What's your definition of an "investor friendly realtor"?

Question

I met with a couple recently who was interested in investing on Oahu. They mentioned how their previous realtor told them that purchasing a single family home here (in a middle class neighborhood) would be a great investment. I was shocked. For the amount of money they had, a single family home in that neighborhood would be borderline terrible. I wish I could say this was the only experience I’ve had like this. Realtors buy and sell properties. Few are good at real estate investing.

What's your definition of an investor friendly realtor?

If someone is looking for a realtor who will write lots of offers for them, then any realtor will be fine. But if they are looking for a realtor who will help to grow their portfolio, then most realtors will not work out.

For me, the biggest criteria would be a realtor who personally invests in the market they cover. As in most things, it is difficult to lead from behind. Ideally, they will have been investing since before the recession. The last few years have made everyone look smart. Second, a realtor who is more concerned with growing their client’s portfolio than they are about selling properties. They’d prefer to have no sale than the wrong sale (i.e. one that makes poor financial sense). This would assume the realtor could decipher between a good and bad investment. Unfortunately in Hawaii, realtors who meet these two criteria are found in isle 10, next to the unicorns. ;) I would imagine this is true in most states.

My intention for this post is to help those starting out in investing. I hope the comments on this thread will produce a collection of helpful criteria in identifying a truly investor friendly realtor. One that will help a new investor grow their portfolio and not just sell them properties.

Chris Mason · Answer

I'll share two things I've come across:

@Wes Blackwell has a spreadsheet, updated weekly, that tracks every single 2-4 unit listing in his two core markets of Sacramento and Stockton. It includes metrics like cash on cash ROI, cap rates, DOM, etc. Blew me away when I saw that. I have no idea why more agents don't do that. To the best of my knowledge he is the only one in those two markets doing it, and good luck showing up late to the game at this point and trying to cut into his market share. Sure as hell makes me look good when I refer folks to him as THE expert in 2-4 unit properties in those two markets, and he knocks the REI socks off with something more comprehensive than they've ever seen before. I'd love to see someone do that in Oakland and/or the core East Bay (hint freaking hint local agents getting this keyword alert that know me).

Another thing I have seen only one agent do is, to deal with everyone listing low in the Bay Area, she does basically a CMA on the listing agent (in addition to normal analysis stuff). Using long term averages of a listing agent's list prices to final closed sales prices, she basically "backs into" the real asking price. This is in contrast to the more common ham-handed approach of just tacking $100k onto the list price. Not all agents consistently list exactly $100k low. Some are 20%, some are $75k, some are 15%. So if you're just randomly tacking $100k onto list price, there's a very good chance you're leaving money on the table. Not only does she not have her clients leave money on the table (& she has the data to validate that), but her percentage of offers accepted rate is stunningly higher than most other agents. She is actually not investor friendly and most of her clients are vanilla owner occupants, but I see no reason why others couldn't step their game up and use this. I'm happy to share this one because inaccurate list prices annoy the hell out of me (& my appraisers), so anything undermining it, I like. :)

Loren Clive · Answer

I totally agree @Isi Nau with For me, the biggest criteria would be a realtor who personally invests in the market they cover. So you need to ask: how many homes do you own? How many rental properties do you manage? How many homes have you flipped?

Realtors who are investors themselves will have the contacts to get things done and will have firsthand knowledge of rental values and solving all the problems that come up for investors. It kills me how many realtors, even after 20 years in the business, are themselves renters and don't even own a house.

Another factor is being able to do an accurate CMA. And knowing how much repairs should cost. And how to get them done for less.

And knowing the financing side. I was recently working with a client who just refinanced his primary residence. He was looking to up his purchasing power on a new primary, and I suggested that he secure a HELOC on the current primary first, as HELOCs are easier to get on primaries, before purchasing a new primary residence. I would not have known to suggest this had I not employed the same strategy myself to purchase my second home. The client really appreciated that insight.

@Michael Lopez agreed, any client that expects you to cut your fee is not a client you want to work with.

Mary Shea · Answer

@Isi Nau I 100% agree with you. Before I got my license I worked with an agent to find flips on the MLS. We wasted a ton of time looking at properties that had no investment potential, which lead me to get licensed. Just because a house is in disrepair does not mean it will be a good investment. On the other side of the coin, a house doesn't have to be in disrepair to make it a good investment. If you are working with an agent, work with one who also invests. The investors who work with me know I won't send them anything that doesn't pencil out, and that I know what I am talking about when we walk the property and do rough rehab calculations. I also share most of my sub contractors info with them as an added bonus so they can get them lined up quickly and maximize profits.

Aaron Lovett · Answer

The average person uses the word "investment" very differently from the way an investor does. For some "invest" is synonymous with "spend money". So in that sense, yes, plenty of real estate agents and home buyers will say that any home purchase is an "investment". They usually mean that even if they pay a fair market price for the property, if they live in it for a few years and keep it maintained, they expect to build equity in it.

However, and to @Russell Brazils question, an "investor friendly" real estate agent needs to understand and serve the goals and strategies of his clients. I find that different investors have very different formulas for evaluating deals, even when evaluating the same properties for the same purposes. And of course, there are lots of ways to invest in real estate, even just residential properties. So, the better I understand the investor's playbook, the better I can work for him.

