Sep 23

How Investors Can Save Thousands By Following These 4 Simple Rules

By Wendy Papasan

Before I became a Realtor, my husband and I were approached by a real estate agent who invited us to get involved in an investment where we were promised a fantastic return. It felt too good to be true, but we trusted the Realtor. Long story short, the contractor was crooked, he left the country with our money and we got a half-finished home and no money to finish it. The bank loaned us $150,000 to finish the home and we sold it for a $150,000 loss. 

We like to think of this not as a failure, but as a $150,000 investment in our financial education. One of the MANY lessons we learned was the importance of finding an ethical agent with experience working with investors. 

Most experienced investors are looking for agents who understand investing and are investors themselves. A competent agent can help you avoid a $150k “lesson.”  

1. Create Investing Criteria

Everyone who’s interested in investing, should take some time to ask themselves questions about what they really want and desire in an investment. Narrowing down what you’re looking for actually makes hunting for a property easier. Some questions to ask yourself: 

  • What is prompting your decision to buy an investment property? 

  • Why is that important to you? 

  • Are you more interested in cash-flow or appreciation? 

  • What kind of return on investment do you expect? 

  • Would you be willing to fix it up or would you like it move-in ready? 

  • What are the top three things your investment needs to have? 

  • Are you comfortable investing in other areas of the country?

2. Work with an Agent Who Understands Investing

The most important thing you need to look for when interviewing agents is to make sure you are working with an agent who is an investor! Just because they are a good residential Realtor does not mean they understand investing. Some questions to ask to ask your prospective agent:

  • Are you an investor? 

  • What kind of investing have you done? Have you worked with multi-family? Fix and flips? Apartment complexes? 

  • How long have you owned rental properties and how many properties do you own? 

  • How many investors have you worked with? Have your deals closed? 

  • Do they have access to off-market or pre-MLS properties or will they just set you up on a search on their web-site and hope something great comes along? 

3. Look For a Fiduciary Agent

In my market in Austin, TX, there are more than 14,000 agents and the average agent sells 1-2 homes/year! Would you hire a heart surgeon who only did surgery once every 6 months? And while real estate sales obviously aren’t life or death, for most people their investment is their largest asset and a wrong move could bankrupt you. Ask yourself these questions: 

  • Is real estate your full-time job?

  • Can your agent do more than open a door for you? 

  • Will your agent evaluate a deal for you using a pro forma? 

  • Are they a good negotiator?

  • Will they help you understand “the numbers”

  • Are they ethical and do they have your best interests at heart? 

  • Do they understand different areas of town and what the investments possibilities are in each area? 

  • Are they a local economist who happens to specialize in real estate? 

4. Find a Realtor who has a great “Team”

Most agents are solo agents, but that doesn’t mean they can’t have a great team around them. Look for agents who have a seamless network of vendors and partners. Ask your Realtor if they can connect you with:  

  • Lenders and mortgage brokers that are familiar with investors. Different brokers have different products that may include construction loans, loans where you can roll in remodeling costs, etc. 

  • Vendors who can help with remodeling and repairs, including contractors, plumbers, electricians, HV/AC repair, interior designers, etc

  • Are they connected to an investor network? For example, do they have access to wholesalers who send them off-market deals? Do they regularly meet with other investors to stay relevant. 

  • And perhaps most importantly if you are investing out of state, do they have several vetted and qualified property managers that can help you begin your investing journey. 

Working with an experienced Realtor who has both your best interests at heart and experience investing themselves, can make investing safer, easier and more enjoyable. The key is to do some research before jumping in with both feet. You’ll need to do your diligence around what you’re looking for in an investment as well as what you’re looking for in a Realtor.