christopher, Great Post! 

One other thing my investors like from me is the tools I have on my laptop.  Running the numbers before and after taxes, adding in expenses, aquisition costs, etc. and plugging in different market conditions helps them to estimate their potential earnings and their potential risk. 

I never predict the market, I always ask them what numbers they would like me to plug in.  It sets me apart from many of the agents in my area.  Skills I aquired through CRS.

Dec 11, 2006 01:34 AM #6
Rainmaker
51,225
Kelly Mitchell
Agent Caffeine & BreveTV - Honolulu, HI
AgentCaffeine.com "Fuel for Your Real Estate Biz"
Thanks for taking the time to address very thoroughly issues that should be addressed with investors.  In my experience I have found that everyone has a different set of rules, business acumen and understanding.  Some need a lot of information and others will be insulted by too much.  I guess it really depends on their level of experience.  Rents can be tricky too.  In a changing market rents fluctuate too. I always recommend they do some of their own research and in addition I contact my base of property management firm owners. They tend to have the most accurate numbers.  Each investment is so different I find it hard to plug in standards and try to focus on the unique needs of the investment, how to leverage it for the highest return on investment and what future market conditions can enhance the resale price. 
Dec 11, 2006 05:45 AM #7
Rainer
29,293
Michael Roberts
Real Estate Professionals of Glynn - Saint Simons Island, GA
Do you go to a shade tree mechanic to have a brain tumor removed.  Of course not you go to the professional.  And a professional who is knowledgeable in his field.  Just because you use a Realtor doesn't mean that Realtor is adept at investment property.  Realtors who deal in investment must have an understanding of the economics of cash flow, timing and psoitioning.  Without this and a bit of good ole fashioned common sense you have squat.  I work with investors a great deal and can tell you that you always, always prepare multiple senerio- tkae off of what can happen if property is aquired under specific conditions.  Even the most sophisticated investor cna always use another pair of eyes and a new perspective.
Dec 11, 2006 08:24 AM #8
Rainmaker
199,935
William Collins
ERA Queen City Realty - Scotch Plains, NJ
Director of Property Management
Christopher, Thanks for the post. Seems simple enough, but all to often, you encounter those who lack the skill set necessary to perform adequately. Good post.
Dec 11, 2006 09:15 AM #9
Rainer
21,432
Christopher Smith
EquityScout.com - Houston, TX

All, thanks for the comments!  I learn something from every post I make in my blog.  

William:  Agreed - seems easy, but it's not!  This is a unique skill set for real estate agents - I find very few who actually have it.  Cashflow analysis is not a skill that most agents develop, those who do increase their relevance and their value.  

Randy: I started out as a second lieutenant with the 25th Infantry Division (L) there in Hawaii.  I played rugby for the Hawaii Harlequins and I was the 6'4" Texas trying to learn to surf on those little baby Waikiki waves.  You live in a beautiful corner of the world.   I like your comment about plugging in the investor's assumptions - generally a wise practice.  But there is a fine line.  Here's a conversation I've had a few time with my realtor:

  • Me:  Hey I'm looking at 123 Main street, what do you think it'll rent for?
  • Realtor:  Well what do you think it'll rent for?
  • Me:  I don't know, what do you think?

This would go back and forth a couple of times until she gives me her view.  Which sometimes I use and sometimes I don't.  But the point is that I like having another opinion. 

Joey:  Low rates!  Easy terms!  High LTV ratio!  And Fast Close!  Easy!

VickyMost agents add little value to investors.  But agents who understand investing can add a lot of value.  Most investors will automatically assume that any agent they meet falls into the first category - that's why you get the reaction that you get.  Your job will be to show them that you fall into the second.   

Dec 11, 2006 09:40 AM #10
Anonymous
Anonymous
Anonymous
Great post.  The thing my investors like most is screeninbg properties for them.  I pout my clients in a pecking ordar based on their loyalty to me.  Those who have done the most transactions with me get called first as I see new opportunities coming to market.  I frequently get acquaintences, even friends asking me to let them know when new deals come around, but they won't enter to a buyers agreement.  I simply explain to them that I'll put them on my calling list, but there are 25 ahead of them. 
Dec 11, 2006 10:06 AM #11
Rainmaker
658,347
Jim & Maria Hart
Brand Name Real Estate - Charleston, SC
Charleston, SC Real Estate

Christopher,

 

Thanks for the post. It is great to get your perspective.

Dec 11, 2006 12:44 PM #12
Anonymous
Anonymous
Sheila Meinecke
Excellent post Christopher! You have the right outlook, and I appreciate your sharing it.  I will pass your site info along to any investors I come accross.  It would be a very handy tool indeed.
Dec 11, 2006 02:09 PM #13
Rainer
41,868
John Klassen
M & T Bank - Kingston, NY

I have two agents that I look for investment properties with. I have told them exactly what I look for and tell them when they find it I will buy. I need a partner since real estate investing is not my full time gig. I greatly appreciate their expertise.

My agent, saves me time and money.

 

Dec 11, 2006 04:46 PM #14
Rainmaker
1,515,853
John Novak
Keller Williams Realty The Marketplace - Las Vegas, NV
Henderson, Las Vegas and Summerlin Real Estate

Thanks for posting an investor's perspective. I like gathering data and playing with spreadsheets. Combined with my love of the web and technology, I think that will help me build a decent investor clientele in 2007.

Dec 12, 2006 12:12 AM #15
Anonymous
Anonymous
Shirley

Most of the investors i've come into contact with just do not want to pay agents.  The last one was where his wife was the agnet that offered the house, owned by them both, and in the MLS listing she offered agents 3%. Then she turns you over to her husband, who is the investor owner who "knows the numbers that will work". Well through each round of negociating he negociated my commission down "to make the deal work" I informed him that when a Realtor offers 3% to co-op agents, that no one is to start to try to get my fee down. Thats is totally off limits.

The only time that any investor/agent relation worked for me was when the investor was buying by getting a loan and didn't mention my commission.    I have had some investors say "I will find the house and you don't have to anything and all I want is you to give me 50% if your commission. First to say that I didn't have to do anything......well each agent answers to The Local Real Estate Board and The Real Estate Commission and first to their Broker. There is a lot of liability at steak.

Well there are a lot of other stories good and bad, but mostly bad. It is never a good idea to dismiss someone, to say your not important enough to be paid your full commission, etc.

What do you think about all this.

Thank you,

Shirley

Atlanta, 

GA 

Dec 13, 2006 12:12 PM #16
Rainer
21,432
Christopher Smith
EquityScout.com - Houston, TX

Shirley,

I don't necessarily think this is unreasonable, and in my opinion you should not take this as an insult or a dismissal of your skills/abilities.  

A buyer generally has a certain set of expectations from an agent which justify the agent getting 3% of the deal as a fee (assuming a 6% total split 50/50).  The agent needs to understand the needs of the buyer, screens lots of possibilities, narrows down the list, arranges the showings, spends his/her time/effort/gasoline visiting the homes, advises the buyer on the purchase, negotiates on the buyer's  behalf, takes the buyer through the closing process and in the end gets the keys into the buyer's hands.  Man, that's a lot of work, and this is why an agent's commission is well earned, in my book.

But...(there's always a "but" isn't there?)...some investors don't need all of this!  And if the buyer is an investor who doesn't need all of the services (time, effort, money, expertise) that one would normally expect from a buyer's agent it's not unreasonable that the investor would try to negotiate a modified fee.  

I don't think the investor is being obnoxious.  But that's just my two cents...

Dec 13, 2006 12:32 PM #17
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