4 Essential Questions to Ask a Commercial Real Estate Agent

“I’d buy it. It would be a great investment.”

How many times have you heard this phrase from an agent when inquiring about a property?

How many times have you heard agents tout properties that no one in their right mind would buy unless they were looking to lose money? Like parents who think their kids are the smartest, it seems to be the default response from agents and brokers that the properties they represent are always the best investments you can make.

Look, I love real estate, but the reality is not all real estate is a good investment. There’s a reason they’re giving away properties in parts of Detroit. If all you have to do is promise to renovate them to receive title free and clear, why are so many of these properties still available? Because they’re not great investments—at least in the eyes of investors who know what they’re doing.

At one point in my investment career, I started paying attention to those agents and brokers who had a habit of saying, “That’s a great investment,” vs. those agents and brokers who spoke a different language, the language of an investor—my language. I started taking inventory of the tendencies, habits, and language of both groups of agents/brokers. Here’s what I found and what questions you should ask when searching and evaluating brokers/agents to find someone that’s right for you.

1. Are you a seasoned investor?

House flipping doesn’t cut it. Agents/brokers who have invested in the commercial real estate class for the long term know exactly what’s important to you and speak your language.

There’s a stark contrast between agents who are experienced investors and agents who are not. If they have never put their names on the line, they don’t understand all the potential risks or the potential rewards from a CRE investment. Agents who are inexperienced investors sound like salesmen and they’re more concerned about the delivery of their message than the substance of it. They talk in generalities, saying things like, “This is a great investment.” “This is a great part of town.” “You’ll never regret buying this property.”

The agent who is an experienced investor will be more detailed. They’ll talk about acquisition and disposition cap rates, internal rates of return, CapEx, local job growth, local economic indicators, specific demographics about current and potential tenants, market rents, value-add opportunities, etc. They know what’s important to you because they’ve been there.

Agents who have invested in CRE themselves approach their roles as agents more like a business and less like a job. They’ll see their relationship with you as an investment because to them, CRE investors are ideal repeat customers. If an investor finds a gem through an agent who took good care of them on a past deal, they’ll keep going back to that well and keep using that agent and even send referrals their way.

The investor agent thinks long-term, the salesman agent is only concerned about closing today’s deal and has no problem burning bridges as long as they make their commission on this property.

2. Are you currently investing, and in what asset class?

Just because someone invested back in 2001 or 2008 doesn’t mean they understand the risks, rewards, opportunities, and trends prevalent in the current market.

You’ll also want to look for an agent who invests in the same asset class. The knowledge and skills required for and obtained from investing in industrial properties don’t necessarily translate to investments in multifamily. The tenant profiles, economics, marketing, and financials are very different between the two classes. That’s why it’s important to work with an agent who has experience in your target asset class.

3. How well do you know the area?

An investor agent is knowledgeable not only about the specific property you’re interested in but also similar properties in the same neighborhood, surrounding communities, and even in the state and region.

They know the job and immigration numbers. They know the short-term and long-term economic forecasts and all relevant underlying economic metrics and facts relevant to your potential investment. And they know how to communicate all this relevant data to you so you can make an informed decision. It’s the same information they would rely on if they were investing for their own benefit.

4. How large is your network?

An investor agent will have valuable contacts that could potentially save you significant time and money. An agent that can recommend reputable contractors, property managers, accountants, lawyers, marketing experts, and cost segregation firms can be an invaluable resource.

You may be hesitant to work with an agent who may also be your competition, but the truth is, they can be the best resource to work with in terms of avoiding bad deals, finding great opportunities, and reducing time and expenses. They can’t buy every deal that comes across their desk, so it’s possible to maintain a symbiotic professional relationship without getting in each other’s way.

In my personal experience, I often find myself passing along great deals to my clients if the timing isn’t right for me. That’s why you shouldn’t pass up an opportunity to work with the right agent even if you have hesitations. The benefits far outweigh whatever potential pitfalls you perceive.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.