Real Estate is a Team Sport
Licensed Real Estate Agents/Brokers are Invaluable Resources
By Doedi Meyer
We all know investing in real estate takes some combination of knowledge, money and time.
In the REI INK November 2023 article “Industry Professionals That Can Accelerate Your Investment Career,” Nate Zielinski mentions several professionals whose help and expertise are invaluable. In the category of Real Estate Brokers, Mr. Zielinski mentions mortgage brokers, lenders who can help the investor find the terms that make the deals work. This is a very important part of the game, but to go one step further, there is another industry profession in the Real Estate Broker category: a state licensed real estate agent or broker, preferably one who is also investing in real estate for their own portfolio.
Licensed real estate agents/brokers who are also knowledgeable investors have a larger, more varied playbook than those who have only listed and sold properties for clients.
Just as you would not hesitate to leverage the skills and efficiencies that come with the hiring of a property manager, CPA or attorney when needed to scale your portfolio, working with licensed real estate agents in the real estate transaction can increase your productivity, deepen your knowledge of the area, and improve your reach into areas beyond the local area. If you live in California and want to invest in Texas, that’s a lot of ground to cover. By establishing a client/agent relationship with agents and brokers in the areas you are interested in, you will have boots on the ground that have local area expertise.
What they are called varies by state: some states may call everyone a broker, and some states distinguish between an agent and a broker by the level of education, training, and testing. Many have taken the extra step and joined the National Association of Realtors®, the largest trade group in the country. Realtors® are held to a higher ethical standard and have sworn to uphold the Realtor® Code of Ethics.
They all have some level of fiduciary responsibility to their clients. By adding one or more of these players to your investing team, you can put a lot of skills and knowledge to work for you.
So, what are these skills and how do you find an agent who has the expertise you need?
Training and Experience
A clear overview of the playing field is a great start. An experienced agent who has gone above and beyond the basic required training will know the ins and outs of the entire process. They’ll also have contacts they’ve made over the years to further leverage their value.
Timely Expertise
Are the national housing market headlines applicable in the area you want? Often the media generates a lot of fear and uncertainty. Your investing decisions require more confidence. The right agent will have in-depth data on their area to clarify how these headlines do or do not apply to your goals and your preferred area.
Pricing and Market Value
You have likely heard the phrase, “You make your money when you buy your investment property.” We are back to the value of data, and it is likely the agents with local area expertise have the most access to the data you need.
To buy at the right price, you will need to know comparable sales prices of properties in various conditions and what the potential lease rates will be if you want a long-term hold.
When selling, it may be tempting to go with a higher asking price, perhaps recommended by an agent who is anxious to get the listing. Overpricing property almost always has negative consequences.
Studies show that as days on market increase, buyers start discounting the property and asking the dreaded question “What’s wrong with the house?” The agent who has the data and knows how to use it can explain the current market and the competition. The data-driven conversation is important when you make your purchase offer and when determining your listing price. And ask the agents you interview to give a detailed description of their process for selling the property.
Contracts and Details
Contracts. Disclosures. Do I need this particular document to protect myself in the transaction or not?
Agents cannot give legal advice or draft documents (unless they’re also lawyers), but they have a lot of training that can guide the transaction to the finish line while minimizing the chances for liability and future complications.
More than a Sign in the Yard
Everyone knows about For Sale By Owner (FSBO). In the world of searching for investment properties, we know that sometimes those are a possible source for a good deal. So, what does that tell you about selling an investment property for top dollar? The answer is, don’t go FSBO. Effective listing agents have strategies, marketing tools and networks to attract more buyers. And since they do not get paid until the deal closes, the marketing dollars they spend do not come out of your pocket.
Negotiating
Whether you are a full-time investor or have a day job, this all takes time. When you have that great agent on your team, they take care of all the details, so you don’t have to. They will also offer suggestions on viable negotiating strategies and act as a buffer between you and the other side of the transaction, and may be able to gain more insight into what the seller or buyer really needs to make the deal happen. (Hint: it might not be a higher price.)
Developing one or more relationships with licensed agents in the areas you are interested in can save time and effort. Take the time to meet agents at real estate investing meetups and networking meetings. When you find the ones who click, build the relationships.
One last thing
Generally, real estate agents work on commission. They get paid when a deal closes. When you build a relationship with an agent and they know you will offer opportunities for closings, they will likely be willing to share information between deals. But just as you would expect to pay the other professionals on your team for their work, negotiating compensation for frequent or extensive work on market analysis, researching particular geographic areas or brainstorming strategies can go a long way to keeping a great agent on your team.
