Realtor help

General Real Estate Investing
1

The realtors that I have been talking to about buying a multi-family property have no idea what an investment property is. The last one I spoke to was telling me about a 150k duplex that grossed $1400 a month. I would not look twice at this duplex. I have found a few that by offering 30% less than asking price I can get one side of the duplex to cover the total monthly debt which is what I am looking for. The realtors that I have spoken to act like I am saying something crazy when I say that I would not pay more than 70% of the asking price for these properties.

My problem is my personality. I look at it like, I don’t have time to explain to them why the asking price does not make sense investment wise nor should I have to. I am telling you what I will pay for it end, now make an offer.

What is the professional approach to handle a realtor that does not understand what I am doing and why I am doing it?

2

So which is it? Are you offering 30% less than asking price (which equates to 70% of the asking price) or 30% of the asking price?

And just as an FYI, you may have misudnerstood something…you should be looking to to pay 70% of value…the asking price may already be substantially discounted from the worth.

Keith

3

30% off of the asking price. I don’t misunderstand that at all. If a property cash flows decently at 100% of the value then I would still buy it for that price.
The properties that I was looking at needed roughly 30% of the price to cash flow. Some of them have been listed for over 18 months. I understand buying at 70% and the reasons why I should, the 30% I came up with just happens to match that, I am not actually using that formula.
This is how I look at it: I look at the property that is listed. I figure out what numbers work for me and pay not attention to what they are asking for it. I offer what it is worth to me. I will insult some people with my offers, I am sure but I may find a desperate seller and hit a home run.

Now, back to my question, how can I convey this to my realtor and make her understand where I am coming from?

4

Good plan…

Find an investor-savvy Realtor. Ask other investors (you’ll find out if you haven’t already that they are your competition but a lot of them will be on your side, too)…ask at the local REI Club meeting as to who the Realtors that are in the game are…

Keith

5

Thanks.

6

If you want to know who the big Realtors are then you can go to loopnet.com and see who appears over and over. Personally I don’t mind new Realtors. I’m hard on my Realtors and make them understand the importance of finding great deals. I have no problem explaining how it is going to be.

Realtors just aren’t going to know as much as investors. Realtors got into the business of being a Realtor because they thought it would be easy money also known as lazy money. They are by nature worthless, but you can still use them. I would only use local Realtors, they have the best chance of finding local deals.

7

First problem here is that you’re not finding deals. You’re finding properties for sale and throwing out lowball offers hoping something will stick. While that might work, know that you’ll have to make a ton of them to get one, and you will likely upset more people than you please. That’s just the way it is doing it like that.

Second problem sounds like you need an RE agent (for all those knowledgable people like Iron above, there are RE agents and there are REALTORs and there is a difference) that works for YOU. First thing that YOUR agent needs to understand is that you will be making LOW offers. In fact, they will probably be downright embarassing. If they aren’t comfortable with doing that, then you need to find another. Simple.

On a side note, it is simply amazing what some people will type on a public board. Iron, that post is about the most bigotted, hypocritical, and frankly idiotic statement that I’ve seen on here in quite awhile. I’ve got no great love for agents. However, I’m no fool either. I know several agents that have a better understanding of what makes a deal a deal, the financing and terms needed, and a ton of other minor details to make it go than the majority of people posting on this board. An agent is NOT an investor per se. Comparing the two is like comparing a car salesman to a mechanic simply because they both work in the automotive business. Geesh man! Stick a color or creed in place of “Realtor” in your post and you could be easily considered racist.

Definitely time to switch to decaf.

Raj

8

The realtor we use now is awesome! We were clear from the moment we met him about how the relationship would be. He does what we ask of him, he throws out his ideas at us because he actually has a set, and we get along great! I value his opinion because he knows the market. He doesn’t quite understand what we do but he is young and hungry so we work well together. Realtors are like any other profession, there are good ones and bad ones, just like INVESTORS! :beer

9

Roger J,

Nothing I posted is false. If your experience about Realtors is different then you have not been in Real Estate very long. Realtors do not understand investing. If some do have knowledge then they are a minority of individuals and certainly not the majority.

My point Roger was that Realtors will not teach you how to invest, you will likely have to teach them how investing is done correctly. Then you can use them to help you invest. If you want to really understand Realtors you should become one, then you will really appreciate how fun it is to work with them.

10

Iron:

As a Realtor, I guess I should be a little insulted by your comments. I’m sorta used to the Realtor bashing though so I won’t take personal offense. In life, I’ve tended to notice that making blanket statements do tend to get people in trouble.

I think the problem here is that you just haven’t met any good ones or don’t really understand what their job is. Their job is to facilitate the purchase of a property and to educate the public. I think your problem with Realtors is that you basically don’t understand what they do. Their job is not to teach you how to invest. You can not be upset with a group for lacking a particular skill if that skill is NOT something that they specifically offer. Sorta like being mad at a plumber because he’s not an electrician.

And for the record, my degree was in electrical engineering.

