A Good Real Estate Agent Can be a Property Investor’s Most Valuable Asset
By Kerry Curry, Contributing Writer
A real estate agent or broker who understands residential property investing can be a virtual goldmine for investors, so establishing a relationship with an experienced, investment-savvy agent can be very helpful, especially for novice investors.
To get the skinny on this topic, we talked with Tom Donegan, broker/owner of RE/MAX Premier in Fairfax, Virginia. Donegan, a Realtor for 29 years, is also a commercial and residential property investor.
“Most real estate investors, I find, are good at something else and it’s not necessarily real estate. It may be that they are a great dentist or a great lawyer or a great doctor or a great entrepreneur,” he said. “The question becomes, ‘Where do they put their money when they begin making money?’” he asked.
Real estate is an alternative place for professionals who want a diversified investment portfolio. First-time investors or those who aren’t trained in real estate, should consider using a real estate agent to guide them to properties that fit their investing criteria, Donegan suggests. Some experienced investors also choose to use a real estate professional to help them find deals.
“Over time, after an investor has been doing this for awhile, they develop some of the skills themselves, and some get bit by the bug and actually start doing real estate investing as a living,” Donegan said.
How to find a real estate agent well-versed in property investments
Donegan recommends that investors looking for a real estate agent tap local real estate investing clubs to make contact with agents who understand real estate investing. The Northern Virginia region, for example, has a real estate investing club that meets in two different locations.
Another way is to reach out to a particular brokerage to find agents who specialize in property investment. RE/MAX, for example, has a database that allows any office to search for agents across the U.S. and even in other countries that specialize in investment properties, Donegan said.
Considering a particular agent? Donegan recommends an in-person meeting between the investor and agent so that the agent has an opportunity to learn more about an investor’s philosophy of investing and his or her goals before the two begin working together.
Avoiding an acrimonious relationship
Investors and agents haven’t always had a history of good relationships.
Part of the issue is the relationship dynamic. The property investor is asking the real estate agent to find them deals, but isn’t paying the agent for the work they do on their behalf. The agent earns his or her commission from the property seller, not the buyer.
Agents have complained that they’ve brought investors great deals only to be cut out of the commission. Investors have complained that agents don’t understand cash flow and other investment terminology and are bringing them bad deals.
Communication and respect are a two-way street.
“Anytime you are negotiating something there can be acrimony, but if you are dealing with the right people and they have integrity, you can have a great relationship,” Donegan said.
Agents, for their part, must be well-informed beyond the numbers. Does the client like to be hands-on or hands-off, for example?
“The Realtor’s job is to get into the head of the investor,” Donegan said, “and really understand what they are looking for.”
The investor, meanwhile, needs to understand they are asking the agent to find them deals without actually putting skin into the game. They need to be ready to act quickly and have funds readily available when an agent brings them a deal that matches their criteria.
“Investors treat their agents like employees they don’t have to pay. Agents, in return, have learned to be skeptical, cynical, and defensive. They turn off their effort at the first sign the buyer is a flake,” writes David Greene, an investor, in a BiggerPockets post. “Both sides end up frustrated, and things usually fizzle out. This ensures both sides lose and move on to new relationships that start the same cycle.”
Rather than viewing the real estate agent as an “employee,” Greene suggests a paradigm shift in which the investor views the agent as a partner and the relationship is one of equals with mutual respect.
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