Time for a new agent?

Question

Hi BP community. I've been struggling with something recently that I was hoping to gain perspective on from those who have been there and are more experienced than I.

I've been working exclusively with an agent for the past ~1.5 years of my real estate investing journey. She's been great overall and has epitomized "trusted advisor" status, finding and helping me close on 3 SF properties in the Nashville area.

The past 6 months have not been so great however. I switched my focus to small multifamily and have asked for help again, but she has not sent me one small MF property to view. Instead, I've sent her several small MF properties over this period and asked for her perspective. She has provided this along with virtually showing me the properties when appropriate (I'm out of state), which have resulted in 3 offers but none accepted.

I don't blame her for the offers I made not getting accepted, but I would really like her to be more proactive in sending me small MF properties like she once did for SF properties. Recognizing the market has heated up substantially since we first started working together, I'm not sure if I should chalk this up solely to that or if she is simply just not very interested in helping me land my first small MF deal.

A few things I do know from trying to feel this out with her myself is that she personally favors SF properties over small MF properties, and seems to be constantly busy working on larger deals for wealthy clients buying in the $1M+ range. While my budget isn't that high, I do think it is attractive enough being in the $300K-$600K range. I asked her directly if she was too busy to help when we first started looking again to which she confirmed that she wasn't.

Should I be considering a new agent at this point or is this just how things are in today's hyper-competitive market when working with an agent?

I don't want to work with a new agent, as we've built a great relationship and significant trust, but I'm also adamant about landing by first small MF deal by early Feb as I will be moving out of the country and want to offload management of my portfolio to a property management company. It is also painful watching my hard earned dollars wasting away to inflation while sitting in my Ally "high yield" savings account waiting for an opportunity.

--Ryan

Luka Milicevic · Answer

@Ryan Lewis I work almost exclusively with out of state investors like yourself and can comment on a few things here....

If someone doesn't know/understand multi fam then it's difficult to land a deal with them. This agent is a SF agent. That's what she does.....

This is something I've seen a ton happening in Nashville right now with agents....if you are at a low budget you are going to the bottom of the list. I've heard it time and again. You can't really blame agents for prioritizing high dollar buyers over small dollar buyers. We have a TON of California folks in our market all over a $1....

What you are looking for is also very difficult to find. There just aren't that many small MF out here. You're also not going to land a DEAL via an agent. You're just not. If it's on market you are going to pay full retail price. If it's off market via a wholesaler.....you're still going to pay full retail lol.

That's just the nature of the game right now. There are a lot of buyers and not enough sellers.

Hope that's somewhat helpful....

Account Closed · Answer

You should never ever feel like you need to be loyal to a real estate agent or broker and this subject comes up all the time on every real estate forum and I can write about the reasons forever.

The problem with dealing with and trusting one broker is you are limiting yourself to only the properties that broker offers you and you are most-likely missing out on many golden opportunities when other brokers have better deals and pocket listings where the properties are not available to the general public. If fact, most properties I ever purchased were pocket listings.

I find that very few brokers know how to do the math for multi-unit properties and while you may think you love your broker you need to realize that virtually every broker tells you that every and any property is great for you as long as you are willing to buy any property from them so they can earn their commission.

I go to many real estate club meetings, meet many brokers and almost get into fist fights when brokers tell me that single-family properties crank out better profits than multi-unit properties and that indicates that many brokers are ignorant about doing the math for multi-units, don't care enough about their clients to learn and they have an agenda that does not align with your agenda.

I just made a fairly decent video on youtube that explains a software app you can download for free and I explained how I do the research and math for multi-unit properties. You will never find this information in any book nor will any broker every tell you.

Go to youtube and search blprei multi-unit.

It sounds like your current agent does not know the answers to what you are looking for. I call brokers on the phone in several states almost every day and I am very disenchanted with the answers I get. You can never trust a broker and you have to realize brokers are like car salesmen. No sane broker is going to tell you there is a better property to buy from another broker. No broker will offer you important information upfront that you need to know so you don't buy a property from that broker and buy from a different broker. For example, I was looking at a $4 million property in Cleveland and the marketing package showed all the current expenses that were accurate and listed the property taxes as $48,000 per year. I called the broker and had to ask whether or not the $48,0000 taxes were correct for the buyer and he sent an email with all sorts of calculations and the buyer's property taxes would be $198,000 per year. This made the purchase so bad I would have been hit with a negative cashflow that would have been impossible to recover from. You cannot trust nor rely on the sole information you get from brokers and you need to shop with every broker you can get to send you properties that are for sale.

