Real estate is a profitable business for savvy investors in the know. That said, tackling the complicated purchasing process alone is not an excellent way to start. The help of a qualified realtor provides necessary legal and market information every investor can benefit from. So, how do you know if you are working with the right people? Read on below as we discuss some key attributes every investor-friendly real estate agent should have, questions you need to ask, plus tips on how to choose the best fit for you.
Is There a Difference Between Real Estate Agents and Realtors?
Before your search, let’s cover some basics. Throughout the real estate industry, you will hear representatives called by several different names. Below we take a look at those as well as the differences between them. While it does not mean one is necessarily better than the other when it comes to investment properties, understanding their credentials may help narrow your options.
- Real Estate Broker – Brokers are either an individual or a firm in the real estate business. These entities charge a fee or commission for conducting real estate buying or selling transactions. Additionally, they can handle an earnest money deposit and an escrow account.
- Real Estate Agents – Agents carry a real estate license and assist individuals through buying or selling a home. Once licensed, an agent must hang that license in the office of a real estate broker. The broker will oversee the transactions of the agents in their office.
- Realtor – A realtor has the same duties as a real estate agent with one key difference. A realtor is an individual who belongs to the National Association of Realtors. These professionals have achieved a higher level of industry education and are viewed as experts in their field.
What is an Investor-Friendly Realtor?
If you are looking to buy and sell a home, finding a real estate agent is relatively simple. However, buying investment property comes with a unique set of added circumstances. An investor-friendly realtor understands these circumstances and helps you search for a property through a different set of eyes.
As an investor, the last thing you want to do is waste time or money, so the right agent on your side is vital. The professional you work with should have a working knowledge of all the ins-and-outs such as applicable tax considerations, various mortgage options, local rental markets, and return on investment calculations. If they have invested in real estate, that is a huge plus since you can benefit from their first-hand experience!
Are They Right for You? 5 Questions for Finding an Investor-Friendly Realtor
Once you are ready to take the plunge, combining research and word of mouth recommendations is the best place to start in your search. Keep in mind there are important factors to evaluate when looking for the right investment real estate professional. Check out these five questions to ask yourself below.
- Do They Have the Right Experience?
- How Well Do They Know the Local Market?
- Does the Agent Invest in Real Estate?
- Do They Understand ROI Calculations?
- Can the Agent Offer Any Valuable Industry Connections?
Do They Have the Right Experience?
Before signing on with any agent, delve deep into their level of experience. Afterall. It is your financial well being on the line. For anyone who claims to have investment experience, request some case studies of properties they have formerly been involved with. This will give you a better picture of their working knowledge of the critical factors involved in buying to invest instead of buying to reside.
How Well Do They Know the Local Market?
Anyone who knows rentals knows the local market is everything. It largely dictates rental income projections, occupancy rates, competition, and future growth, all important factors when deciding where to invest. A great agent will provide the answers to things like, who makes up the local rental market, is the average rental rate on the rise or declining, and are there good resale capabilities?
Does the Agent Invest in Real Estate?
It is no secret that first-hand knowledge is a huge asset in any industry, especially real estate. Experience can result in smoother processing, fewer mistakes, and a greater sense of trust on your part. Based on their trials and tribulations, an agent can better guide you through the steps of buying your investment properties. That said, a realtor actively investing themselves is also your direct competition, so evaluate all circumstances and choose wisely.
Do They Understand ROI Calculations?
Return on investment is the backbone of investment decision making. Finding a great deal is only half of the equation, and an investor-friendly real estate agent will understand this. As you speak with potential agents, make sure you assert your financial goals clearly. Knowing your short- and long-term priorities will aid them in finding the right properties for you. All agents have access to a wealth of property listings via the MLS, but only savvy agents can find the ideal balance of factors for a rental investment.
Can the Agent Offer Any Valuable Industry Connections?
It is all in who you know, a familiar phrase in business. Like many industries, you may find the investment community is a tight one. Experienced professionals know how to get a deal done and who to contact to make it happen. Often an agent in the know will also have access to properties coming on the market faster than other traditional avenues. The ideal realtor will have the community knowledge and connections to not just get you in the game but help you succeed!
- Can you tell me the profit margin on the last several rental property purchases you brokered?
- Describe the process you use to find profitable investment properties?
- Are you able to recommend any general contractors familiar with rental properties?
- Do you have any advice for accumulating a portfolio of investment properties?
- Could you recommend any accounting professionals or firms familiar with the tax considerations of rental investments?
Essential Traits of the Ideal Investor-Friendly Real Estate Agent
Ok, you have found someone with experience and a grasp on the local market, but what else matters? Quite a few things! Even the right combination of expertise does not mean they are the best fit for your goals. To further evaluate the prospects, look at these critical traits below every investor-friendly real estate agent should have.
