Tomorrow I am being interviewed for a magazine article on real estate investing and selecting an agent. I do this with some trepidation as I'm always a bit leery of being mis-quoted. So I thought I would post my list on my blog as a good way to prepare.
Before you contact a real estate agent, know your goals. Yes, I know you want to make money, that is the obvious part. How you want to make money might not be as obvious. Do you want to be a 'flipper'? Be careful, it is NOT as easy as all those TV shows make it out to be. Looking for an apartment complex? How about Land? Single-Family Residences? Are you looking for short term gains, monthly cash-flow, long-term appreciation?
A good experienced investor agent will ask you what your goals are and want to know your background as an investor. A good agent will also tell you what challenges you will face with each type of property. If you are looking at multi-unit properties ask the agent what experience they have with commercial properties. Is the agent familiar with commercial lending?
Ask what type of education the agent has. In Arizona, we are required to take 24 hours of continuing education every 2 years. A pathetically small number. There is no requirement for 1031 Exchange, commercial, income statement analysis. None. This means an agent can call themselves a 1031 Exchange expert having never done a 1031 Exchange let alone attended a class.
Many of the certifications available to real estate agents have little, if any, education in investment properties. So the agent you choose might be very well versed in residential and have lots of designation but have absolutely no education in investment properties. Basically, if an agent wishes to learn more about investment properties they must make a special effort to gain this knowledge. Personally I have traveled to both California and Florida to find accredited classes in real estate investment.
The agent you select needs to be aware of the investor market in certain areas. In Phoenix and Arizona in general there are pockets of developments where 30%-60% of the owners are investors. This translates to a saturated rental market in that area. It is important that your agent know this or know how to obtain this information. Your agent should also provide you with a copy of the Landlord and Tenant Act prior to you making any sort of purchase.
Your agent should be able to discuss with you the difference between residential and commercial multi-family properties. He or she should also be well versed in the challenges of each.
Pay attention to the answers. This is when you will know if you have found the right agent. It is OK for the agent to tell you that they don't know the answer to some of your questions. How he or she follows up is important. It is also OK if the agent tells you they have no experience with certain types of properties. If you were to ask me to assist you in purchasing a liquor store, I would tell you I know little about it and we should find an agent to can better assist you.
Your agent should always work in your best interests. This is not all-inclusive but it is a start. I will add more tomorrow after my interview.
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