I purchased a property not long ago from a broker who I thought was honest and my friend, but he keeps sending me seriously bad properties for sale and always presents them as being a great deal in the beginning. When I tell him about the downside to each property he immediately agrees with my assessment and that raises the hair on the back of my neck.

I had a real estate agent who worked for Century 21. Her and I lived in Sandy Valley Nevada (a town with about 3,000 people). I purchased 28 single family homes between 2008 and 2010 at a live auction and I paid her 1% to 2% of the purchase price only to help watch over the escrow companies because I own several other businesses and needed someone on my side. I also purchased a few properties through her the conventional way and she won Salesman of The Year two years in a row at her Century 21 office. The, she kept sending me listings for properties and she told me how great they were. She sent a property in Sandy Valley that consisted of a restaurant, post office and two novelty stores and told me the property was for sale for $280,000 and was a goldmine. I immediately told her I thought the property was worth $180,000 and she immediately agreed with my assessment. I can't remember, but the property sold for $160,000 or $180,000 to someone else. This was about 10 years ago and two of the stores have been vacant since that time. Then, after a while I got angry with her and ignored everything she sent my way.

Steve K. · Answer

This is likely due to one or both of these two things: your agent doesn't really work in MF or there are simply no MF properties to be had in your market. In many markets right now, only a handful of small MF properties are changing hands each year. Most of them are traded among a small group of commercial brokers who specialize in small MF. How many small MF properties has the agent sold?

What I would recommend is prospecting for your own deals off market anyway. Send "sincere request" letters, research properties you'd like to buy and contact the owners directly by looking them up in public records and skip tracing their contact info, network with wholesalers and property managers and the small handful of agents doing all the MF deals, etc. It will be hard to find a successful agent who works in both retail luxury SF and MF and also has the time to do this legwork sourcing deals for you, so you will probably have to do it yourself. You could still have her write the offer and manage the sales process for you, seeing as you like and trust her and being remote you need a trusty pair of boots on the ground. But sourcing small MF deals in an extremely tight market is a lot different and generally both a lot harder and less rewarding than selling luxury homes.

Theresa Harris · Answer

Talk to her again and tell her you want to buy before the market heats up in the spring.  Explain that you know she prefers single family and if she can't find you a multifamily, ask her to suggest someone who specializes in those.

Ryan Lewis · Answer

Thank you Karen.

It's worth clarifying for all that I am certainly NOT blaming my agent for anything, and tried to articulate as such in my post. I'm simply just considering if changes should be made or not.

Account Closed · Answer

There are 10,000 plus more questions that need to be answered and those questions should be answered only by investors who have extensive experience with both single-family and multi-family investing and not answered by an agent or broker who sells properties for commissions. A strange thing I notice many years ago is a high percent of real estate agents and brokers were not real estate investors. My mother was a real estate agent for many years, sold many properties, never invested in a property and gave me horrible advice that almost wiped me out.

No investor, agent or broker should tell an investor that single-family investing is better or worse than investing in multi-units. I made millions of dollars investing in single-family homes when I purchased them for 30 cents on the dollar between 2008 and 2010 and I made 20 times as much investing the same amount of money in apartment buildings. Every single-family and multi-unit has its pros and cons and needs to be analyzed.

I will always make my claim that it is much easier and more-profitable to manage 4, 10, 20, or 100 units under one roof that to manage the same number of single family homes. In 2020 I sold and gave my children 26 of the 28 homes I owned in Las Vegas because even though I paid cash for every house and paid only 30 cents on the dollar for each one the constant breaking down of the air conditioners was eating up my profits, every time a tenant moved the cleaning and carpeting cost me $6,000 to $12,000 and for the past 2 or 3 years I had a property management company and the errors they made and costs was sucking up all my profits. So, I sold and gave the homes to my children, did not do a 1031 Exchange because the homes were sold over a long period and I paid the capital gains taxes, purchased a 6-unit in California and paid every mortgage I had on my apartment buildings and I save $180,000 every year from interest charges.

I will always look for multi-units first and buy single-family only if I can find one for 40% or more less than the after repair value. The big money is made from appreciation and not from collecting rents. The difference between single-family and multi-units is multi-units appreciate in value when you increase rents and single-family homes do not increase in value when you increase rents.