Oh and to answer the original posters question. You will have a hard time finding good deals that cash flow because you are competing with people who wish to buy properties as an owner occupied. They will always be willing to pay more than an investor because they are not going by a cap rate. You may luck out by tossing out a lowball offer, but if you check the comps, you’ll notice that most places will sell for within 2-10% of the asking price. Occasionally you’ll see some places selling at a big discount, those are cases where the seller was in a big hurry and took the lowball offer. Personally in those instances I think a disservice was done by the listing agent because if they were willing to take that much off the asking price, they should have just priced it closer to the selling price and they would have gotten more offers. Usually properties that are priced low relative to the market that are in good condition still generate bidding wars. There was one a few weeks ago that was probably about 50k under valued and I heard there were about 20 bids. Our client bid 20k over asking and still lost. Of course your market may be different.

As for what your approach should be, find another Realtor who’s willing to waste their time writing offers that aren’t going to go anywhere. Or have them call and make a verbal offer and see where it goes. I would also ask your Realtor to show you the comps for the area. If you do see that most places are selling within 10% of asking price, then I would suggest that you stop wasting your own time trying to find a deal that doesn’t exist.

11

Oh joy.

Nothing I posted is false. At least, in your mind. BTW, this is also the standard bigot statement as well.

If your experience about Realtors is different then you have not been in Real Estate very long. See. This is a false statement.

Realtors do not understand investing. Ah! Generally speaking, a true statement! However, as Henry has already pointed out (which, btw, was education from a, yikes, REALTOR), understanding, and teaching, investing is not the function of a RE agent.

If you want to really understand Realtors you should become one, then you will really appreciate how fun it is to work with them.
Are YOU a REALTOR? Heck, I’ll go you one better than that. I bought the whole company!

Let’s review:
Realtors just aren’t going to know as much as investors.
About what? Investing? See above. Life? In general? What? BTW, I see no post here that has been as informed in it’s information as Henry’s, who is a Realtor.

Realtors got into the business of being a Realtor because they thought it would be easy money also known as lazy money.
Well, this one is just loaded with falseness (is that a word?). Realtors don’t get into “the business of being a Realtor.” A person who becomes a licensed RE agent pays a fee to join the Nat’l Association of REALTORS in order to be called a REALTOR and “the business” that they get into is listing and selling real estate. And using your statement, change the word “Realtor” for “RE investor” and you also have a generally fair statement. That’s why 95% of most “investors” don’t even make the first purchase. Heck, at least in the RE agent world, the ratio of success is about 50-50.

They are by nature worthless, but you can still use them. First, “by nature?” What’s nature got to do with it? If they’re worthless to you, fine. I think that you’re misusing your tool, but that’s my opinion (not a fact, as you say). However, this statement is a contradiction in and of itself. Something is either worthless, or it’s not. If you can still use them, then they are not worthless. Again, it’s simpy using the right tool for the right job. Kind of like the car salesman/mechanic or plumber/electrician thing, but I digress.

I would only use local Realtors, they have the best chance of finding local deals. Okay, I’ll apologize upfront for this, but the only thing that came to mind when reading this statement was…DUH!

Raj

12

You like calling people racist, do you know why? Its what people do when they want to get their point across but don’t have a leg to stand on.

When I said Realtors aren’t going to know as much as investors, what do you think I was referencing? I think it might be investing in Real Estate. That is kind of the point of this site, isn’t it Roger? I love it when people like yourself play dumb. My point was that he should not expect Realtors to understand investing. I said that I don’t mind explaining how things are done correctly with investing to Realtors.

That’s fine if you think paying 2-10% under asking price is the way to go. If you think low balling is a waste of time then you should probably not be an investor. If there are no deals, then you have to low ball to create deals. You need to get properties at great deals or there is no money to fix things, no money when things go bad, and no money for all your time and effort. Getting properties properties at great prices is part of the deal with investors who want to make it into their second year, third year and so forth.

There Roger, now I taught you a little bit about bidding. I don’t mind teaching and learning. You may want to focus on the learning part if you want to be an investor or have investors as your clients.

13

A wise man once said…well posted:

You won't get great deals unless you ask.
14

Last week I had a Realtor email me a property with the subject “70% of value, motivated seller”. It was a duplex he was selling for $350,000 that he said was worth $500,000. We went back and forth with your an idiot, no your an idiot. Finally after showing him how NOO properties cash flow and price out, I told him he should go to his Mother or Grandmother and tell them about this great deal. Have them buy this $500,000 duplex and watch them lose their butt financially. I told him then after you see a loved one lose their butt financially, maybe then you will learn how investing in Real Estate works.

An investor can only buy great deals or nothing, either is fine. If I put 10 bids in for 70% or less of the value and none of them get accepted then that is fine, if one gets accepted then great. Overpaying puts your business and your family at serious risk of financial trouble.

15

Iron, Iron, Iron. Decaf Buddy! Works wonders.

First, I never once called you a racist. Not liking a Realtor doesn’t make you racist since Realtors aren’t a race (yet).

