Reverse R.E market search: 1st find agent then decide which market. Thoughts?

[Dan N.]

Hear me out.
Usually the process is that first, you select a market you are interested in (especially for OOS investors) and then look for boots on the ground.

Over the past 6 months, I have selected a few interesting markets and have interviewed multiple agents in each of those markets.
One of the things I noticed is that the vast majority of agents don´t offer any unique selling point other than representing someone when an MLS property is found (either by buyer or by an auto search they set up).

In today´s market conditions, it is increasingly more difficult to find a great deal on market.

If I could find an agent who "drives for dollars", cold calls lists etc and actively searches for great deals, I would be willing to invest in other markets that are not on my radar.

Thoughts?

PS.
If you happen to have an agent who does these activities, I would love to connect with them, regardless of where they are (as long as they are landlord friendly states)

[Eric Fernwood]

Hello @Dan N.

When I started investing, the only value realtors provided was sending MLS data sheets for the properties I selected. Once I decided on a property, they facilitated closing. In my opinion, they contributed almost no value.

I do not agree that the order should be to find a good agent and buy where they are located. If your goal is financial freedom, then the investment location is the most important decision you will make.

Financial freedom is more than just replacing your existing income. It's about maintaining your current lifestyle for as long as you live. To achieve this, you need a passive income that meets two requirements:

• Rents must outpace inflation: If rents do not outpace inflation, no matter how many properties you own, you cannot achieve financial freedom due to inflation continuously eroding purchasing power.
• Income persistence: Financial freedom requires that your income lasts throughout your life.

Whether rents outpace inflation and how long the income lasts depends on the city where you invest.

Start with an initial list of potential cities and then eliminate any city that does not meet additional criteria. I started with cities with a metro population >1M.

✅ Economic stability. This requires a metro population >1M. Smaller cities tend to be dependent on a single company or market sector. Wikipedia

✅ Significant and sustained population growth. Use Wikipedia for population growth data.

✅ Low operating costs: The three most apparent costs for investors are income taxes, property taxes, and insurance. Tax Foundation, Insurance - ValuePenguin, State Property Tax Rates - Rocket Mortgage

✅ Low crime rate: Companies depend on attracting talented workers. Talented workers will not move to a high-crime city. Do not invest in any city on Neighborhood Scouts’ list of the 100 most dangerous US cities.

✅ Low risk of a natural disaster: The issue isn't your property. Insurance will cover the cost of rebuilding. The real problem lies in the community: jobs, stores, roads, healthcare services, gas stations - everything has been destroyed. Your previous tenants had no choice but to relocate. Without employment opportunities and essential services, they won't return. Meanwhile, debt service, taxes, insurance, maintenance, and other expenses persist without interruption. The best indicator of the probability of a natural disaster is the relative cost of homeowners insurance. The lower the cost, the less likely a natural disaster. Use this national homeowner insurance cost comparison site to compare insurance costs. Never buy in a state with high-cost homeowners insurance.

✅ Pro-business environment: Google search

✅ No rent control of any kind. Rent control is a strong indicator of an intrusive government: Google search

After filtering out cities that fail any of the above criteria, you will have a short list of potential cities. The next criterion is the existence of an experienced investment team.

Investment Team

Why is it essential to work with a local investment team? Podcasts, books, seminars, and websites only provide general information. You will purchase a specific property in a specific city with specific local conditions and regulations. Only an experienced local investment team has the local knowledge, processes, resources, and skills you need to be successful. I would consider another city if there is no existing investment team.

Also, working with an investment team usually does not cost more. For instance, we have delivered over 490 investment properties and charged our clients a fee on only four or five, which were exceptional circumstances. In all other cases, our fees were paid by the seller's listing agent, not by our client.

The leader of an investment team is an investment realtor.

Investment Realtor vs. Residential Realtor

While there are usually thousands of residential (or "investor friendly") realtors in a metro area, there are usually only one or, at most, two Investment Realtors.

Residential realtors enable people to buy or sell homes. The process is simple. Homebuyers select properties, and the residential realtor provides access. Once selected, the residential realtor facilitates the offer and the closing process. Some residential realtors occasionally sell real estate that will become rental properties. However, residential realtors provide limited value beyond supplying MLS data sheets.

Investment realtors enable people to buy rental income properties. Investment realtors are always part of a team because only a team of experts can provide all the knowledge, processes, and services needed for you to consistently buy performing properties. As an example, below is the process we follow.

Below is how we work with the property manager to validate investment properties.

How to Find an Investment Realtor

There is a process for finding an investment realtor. It starts with compiling a list of candidates. Get names of realtors from:

• Real estate investing websites (such as Biggerpockets.com)
• Property managers
• Local investors
• Real estate brokers
• Google searches
• Local meetups

Once you have a pool of candidates, the next step is to identify the investment realtor by using a set of interview questions.

Ask each candidate the same questions and record their responses. Below are some sample questions. It is unlikely to find a candidate with the "perfect" response to every question, but they should provide reasonable answers.

• Tell me about your investment team - You're looking for a response like, "I've worked with X property manager for years. We've completed X properties." "I work with several renovation companies...”
• Do you or have you owned investment properties? - If the candidate has not personally owned investment properties, I would reject them.
• How many investment properties did you close in the last 12 months? - Some realtors only sell two or three properties per year. However, this level of sales does not provide enough repetition to develop the necessary processes, experience, and resources. In my opinion, being proficient in this field requires selling a minimum of 12 investment properties per year.
• Did you or your client select the properties? This is an important question. Residential and investment-friendly realtors do not choose properties. Instead, they send MLS data sheets for the properties requested by the client. The client evaluates the properties and selects one or more to make an offer. If you do all the work, the realtor adds very little value. Reject any candidate if the client chooses the property.
• What were your primary selection criteria? - It could be the initial return, appreciation, tenant pool, or something else. You're looking for a plausible answer based on analytics, not opinion or “feelings.”
• How did you estimate rent and time to rent? - They should be able to describe a process like, "I look at recently rented comparable rentals." Another good answer is that they work with a property manager who supplies this information. If they answer Zillow, Redfin, Rentometer, etc., they do not know how to evaluate investment properties. Next candidate.
• Tell me about your renovation process. - You are looking for an answer similar to, “I work with the property manager to determine a list of renovation items. Next, I work with XXX renovation company.”

These should get you started.

Final Words

The most important investment decision you will make is the location. If you choose to invest in a city where rents have not outpaced inflation, no matter how many properties you own, your income will continuously decline until you are forced back on the daily worker treadmill.