Ok, based on the information I’ve learned here, here is my plan.
-I’ve picked an area to farm (mooooo, ;D )
-I’m hoping to go this weekend and look at houses in the area. Based on my evaluations and sold comps, I should determine values.
-I’m looking to purchase properties that I can keep and rent. My goal now is to build my portfolio of properties. Between purchasing under value and appreciation over a couple of years is where I hope to gain, with a side plate of PCF from tenants.
The problem I am having is this. As I am just beginning, I’m not comfortable with doing this on my own. So I’m working with a realtor who is also a personal friend, albeit fairly new to her profession (plus she has the MLS access).
How do I do any offers/deals in the traditional buying/selling sense. (ie a buyer, a seller and two realtors?) Can I expect to get truthful answers when I ask their motivation for selling? If I offer a price under value, should I expect the selling realtor to advise the seller?
How can I/what’s the best way to negotiate through the realtors?
Now, before I get flamed for going through realtors and such, let me say…I know this isn’t the IDEAL way to do it. However, not having done anything before, this is how I will feel most comfortable. I know I’ll lose some profits to the realtors, and frankly that’s ok. I don’t mind helping out a friend.
So if you can think of anything that would help me out, I’d appreciate hearing.
Jeff is giving good advice…as to motivation for selling – other than idle curiosity, does it really matter (unless the subway runs right under it or it’s on a toxic waste site!)? As long as you get it for the price you need to get it at and can make the cashflow properly, it doesn’t really matter why they’re selling.
If you are making an offer that’s out of the norm, you can reserve the right to accompany the agent to present it. Then, you can explain your price reasoning, if need be.
True, the reason for selling is mostly inconsequential but sometimes the brain needs to know for validation or something.
It’s funny. I am buying a condo in a decent complex. Since I contracted, 5 other units went on the market! (All higher priced that what I paid, of course.)
This is not usual for the complex so I am wondering why the mass exodus? Is the roof falling in, What don’t I know? I did my due dilligence so I have to go with my research and my instict. I have had no losers thus far but it still makes you wonder.
I will let you know if I get a giant assessment my first month in there.
Just a note about the realtor. I know she is your friend, but make sure you make it clear that you want representation. If you sign a buyers rep agreement then she MUST keep all of your information (how much you are willing to pay, etc.) confidential. Without an agreement all realtors represent the seller, even if they are working with you. No slap on her, that’s just the system.
If you ask for representation then she is bound to truly represent you or lose her license. Nothing much better than a realtor who is looking out for you.
You seem to be on your way to a good start! I do have a couple of comments.
Working with a realtor that you can trust IS an ideal way to start. In fact, it’s an ideal way to do real estate deals regardless of your experience. I use realtors all the time and have gotten some great deals through them. All this “gotta be creative” stuff is nonsense. The people that are always down on realtors generally are either gurus that are trying to sell something or newbie followers that are just repeating what they’ve been told. Obviously, the gurus can’t sell a course that simply says “go see your realtor”, and remember that the gurus target people who have no money and no credit. The only thing that matters to a real estate investor should be making money. If you can make good money using a realtor and you never have to post a single bandit sign - then good for you!
Definitely, stick to your plan and go look at a bunch of houses. It will be the best time you ever spend. Once you have looked at a bunch of houses that aren’t good deals, you’ll KNOW house values in your area and will be able to make offers on the spot! You won’t need comps or appraisals to give you market value. How valuable is that? It is unquestionably one of the most important things you will ever do! When a good deal comes on the market, you can spend 20 minutes looking at it and make an offer right on the spot. The newbies and wannabes will have to call their realtor for comps or have to go home to look up comps on the computer. By the time they’ve done all their newbie stuff, you’ll already have tenants in the place and be getting rent checks!!!
You said “Between purchasing under value and appreciation over a couple of years is where I hope to gain, with a side plate of PCF from tenants”. I would say that positive cash flow should be the focus of your efforts and not a “side plate”. In my opinion, the primary reason to buy a rental is to make money. The secondary reason is to pickup some equity. If I get some appreciation, that’s just icing on the cake. The boom is over (you heard it here first) and those that bet on appreciation will soon be out of business!
Just a few points to consider. I think that you plan is a good one and that you’re on the right track.