Second, you say that YOUR point was that realtors won’t know as much about investing as an investor. MY point was that why should they? That’s not their function. Remember all the comparsions?

Third, if you think that rant taught anybody anything other than the fact that you are unable to carry on an adult conversation, then maybe you want to think about removing the chip from your shoulder. It seems to be affecting your ability to read. For instance, no one said that any potential investor should be buying at 2-10% of the asking price (or even of actual value) of a property. What was said is that the majority of properties sold thru the MLS system in his area sell within 2-10% of asking price.

The point of all of that was simple. Finding listed properties for sale above, at or near full value and making lowball offers is NOT the best way to find deals. Is it doable? Yes, but it is a major numbers game. I’d guess 1 in 250 or so will actually close.

I don’t have a leg to stand on? I guess that’s right. It’s hard to make valid arguments against your basic premise of “Well, you’re wrong and I’m right because I’m right.” I guess you showed me.

Sorry, Iron. It’s me, not you. You see since the majority of the holier than thou blowhards have been successfully removed from this site (for the most part), I’ve not had any blantantly idiotic statements to respond to. I guess I’m not cured yet.

BTW, you could have probably saved yourself a half hour or better in time if you had just told that agent with the $350K duplex, “no thank you” rather than engage in a “I’m right” match (sound familar?) Better yet, just delete the email.

Good day,

Raj

16

You are a typical Realtor, not really good for anything. I don’t expect a Realtor to understand Real Estate investing, although it does seem like a skill they should probably learn. If you ever want to invest in Real Estate you really need to ask some questions, so you can remove your “Realtor” ideas.

To clarify about people on this site. We all invest in Real Estate, so you can’t fool anybody here about how Realtors behave. You should probably try focusing on those buying owner occuppied SFH, they might be impressed with you.

F.Y.I. I would never work with a Realtor who is afraid to low ball, nor should anyone else here on this site.

Good Luck Roger

17

With all due respect, I’m not really sure you’re the one who knows what you’re talking about. You’ve done nothing but make blanket statements.

You talk about value, but you should really be talking about cap rates. Capitilization rates are what investors use to compare the returns of different properties. Historically cap rates have been as high as 20, but in certain areas they can be rather low due to more demand than supply. With lower interest rates and easy access to credit, the cap rates have continued to creep down making it hard to find good deals because now you’re competing with a lot more people than before. Around here, a good cap rate is considered to be around 8-10, but some are as low as 3-4 and there’s still people that buy them. Those are the ones that buy 500k homes, knock them down and put up 2 million dollar homes.

Investing in real estate is not just buying a property and holding it. It’s also what you can do to improve the value of the property. Some low cap rates may be due to under market rents or maybe they just need a little work to bring up the rents.

Also, I’m a licensed broker in this state. When you get your license, they teach you how to comply with the laws and all the terms about real estate. The classes teach you nothing specifically about investing. I’m also a Realtor in that I joined the National Association of Realtors and pay my yearly dues. In order to become a Realtor you need to be a licensed real estate agent or broker and take a half day class. There are additional skills that some Realtors have such as experience in investing, but that’s also similiar to finding a carpenter that also knows something about plumbing. Railing about how all carpenters should also be plumbers just doesn’t make a lot of sense and just exposes your ignorance. The fact that you haven’t personally encountered any doesn’t mean that they don’t exist. I think you need to be more flexible in your thinking, it would also help in investing and seeing other possibilities.

As for low balling, there’s nothing to be afraid of, it’s just a waste of time. I do them also, but haven’t had any accepted yet. The key thing to keep in mind is that it’s the seller that determines the selling price and with 100% financing still available to those that qualify, the barriers to entry in this business has been lowered which is why it’s much harder to make a profit now than it was in years past.

18

henry,

Cash flow is how I know what it is worth. Money in Vs. Money out. Any other method like cap rates are secondary to real numbers. It doesn’t matter if the cap rate is 5 or 20, what matters is are you making money or losing money. Are you making 100 a unit or losing 100 a unit. Cap rate doesn’t make you money every month. You would know that if you invested in Real Estate.

I have had a lot of success with low balling. So have many other SUCCESSFUL investors. Its the unsuccessful investors that think it is a waste of time to low ball. You need to low ball, you need to find deals, you need to buy great deals, or you shouldn’t invest.

I can argue all day and I’ll still be right. So keep the posts coming and I’ll show you like I show other Realtors the errors in their thinking.

19

Iron Range…

Can’t we all just get along? I gaurantee that one of your knuckles are bleeding. How do I know? Because you have a HUGE chip on one of your shoulders, therefore weighing down that side of your body and making your knuckles drag on the ground!!

I get that we all don’t agree on things at all times and that’s okay. Why get so worked up about somebody thinking differently than you? It’s what makes us individuals. I have read your posts and learned from them and appreciate them but dude, take a breath. It’s okay. Really.

LET’S ALL HAVE A BEER… ON ME!!! :beer

20

Jared,

As always you are wise, so I’ll take your advice.