Real Estate Power Teams: Your entire team MUST be "investor friendly"
It's important to surround yourself with a power team that can educate you, people that are experts in their fields. You want power team members that can say NO. You don't want someone that is going to say what they think you want to hear…that will not serve you. Your power team members should be smarter than you in their given field and be willing to teach you what you need to know to become a smarter and more savvy investor.
Finding a great Realtor that understands investors, works with them or is an investor is worth their weight in gold. They will understand what it is you are looking for, and will send you the right listings. They won't mind submitting lowball and multiple offers. They understand that they get paid in quantity and love working with investors. Also, you might have a few realtors that work with you in different geographical areas that they specialize in.
Benefits to working with a realtor
- They have access to the MLS
- They have pocket listings and word of mouth leads
- They provide comps
- They can provide market statistics
- They can provide legal info such as zoning etc.
- Less legal work for you
- Weeding out process is done for you
- You leverage your time and resources
Finding a Realtor
If you are in the market for an investor friendly realtor, most likely you are a new investor. To get your feet wet and start looking at properties and to develop a relationship with a realtor I suggest doing the following. Start with calling the national real estate franchises such as Century 21, REMAX etc. There are also independent realtors. I suggest beginning with a large national brand office because you will have access to a lot more realtors. First call the receptionist, don't call the individual realtor. The receptionist sees everything that goes on in the office and they will have insight into who works with investors. They will know who to match you up with. Here is a sample conversation…
"Hi (Receptionist name), my name is (Your name) and I'm a real estate investor looking to speak with an agent who works with real estate investors, or an agent that does real estate investing. Do you know of any agents in your office?"
Typically they will connect you to their direct line or give you their contact information. Here is a sample conversation with that agent.
"Hi (Agent's name) my name is (Your name), and I just spoke with (Receptionist name) and she referred you to me. She said that you have experience working with real estate investors and/or that you also invest yourself…is that correct?" Great…what type of investors do you work with flippers or landlords?
"I'm interested in looking at properties in this area that I could buy, fix and sell and make $15,000-20,000 or more after rehab. Could you help me with that? What are the "Hot" neighborhoods, the fastest moving areas? I'm looking for…
- Starter homes 3/1 to 3/2
- 1,000 square foot minimum
- $100,000 or less (the market price point will vary)
"Also, could you add into the listings search the following criteria?"
- "As Is" in the listing
- At least 1 price reduction
- 60 days over the average days on market
- Vacant (most likely REOs, but easier to see a lot of properties in one day to get your feet wet)
"Please email me the listings and I'll review. Are you available on (date) to show the properties?"
Fear can set in when making these calls, don't be afraid and stick to the script. If you get questions about your real estate investing experience…you can deflect. An example: "How many deals have you done?" Answer: "You wouldn't believe it if I told you". "How quickly can you close?" "In 2-4 weeks, just like everybody else".
Property Search Criteria
You are looking for properties that can be bought, rehabbed and sold and turn a profit of a minimum of $15,000. A lipstick rehabber will take a lower profit margin ($15,000-20,000) because less time is invested in the project. A medium to major rehabber is going to want more. If your intention is to assign the contract or do a double close you still need to look at the deal through the eyes of a rehabber because you need to factor all of those numbers into the equation.
The Top 4 Criteria for Listings
- "As Is" This indicates that there is something wrong with the property and a seller is motivated.
- At least 1 price reduction. If the seller is motivated you will see a history of price reductions. 1 is good but 2 or more even better!
- 60 Days over the average days on market. You can see the days on market listed on the MLS, ask the realtor what the average days on the market is for that area. You want to see at least 60 days over that time frame…this could indicate motivation.
- Vacant. A vacant property could mean a lot of things…REO, vacant rental, issues with the property, absentee homeowner, probate etc. Typically the motivation will be higher to sell.
- Look for the average starter home. Don't discount a 3/1 it can be converted to a 3/2
- Look for at least 1,000 square feet and above
- Depending upon the market, $100,000 or less. You need to know the market price point.
Notes: Your offer is typically going to be 50-60% of the asking price. If you submit offers and are getting too many counter offers…you are offering too much. Time to re-evaluate how you are calculating your offers. I tell my students "If you are NOT embarrassed by the offer you make, it's probably too much".
A few more notes on Realtors…
Dual agents: When you find a listing that is represented by another realtor, call and ask if they will act as a "dual agent". There are a few advantages to this. A dual agent will make double commission when working for the seller and the buyer, 3% plus 3% to equal 6%. You will have more wiggle room when running the numbers if it is necessary to negotiate a lower price the agent might be willing to come down a bit on their commission. Also, a dual agent knows the position of the seller, and how motivated they are to sell and why they are selling. It's not "legal" for them to disclose that information…but they will hint at it if they are motivated to make the sale.
Realtors for Out of State Cash Buyers: If wholesaling is your main strategy you can extend your cash buyer network to out of state buyers by providing a "complete package"! When an investor purchases an out of state investment property they will be more interested in working with you if you can also provide a network of power team members; a great realtor, a reliable general contractor to do the rehab work, an excellent and trustworthy property management company to take care of the rental. There are a lot of investors out there that want to park their money for a higher return, but they don't want to do the work themselves. They want turnkey investments.