All Forum Posts by: JJ Conway

When I started out as a Realtor (was in 10 years before leaping to financial planning), I did drive clients around to rentals because those were the small potatoes more established agents in our brokerage didn't want. Most of my peers would not take a client to a FRBO property that didn't guarantee a fee (either listing a flat fee or saying something like "brokers protected").  After all, who wants to spend days on a client and not get paid?  For the same reason, until the market crashed, they wouldn't take clients to see properties with low commissions either.

I think the agent was right to ask if you would pay them for the reasons someone else mentioned above (time spent with the client which helps the client understand what's available and what they like, probably will still help them review paperwork, and plus the agent can make the decision whether or not to help their client if anything else arises with your property/paperwork).  It's so much better to ask up front so everyone's clear.  That said, you have absolutely NO obligation to pay him.

A fun fact: you'd be AMAZED by the amount of seller-buyer collusion of trying to say they discovered each other on their own so that all can save on Realtor fees. In your case it's the truth, but the problem was so bad that our agency agreements with the client (buyer or seller) we stipulated they would pay commission on anything they buy during the agency agreement. I hated those clauses when I was a military spouse moving every 2 years. Then I became a Realtor and discovered why they're in the agreement!

I still took clients to see FRBOs and FSBOs because I wanted to provide the best customer service (unfortunately poor strategy), and also because I hoped to convert the FRBO or FSBO into one of my listings (very successful with this). So if you don't need an agent to help rent out the property, then great. But if your interest dies down, you might consider establishing a brokers fee.

Also, sometimes it's better to get along, sometimes even pay to play,  especially if this is your first rental. A good agent does more than just advertise (or, in your case, walk them through the process with a higher comfort level since he didn't bring them to you). And even if you don't like that particular individual, there could be some benefits in playing nice with his brokerage. There can also be some downsides to being perceived as rude (not saying you were) depending on how rural the area and which brokers are strong there.   Especially since this is winter- a tough time for rentals in any area (let alone a rural area) and your first deal where you'll go through the process of vetting the applicants. Not saying you 100% need a broker to run a background and credit check (you don't).  Just saying it's your first deal and you don't know what you don't know.  BP forms are some of the best I've seen as far as stock forms go, but they can't possibly cover all the "gotchas" of a local community that a good broker can help with. 

So while I'm not saying you should have worked with this guy, I am asking you to step back and realize he's not necessarily a jerk for asking if you'll pay him.  I feel like I'm rambling so I'll stop now. I hope that helps some and that your first deal goes amazingly well!

I felt the same way until I became a Realtor. I was gonna "do it right" and since we had a VERY large REIA, I knew there would be no shortage of investors to work with. Then I realized all that researching, looking, etc isn't getting me paid - especially with a new investors who either had very specific requirements or would nit-pick any reason to back out of a deal.

What you expect the Realtor to do will have them spend a LOT of time on you and never get paid.  Only a very new Realtor would be willing to do that.

If you want a top quality Realtor to work with you, my recommendation is a) find one at a REIA/real estate investment group and b) when those weekly or monthly search updates arrive, do as much as possible research beforehand to make sure it's worth wasting their time. Finally, not all brokers allow their sales people to be compensated in this manner, but depending on the brokers policy you may be able to pay the Realtor for, say, an hour of time each week doing research walking through properties with you and such. That way even if you never make an offer, and if you make 10 offers that go nowhere, that Realtor still puts food on his/her table. Just some suggestions that may not work for everyone, but worked for me.

I'm surprised to hear so many out of state investors pleased with their never-seen purchases.  I really recommend taking a trip to visit the area before buying.  I have a property in Baltimore that someone in Cali thought was worth 90K because it rents for 900/mo.  When you factor in the neighborhood (riot ground zero), fees, and high maintenance, it's probably only really worth 30K. I probably should have sold it to him, lol, but I plan to be famous one day in the real estate space and I don't need that on my conscience.

I'm always telling people that I'm investing and what kind of properties I'm looking for. I'm very talkative, but I try not to talk much about what I've achieved because it seems like those who talk/brag the most about their real estate success either don't actually have any or they are so overleveraged that there's no cashflow.  I don't want to appear to be in either category, lol, so I try hard not to yield to my natural tendency to tell all.

What @Michael Pearse said -definitely get everything in writing and notarized!  Including your hourly rate and 65-35 split.  Also you didn't mention your agent commission- are you expecting that to be a full, regular commission? Or is he expecting you to waive that to keep the cost down.  Make sure that's spelled out upfront. I've had people balk at the investor-agent charging their fee "I thought we were in this together man."  

I've also had potential partnerships fall apart because I insisted on paperwork hat says I would be reimbursed my rate for the rehab.  We were all on the same page until it was time to sign paperwork.

Hey I'm in Shreveport-Bossier City area. Have you invested here before? Are you working with someone (realtor, property manager, etc?) to verify those numbers? I only ask because something doesn't "feel" right, or maybe I'm reading them wrong

As a Financial Planner I work with people to create irregular income budgets.  I also work with them on business cycles. So maybe that's something you can incorporate.  I was a Realtor for 10 years and both companies I was with had business cycle and a "wave tops" level of financial planning as part of their training.  You might could offer to be that training at no cost for a smaller firm that doesn't have the budet to add it.

Please be careful and talk to legal counsel and a CPA on this.  Business activities put 501(c)3 status at risk.  This is why churches that run day care centers (if they're smart) have that daycare center run by a separate legal entity, not the church.  You could operate the multifamily as a business and make donations to the church.  But the church can't operate a for-profit business and maintain it's tax-exempt status.

Also, I recommend sitting down with a CPA to find out what tax exemption, if any, you/your business would receive from an in-kind donation of housing for visiting ministries / folks in the program / etc. Donations have strict rules. So, for example, you can't donate a $1M piece of art, and claim that value if the charity is going to sell the art. The donation has to be used in the manner for which it was built.  At first blush, donating housing sounds like something you might be able to claim, again, as a donation- not as the church operating the multifamily- but even as a financial planner tax rules make my head hurt so please talk to a CPA before making any promises

If holding/leasing it are what you decide to do, please please have an RE lawyer draw up paperwork to protect your family interest down the line (depending on what you mean by "for all the family").

Ivan what have you tried for refinance? Has a bank looked at the situation?  I'm curious what a traditional bank would tell you, seeing as the amount that needs to be refinanced is about 50% of a appraisal that was done on the land a few years back.  The bank I have my business account with prides itself on helping just about anyone get a loan.  Not the cheapest loan, mind you, but still a good product for where that individual is financially.  

Most heirs I meet with as a financial planner only care about money, so I'm not surprised they're treating you like this. I'm just surprised you haven't been able to refinance traditionally yet.