- Speed and Efficiency
- Honest Awareness
- Unfazed by Rejection
Speed and Efficiency
A great deal is not going to last, even in a slow market. The ideal investor-friendly real estate agent is on top of everything, responding to communications quickly and efficiently handling paperwork. They need to handle the back and forth that comes with brokering a deal where speed is key. Does the realtor work alone? Do they have any administrative support? How quickly do they respond to you? All of these could be telling signs of whether or not it will be a successful partnership.
The art of the deal often takes persistence and a willingness to go after it proactively. Therefore, realtors successful with investment properties must be impeccable negotiators able to do what it takes to see something through to the end.
A part-time agent doing this on the side is not the ideal candidate for investors looking for a dedicated agent. Instead, seek out someone who specializes in their field and is up to date on all of the latest listings, numbers, laws, and opportunities.
Always inquire about prior deals an agent has had experience with. Do not be afraid to ask them what they felt went right or wrong with the sale. Besides, an honest investor-friendly real estate agent is willing to admit their strengths and weaknesses. Their ability to recognize what improvements are possible will ultimately help them better serve your needs. Transparency is essential in any business, but immensely valuable here.
Unfazed by Rejection
The road to a great deal often includes many offers and an equal amount of rejections. The investor-friendly real estate agent you partner with needs to understand your overall goals. So, from the start, let them know you plan to submit many different offers, and many of those will be low. Explain that you are aware this may result in more rejections, but the agent must be ok with this approach. If not, they are not the one for you.
Be Your Own Investment Expert
A fantastic real estate agent is just one element to successful investment in rental properties. While they bring knowledge of local markets, real estate law, and ROI calculations to the table, your strategy should not hinge on them alone. The realtor’s job is to be an expert in real estate; therefore, your job is to be an investment expert. Their experience does not take the place of you being familiar with investment principles and discerning, which deals are right for you.
The most successful investors know the types of properties they are looking for and what the numbers need to be to meet their goals. Therefore, the investor can clearly outline for the agent precisely what they are looking for. This allows the agent to move on deals much quicker, saving time and money in the long run. Two sets of eyes are always better than one. That said, both you and the agent need to be actively searching for deals.
What Every Rental Property Investor Needs to Know
Searching for a property as your home is a different process than finding one that will serve as a rental. Some individuals that have purchased a home for themselves mistake that for experience in investing. With that in mind, we have compiled some thinking points to prepare you for buying real estate as an investment.
- An Investment Plan
- The Down Payment
- Rental Return
- Start Small
- Hire Professionals
An Investment Plan
Simply put, know your goals and have a plan to get there. If you are new to investing, research can provide some tried and true strategies to get you started. Begin by knowing how much money you have on hand and how much you can comfortably risk in a real estate investment. These will give you some general ideas on the steps and preparation needed to be successful.
The Down Payment
Flawless credit is part of any loan or mortgage decision, but just as important is your ability to come up with a down payment. Keep in mind, down payment requirements for investment property tends to be higher than a traditional owner-occupied mortgage. Additionally, do not forget to factor in the capital for closing costs, fees, inspections, rental licensing, and any improvements needed to get the property in a rentable state.
Although only one factor, when it comes to calculating the viability of a property listing, investors turn to the “1% Rule”. The goal here is to determine if the monthly rental income will be greater than the mortgage on the property. This tool can help investors evaluate the risk versus potential gain. The calculation involves taking the total initial investment (purchase and renovation) and multiplying it by 1%. The monthly rent should be greater than 1% of the purchase price to be considered a contender for investment.
Potential Rental Income (Monthly) ≥ One Percent of Purchase Price
Even with the best of intention and preparation, investments of any kind come with risks. Before you break out your checkbook, carefully consider how much you are willing to lose. Especially as you start, these numbers will help keep things in perspective so you do not spend more than you can afford. As your investments become profitable, consider reinvesting that capital to grow your portfolio at a comfortable pace. Going too big too fast could spell financial disaster!
Once you have purchased your rental property, a whole new world of time-consuming tasks awaits. Seeking out an experienced full-service property manager early on is your best bet for a stress-free owner experience. These professionals handle everything from marketing and tenant screening to lawful lease documents, maintenance coordination, tenant calls, compliance issues, and rent collection. In particular, property management firms are an essential investment when you have more than one rental property to take care of.
Are you looking for investment advice? Do you need a property manager to help maximize your ROI with the right tenants? Turn to the Washington DC property management experts at Bay Property Management Group Washinton DC. Proudly serving Maryland, Pennsylvania, and Washington DC, our dedicated staff has decades of combined experience in local markets with a licensed real estate broker at the helm. Visit us online or reach out to one of our helpful staff today to see what the benefits of professional representation can offer you!