Find an Agent that Understands Investment Properties
Finding a real estate agent that is familiar with investment properties is not as simple as finding a realtor to buy or sell a residential home. Real estate investing works under a different set of standards than buying or selling a home to live in, and it requires particular knowledge and a set of skills that not every Realtor possesses. If you are considering real estate investing, you need to find the right agent and the right area to begin your investment search.
Often, a successful investor's agent is also a successful investor themselves. They understand the drive behind investing and will understand your incentives. An investor-oriented real estate agent should be able to provide in-depth knowledge and tips to help you succeed in making a profit, such as being able to predict shifts in the market and guide you in the right direction.
Can They Help You Achieve Your Investment Goals?
When buying an investment property, outline your criteria. For instance, are you interested in older properties to fix up and hold/flip in class B/C neighborhood? Or are you looking for something new in class A/B neighborhood? Testing an agent’s knowledge on these types of investments is another way of knowing if they are right for you. Ask the agent what types of properties they have worked with in the past and what they are most comfortable handling.
Related: How to Identify A, B & C-Class Areas (& How to Know Which You Should Invest in!)
Related: Class A, B, C & D Real Estate: How to Know Where YOU Should Invest
A great investor's agent knows where to find deals that are not open to public, and how to get them. They know how crucial it is for an investor to have a team of experts on their side to make it happen. Look for an agent who has strong connections with reliable local experts, such as builders and developers, lenders who specialize in investment financing programs, CPAs, escrow companies, 1031 Exchange Intermediators, eviction law specialists, and so on. A great investor's agent can also make the course of investing much less complicated and frustrating.
How to Choose an Expert for Your Needs
As an investor, you need an agent by your side that you are comfortable with and is able to cater to your specific needs. Since making a profit on investment properties often requires making lower offers, an agent must be comfortable with serious negotiating. A great investor's agent also knows the market trends, demand and supply well enough to be able to make an appropriate offer so that you are not chasing the seller away unnecessarily. Also, make sure to choose an agent who has a good communication skill. Choosing the right investor's agent is vital to achieve a successful investment. Their job is to basically become the team leader of your investment plans, and that includes looking over every aspect of your real estate investments, not just the purchase/sale transaction process, and to make sure that you are making the right move, every step of the way.
Find an Agent that Understands "Cap Rate" & "Cash Flow"
An agent that understands investment properties will be able to calculate and find you the cap rate of properties. Getting a return on your investment is your sole purpose; your agent needs to assure you that you are spending your money wisely. Make sure the agent is capable of calculating cash flow. If you are planning on renovating your investment property or flipping the property, the agent should understand after repair values and have comparable comps in the same neighborhoods.
Related: What is Capitalization Rate?
Related: What is Cash Flow?
Find an Agent that Understands the Local Market
It is extremely important to choose an agent who knows your local investing market. No matter how well they know about Cap Rates and Cash Flow, it means nothing if they don't understand the uniqueness of the specific market you are after. They should understand the shifts in the real estate market you’re in and how that will influence the value of your investment property. A real estate agent that is comfortable with investment properties needs to understand the micro-markets, especially in a unique market like Utah. Understanding which neighborhoods work best for the purpose of investing is also critical.
What is the Cost of Working with An Investor's Agent?
When you are buying an investment property, the answer to that is ZERO. What it means is that investor's agents typically work as a buyer's agent, and their commission is paid by the seller of the property. Typically the commission the seller pays is 5-6% of the purchase price, and is split between the listing (seller's) agent and the buyer's (investor's) agent. So as long as you are the buyer, it costs you nothing to be working with an investor's agent. If you are selling a property, then you will be responsible for whatever the commission amount you and your agent agree on.
One of the advantages of hiring an agent who specializes in investment properties to sell your porperty is that they could market your property to an entirely different market than the home-buyer market; An investor-oriented agent is more likely to have other investor clients that are actively looking for investment properties to buy. They may also have a wide network of other investor-friendly agents with active buyers.
How To Find The Right Agent?
When looking for the right agent, the best method is by word of mouth. Ask fellow investors if they know local agents that have experience with investment properties. Check your local business agency to find real estate agent offices and search their ratings. Do not be afraid to ask the agent for names of their investor clients that they have worked with. If they have been successful with investment properties in the past, they should be willing to share positive references!