So, you are thinking of investing in Real Estate, great idea ! The first thing you have to find is a great Realtor. Working with a Realtor who understands the market and also has a history and knowledge of investing is what and who you want to find.
I work with some great Realtors who are excellent at finding homes for buyers. They have no idea though what to ask, or what to look for when it comes to an investment property, buying or selling.
Would you board an Air Canada flight with a Pilot if they hadn’t flown a plane before ? And yet, many investors dive in head first with a “Residential Realtor”. Would you let someone who didn’t have a successful track record of investing, select your investment portfolio ? I did, I worked with our regular “Buyer” Realtor when we were looking for an investment property.
They did a great job of showing me properties. That was the extent of it though. Luckily I knew what to look for and I knew what was important. Was I surprised though when we contacted the bank for a Mortgage and they told us the property was Commercial, more than 5 units !
We already had a pre-approved mortgage. But, that only applied for up to 4 units. Our new property was 5 units, oops. Nobody told us about that.
Thankfully our Mortgage Broker was able to get our “Commercial Mortgage” approved. Our Agent didn’t know, hmm. How could they, they didn’t deal with Investors and had never owned an Investment property. Don’t be fooled though. Every Agent alive will happily take your business and tell you that they work with Investors. Ask them some questions first though before you dive in head first. It will save you some bumps and bruises.
I made the same mistake when it was time to sell. I used our friend Realtor, who had found us our home. The Investment property sat on the market for 3 months, we were advised to drop the price multiple times because it wasn’t selling ! It was already listed lower than I had suggested. What was being done to market the property I asked. Well, we took pictures, it’s listed on the MLS. We have contacted local Brokers but nobody is interested.
What happened ? Well, the listing ran it’s course. Nobody was interested in buying our property. Prime location, 4 out of the 5 units had been renovated and the rents were all market value except for 1 unit. No interest though.
Did I give up and drop the price below market value, nope. We interviewed 3 Agents. 2 claimed they were well versed in income properties. These 2 were 2 of the top producing Agents in the neighbourhood. They spun a great tale and were more than willing to take our listing, but, they couldn’t answer the questions.
Realtor number 3 showed up. Very relaxed, no presentation, no marketing material. He sat down at the table, asked us about our property, what happened, or didn’t with the first listing. He asked us questions about the property, income, CAP rate, any issues, renovations completed etc.
We spent an hour talking about the market, investment properties, what was moving and why. Great Realtor, great person and he knew what he was talking about. Decision made.
We discussed listing price. He suggested a price, hmm, that’s higher than what we listed for originally, does that make any sense ? Sure it does he says, because your property is competitively priced based on the Cap rate and the comparables in the neighbourhood.
A very different conversation compared to the first Agent. That conversation went like this:
Q: When do you want to list it ?
Q: How much do you think you should list it for ?
Great, let’s get it listed !
So what happened you ask ? I know, I bet you are thinking it didn’t sell again. Well, we had 3 offers, 4 days after it was listed. 2 of the 3 offers were over list. We accepted one and the deal was done 🙂
Moral of the story, find the right person for the job. Not your buddy, or the Agent that your friend has dealt with. Invite a few Agents over, ask them what they know about Investment properties. You won’t be disappointed. I can be reached at [email protected]