By Jared Hope
When my wife and I began real estate investing in 2003, we really knew nothing about it. Not a thing about real estate, and for sure nothing about buying it as an investment. We also didnt know much about business. My wife owned and ran a massage studio, and had a few employees; I was a personal trainer. Technically we were business owners, but we didnt know about any business structures or systems other than our own.
So when we started out on the journey of real estate investing, we really didnt know how to do things. We went to a REIN meeting in November 2003 called Quick Start to Learn the Way to Buy and Build This Business. But we were so overwhelmed by all the information we learned that weekend that we didnt truly understand how to put it all together. Back then, the words treat this like a business had a different meaning to us than it does today. From then to now has been a huge shift and an amazing journey of mistakes made and lessons learned.
I remember the first house we looked at in 2003. It was not the first house we bought. In fact, we looked at many houses before coming to the conclusion that our real estate agent actually didnt know much about rental properties. He was a great fellow and undoubtedly an excellent agent for someone who was selling or buying a home to live in. However, my wife and I were not looking to live in the housewhat we were looking for was real estate as the basis for a small business. After a few weeks of looking at properties with this agent, we decided to part ways.
The road we went down next was one I would not recommend going down! We tried to do it ourselves. I called the listing agents, thinking this was the best way to get what we wanteda deal. We bought out first house this way and it worked out well, despite our not knowing what we were doing. It worked out because we had decided by then that wed live in the house, and we ended up keeping it for several years.
Since that first property, I have gone on to buy well over two hundred properties and have met many good, as well as my share of bad, agents. Of all the mistakes Ive made, not having the right team was definitely one of the biggest.
I, probably like you, know many real estate agents, and most are our friends who want our business. There is an old saying that you should not do business with family or friends, and this holds true when it comes to buying investment properties.
I had a guy call me up six months ago, wanting to buy houses to flip, which is one of the strategies I use today. I asked him if he had an agent to source the property. He said he had an agent, who was a friend, working with him. I asked this fellow some questions, to find out if the agent knew how to source an investment property, as the process is different from that of finding a home for someone. In the end, I offered my agent, Keith Faria, to him, but he declined, since he wanted to give his agent a chance.
When I ran into this guy six months later, I asked if he had bought any property. He said he hadbut just one. Now, this guy was buying in the same areas as me, and we were looking for the same kind of houses, so I knew exactly which properties he looked at. In the six months it took him to buy a house, I had bought five, and of the five I bought, his agent had looked at four of them and advised him that they were not a fit.
This is an example of how you must work with an agent who is a specialist in investment real estate, if you are specializing in flipping houses. You need an agent who can find you a deal; one who can negotiate a good purchase price, one who will not discredit a property that needs work. If youre looking for an apartment building, its important to use an agent who does only multi-family, as an agent who has not worked in multi-family will not know how to source them, will not know how to do the math on them, and for sure will not know the conditions needed to help you get a solid offer in place.
Going into 2005, my wife and I had thirteen properties, and to be honest, I have no idea how we got them. Of course, I know how we bought themthat was the easy partbut we were really just floating along. Looking back now, I laugh at how we built the business. In 2005, we decided to look for an agent who themselves had investments. This is when we teamed up with an amazing agent, who helped us buy 64 properties that year. He knew what worked and what didnt. When he showed us a property, he had the math all laid out, with sources for the numbers. He owned 30 rentals, so he understood what tenants wanted and needed. It was the kick-start we needed, and with him we exploded our business with the right properties for the right tenants.
One thing I have come to understand through all of this is that real estate agents are transactional. They work for a commission, and their goal is to get a sale. Thats just the way it is. That was my agenda when I sold Xerox copiers, and when I sold traffic signs for a local company. Its the life of a salesperson. Most agents have high integrity and want the best for their clientsmost are not out to hurt their clients or sell them the wrong product. But if they do not understand the game they are playing, which in this case is finding an investment property, the risk for the client is great. The risk is too great, in fact, simply because after the house has been purchased and has closed, the agent is off pursuing the next transaction. The house will be yours, and if its the wrong property, youll be stuck with all the headaches that will comeand these will be large and many. Trust me, I know.
So the question is how to find the right agent to work with. It isnt actually all that hard to do, but it may take some time. I believe the decision comes down to four things:
- The number of rental properties the real estate agent owns.
- How long they have owned these rentals.
- How long they have been a real estate agent.
- How good their listening and sales skills are.
How Many Rentals Do They Own?
This question is a big one for me. I have heard many times that the easiest way to become a millionaire is to follow in ones footsteps. If this concept holds for all aspects of life, then the easiest way to become a successful real estate investor is to follow in the footsteps of one. So if the agent you are using has not bought their own rental property, they may not be able to help you out. Now, Im not saying they will not be able to help you find one or help you buy it, but if the concept is correct, then…
How Long Have They Owned Their Rentals?
This is also a big issue for me, since it can sometimes take years for the real results of a property or area to be seen. For the most part, buying a property in a hot market will be successful for anyone, as it will rent quickly and usually for a lot; the cash flow is strong and any mistakes can be dealt with. The real issues show up in a down market. This is when its true colours come out and you learn whether the property was a good purchase. Using a firm or agent with long-time experience with rentals will be hugely beneficial, potentially saving you thousands of dollars over the years.
How Long Have They Been an Real Estate Agent?
We all want to give people a chance. Its human nature. However, building your real estate investing business properly starts with using the right real estate agent. They are your eyes and ears and also your voice. The more experienced agent has seen more deals, heard more nos, and has gone through more loops and over more hills than lesser experienced ones, and this will help you avoid land mines. An experienced agent who has themselves owned units for many years should be able to negotiate the deal you need and want for each and every one of your investments.
How Good Are Their Listening and Sales Skills?
Many people think sales come down to how well you can talk someone into something. Well, in my experience of both doing sales and using real estate agents for the past 14 years, it comes down to the agentsthe salespersonsability to get the seller and buyer talking about what they need, as opposed to what they want. Its the agents listening skills that will make you the most money, by getting the best properties at the best deals.
Real estate investing is a fun business, even exciting at times. And, if you buy the right properties, it will provide many years of success and happiness. If done wrong, it will likely provide many years of headaches and I told you so. Building a team was important for me and my wife, and all these years later, Im very glad we did, as it helped keep us on the right path.
The real estate investing division of LLR Canada was created based on the things my wife and I needed when we were starting to look for properties, 14 years ago. Of course, back then we didnt know what we didnt know. Dont make the same mistakes we made. Our team is designed to help you find you the right property, in the right area, for your long-term success.
Jared Hope is a veteran REIN Member, real estate investor, dynamic speaker, educator and owner of Landlord Resource Center. Jared has gained invaluable experience by transacting over 200 investment properties representing over $50,000,000. This experience has led Jared to continue to grow his real estate portfolio, as well as his business. His property management company Landlord Resource Center manages well over $100,000,000 in single-family properties.