Some investors need education, information, or insight, but most just need help getting access to properties quickly and an experienced agent who will do the legwork and write the offers. Ultimately, whether or not I agree with the investor's strategy, I'll either serve them well to help them reach their goals or decline to work with them at all and wish them the best. I'll be friendly in either case. ;-)

Michael Lopez · Answer

@Mark Waite I get a little protective for those agents that find themselves lost because I was there when I first earned my real estate license. Some agents find themselves trying to work with investors thinking that it's the best way to start earning a living, but find themselves working in an area of real estate that is not the most beneficial for their career. This is not the fault of the agent because they don't know any better.

What I am saying is that if there is a situation that an agent makes a statement about an "investment" that doesn't really make sense, it's one of two things: either they don't have a clue, or they could care less and are not looking out for the end user, but that applies to everyone, investor or agent.

I am on the same mind set as you. When we all decide that we are here to provide help for someone else, we will finally see the type of success that we were all thinking about or looking for when we first got into real estate. Good luck and God bless!

Michael Lopez · Answer

@Isi Nau To answer your question in the heading of this discussion. In my experience, an "Investor Friendly Realtor" is one that would be willing to search for properties and write up numerous offers in order to lock up properties for the investor who he/she is working with. Most investors ask their agents to take less in the commission or get paid a flat fee, but would like the quality guidance and support to make deals happen. That is what an investor friendly agent is to many investors. For the investor, this will keep the cost down and time to close a deal that best meets their criteria.

On many of the BP podcasts, you will here the investors say that they won't ask the agent to take less because they should be getting paid for the job they do. I agree with that and don't think that it's @Mark Waite's definition of "commission breath" at all, but does that now make me or any other agent one who is unfriendly to investors? I believe a great team can be created if both can respect what the other does for a living and at the end of the day, everyone gets to eat.

Now, I also agree with other posts here on BP that many agents need to understand what a good deal looks like, but may not know because they are either new or have never considered working with investors. In any case, that is a communication and education problem that can be easily resolved.

I have had investors on BP ask me to take less and have said that since I am submitting more contracts that will equal more pay. What the agent is not aware of is that this is not always the case. If you are working with multiple investors that may be the case, but trust me, investors are working with numerous agents and wholesalers which decreases the opportunity for an accepted contract.

Finally, if an agent understands what a good deal is, then less contracts are delivered, but more contracts get accepted and everyone wins.

Personally, I will not take less commission, but that is just me, commission breath or not. If I could get a nickle for every client I took to a property that was "rehabbed" and embarrassingly wanted to walk out knowing that the investor was only trying to make as much money as possible without considering that a family would be moving into the home. I would use that money to take a one month vacation in Hawaii like @Brandon Turner did last month. We are here to help homeowners and renters. We and everyone in our great industry can shine like a beacon of light if we are able to provide home ownership that everyone can be proud of.

Full Disclosure:

I have worked in the hardwood flooring industry for over twenty-five years and have been in hundreds or maybe thousands of rehabbed homes. I became a licensed Florida Realtor almost two years ago and have been on BP for almost just as long.

I have only flipped one home which obviously does not make me a professional investor, but it did actually help land a private investor. (Yes, I know that is definitely not the case for the majority of investors.)

By the way, if you consider going from a Pro account to Basic your account is closed and you will have to open a new one. So any contacts, colleagues, posts, awards, BP friends, or whatever else you may have accumulated over the time you've been a member will be gone.

Mark Waite · Answer

As a realtor who works with investors, I believe that it is critical to understand what the client is looking for before ever making a recommendation. Kind of like going to the doctor and he prescribes a Z-pack without ever knowing your symptoms!

If you take the time to shut up and listen, you can learn a lot about what is important to the investor before ever bringing potential deals to the table. I also believe that it is my job to help do the initial screening of potential deals that might fit my client's objectives. And, as a local market expert, I should be the one to understand that pro's and con's of areas and types of properties to invest in (as well as the pros and cons of each). For example, if someone were to say they wanted to buy a SFR and get into doing vacation rentals, they need to understand the unique challenges of doing that on Maui. Its not impossible but it doesn't happen overnight!

At the end of the day, as a realtor, we should be a trusted advisor to our clients, providing information to help them make the best decision. It is unfortunate that, in the example cited by @Isi Nau it sounds like the couple was given bad advice by a realtor with "commission breath!"

Levi T. · Answer

IMO it is one who will feed me off market deals, pocket listing, before they hit the market. I pay them standard commissions, and get it closed before they even get a contract on it. They just bring me a deal that fits what I told them I look for. They know when someone calls them to sell and the owner says they can sell that ugly house for x price, they have a buyer just one call away.

Nothing irks me more than a real estate agent that want's to feed me deals by singing me up for a MLS saved search email list.

Russell Brazil · Answer

Can you elaborate as to why that property is a bad investment? I have a feeling that you will end up describing the exact kind of property I invest in.

Mark Waite · Answer

@Michael Lopez Michael, I'm not saying every realtor has commission breath but, let's be real, there are many who are more focused on what they might earn as opposed to evaluating what may or may not be a good deal for their client. I've worked with investors on deals where I've made a one percent commission. I do it because I am their trusted advisor on Maui and am looking out for their best interests, from acceptance through closing and beyond.

I am in 100% agreement with your statement that "we are here to help homeowners and renters. We and everyone in our great industry can shine like a beacon of light if we are able to provide home ownership that everyone can be proud of." Well said!

What's your definition of an "investor friendly realtor"?

What's your definition of an "investor friendly realtor"?

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