So, if you own a 10-unit property that you can sometimes purchase for the price of a few single-family homes the numbers work like this:

10 units x rent increase of $100 per month = $1,000 per month more rental income = $12,000 per year x 18 Gross Multiplier = $180,000 you increased the value of the property by increasing the rents and you cannot do this with single-family homes.

Then, suppose, you have a cashflow of $400 per unit when you purchase the property. Then, in your first year, if you raise rents the day you close escrow, you earn 10 x $400 = $4,000 per month x 12 months = $48,000 + $180,000 you increased property value = $228,000 + the extra you earn the first year for cashflow by increasing the rents $100 per month = $250,000 profit your first year plus the paydown on the mortgage that is paid from collecting tenant's money for rent = about $270,000 to $280,000 in profit your first year plus you need to add to that depreciation you get from the IRS.

Suppose you put down only $300,000 to purchase the building. In that case, you earned almost a 100% return on your money in 1 year. Try doing that with a single family house and then try to tell me that investors should be steered toward single-family.

Joseph Hammel · Answer

I used to be an agent while investing as well. Some agents are believe it or not, not that ethical. I'm not saying that about yours but rather the selling agents. Sometimes my approach is to go to the selling agent of the property. They will be more motivated to make a deal go your way if they are getting all the commission and not splitting with a BA (buyers agent). Second reason is they may have a deal that came to them that has not hit the market yet. Or a seller who doesn't want it on the MLS. This might be larger complexes for higher money that they only want to talk to serious investors about. You would be wise to contact several agents and have a chat about your investments you have made, your goals, what you have for funds available, financing ect. You mentioned looking for a PM. This type of networking could help get a recommendation for a rock star PM. For that matter call PM's, lawyers, ect you might stumble into your next deal? Good luck and Merry Christmas to you as well!

Allen L. · Answer

Definitely look for a new agent. This agent is a "homeowner's agent" and she prefers to work with SFHs. I would not care so much about a relationship with this agent, it doesn't even sound like she's a top realtor or has access to off market deals for investors. In general, treasure business relationships where you gain access to exclusive value, not amount of time spent or experiences shared. Also, I generally don't like to use agents for advisors, they are transaction facilitators, supposed to grease the wheels so that you can close on favorable terms, most are not interested in making you the most money on a deal.  Get a better transaction facilitator and someone that works more with investors.  Move on.

Ryan Lewis · Answer

Thank you all for your posts, great food for thought. Wishing all a Merry Christmas.

Natalie Schanne · Answer

@Ryan Lewis - Trust is important. It’s also nice to know you have an agent who likely won’t compete against you. First things first, ask your agent to set you up on MLS auto alerts for any 2-50 units in your area. If she doesn’t know how to do this, every MLS has a help line. In BrightMLS which is a matrix platform, I’d tag you for commercial apartment building (any) and multifamily (any unit count) in your target county or counties or x distance radius from your target area. If you’re not receiving properties, either they’re not being listed on MLS, or you haven’t been set up for alerts. Some agents have their pulse on Single Family properties and so they want to “hand pick” Single Family for you. tell her you don’t need this. When one pops up, ask her to talk to the listing agent to get the scoop on the revenue, expenses, lease terms, etc.

Second idea is… hire a VA for cold calling (or diy) and send letters, postcards, texts (with forwarding to your cell phone) to owners of properties you want to buy. An experienced cold caller VA company costs $6-10/hr and will result in 1 lead every $50 or so (better or worse results depend on the motivation of your list). Postcards printed, stamped and mailed run about 50c and Letters $1-1.5. The direct mail will result in inbound leads directly to you. The cold calls will result in the Va giving you names and addresses of people who have offered to discuss selling their home. Usually you have to commit to your VA’s salary so my first one is running about $1000/mo. Direct mail you can scale up or down as you wish but most people suggest mailing at least 6 months.

Consistently, I’ve found if I’m talking to absentee owners landlords on the phone after having skip traced numbers, they’re nice. You can’t convince anyone to do anything they don’t want to, and you can chat about being a landlord.

Anyway, after you have the terms worked out (Ie like virtual wholesaling), you can send your agent to help you close the deal, perhaps for a fixed fee, as your boots on ground. (Or you can just use your existing handyman and contractor contacts). The service provided will be worth $1-3k, not 3% of 600,000, (18k) unless you think she can negotiate money off the lowest you agreed to with the owner.

Ask your agent to help you get the addresses for free from the property records. (Some places it’s easier than others to sort by unit count - in some towns “duplex” is actually a “half a house” / 2 single families sharing a common center wall, instead of you owning two full rentable units.

Time for a new agent?

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