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’ll need the help of someone who can act as a kind of mentor to help you figure this whole investment thing out. Investing in real estate involves dealing with dozens of variables. 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.
A good Realtor will be a resource for you long after the deal closes. It’s not just about today’s transaction, but about the long-term relationship – before, during and after the deal.
Referrals are the best way to find a Realtor. Talk to people at work or your family and friends. I don’t recommend relying on Google or other online sources of reviews and recommendations unless you’re new to a city and don’t know anyone. The real estate agent who negotiated the successful purchase or sale of your home might not be the right person to help you find an investment property, but he or she should be the first person you ask for recommendations.
When you’ve narrowed your search to one or two agents, look them up online to find out about deals they’ve been involved in or whether their name has appeared in the news. Ask a trusted advisor, like your lawyer, if they’ve had any dealings together. Check local licensing authorities for ethics and standards violations. (The Real Estate Council of Ontario, for example, lists the results of regulatory activities and decisions on its website.) It’s all about doing your due diligence.
Here are five qualities to look for when choosing the right real estate agent:
A good investment-focused Realtor is someone who will listen, follow up and will honestly tell you if the deal you want is a bad one.
An agent with a great reputation in the market you want to invest in – not just with clients and other investors, but also with finance companies and other Realtors – can open doors to great networking opportunities.
You need someone who will work hard for you. Sometimes the best buys aren’t for sale yet.
Ask a potential agent to tell you about a time when they 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 where you want to invest and the type of property you’re looking for, and then he or she will hit the streets and knock on doors.
Many times, this has proven to be the best strategy for my clients. By knocking on doors, I found two houses side-by-side for a client who bought them, tore them down and built townhomes. I recently referred a client to an agent in one of the offices in my region – the client wants to sell two properties (a commercial building and a coffee shop), then 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.
Effective questioning and great communication skills are critical. Your 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 questions of your Realtor, but also that he or she knows the right questions to ask you: 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 better able to help you determine the right type of investment and strategy to achieve your goals.
Your Realtor should understand the terminology and the numbers involved with investing. You need a Realtor who understands phrases like ROI and cap rate, and knows 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 next issue of CREW, we’ll look at creativity, paperwork, strategy and more as we explore five more essential qualities of an investment-focused Realtor.
The agents at EXIT Realty have helped thousands of Canadian investors make the right choices. To contact an EXIT agent in your area, or to learn more about what the company can do for its investment clients, visit exitrealty.com.
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