Updated: Oct 13, 2022
In Illinois alone, there are over 50,000 real estate brokers, and there are more than 1.4 million nationwide. However, only a small percentage of these brokers can or want to work with real estate investors.
As per my knowledge, 5% or less of these brokers are qualified or want to partner with investors. An expert who can help an investor expand their real estate portfolio differs greatly from an agent who just deals in ordinary real estate.
You need to acquire a specific set of skills to become an investment-minded broker. These skills cannot be learned through routine business interactions. Working with investors involves much more than just marketing owner-occupied homes in postcard-farming areas.
From the perspective of the investor, the perfect broker candidate would serve as a mentor who can offer the financial data needed to determine a certain return on investment.
Investors prefer to partner with those who have knowledge of particular markets including knowledge about any local government requirements for particular homes located in particular areas.
Types of Brokers with an Investment Mindset
I frequently tell investors that it is quite difficult to find real estate brokers who are interested in investing. Three groups of real estate brokers frequently make up those who wish to or are ready to work on the investing side of things.
In order to become your "go-to" agent, this broker earned their license. The issue is that they lack investment experience and are inexperienced in negotiations. They make up for what they lack in those areas, though, with tenacity and perseverance. These brokers will work to improve and increase their knowledge. They will eventually fit into one of the other two categories.
The Savvy Investor
When a broker excels at the job they do, they usually cease working on other investors' portfolios and focus only on their own. We lose their knowledge of the day-to-day operations of real estate investing when they stop working with other partners.
The Broker Who Is Investor-Friendly
This kind of real estate broker is "just perfect" in The Three Bears' cosmos. These brokers offer a network and set of tools that are designed with the investor in mind. They have a procedure for screening properties, knowledge of the communities, and a network that may serve as their clients' one-stop shop.
This broker has completed well over 50 investing deals in their career and has a portfolio of real estate.
They are prepared to use that knowledge when dealing with you. They turn become a valuable resource and mentor for the investor.
The broker you want to engage with has a firm grasp of real estate investing's basics. There is no 120-hour real estate broker program that covers these foundations.
Knowledge Your Broker Should Have
Finding a real estate broker that can offer the right kind of knowledge to assist investors is very rare.
Different numbers are involved in real estate investing. When attempting to finalize the appropriate purchase price, figuring out the cap rate, and decomposing the monthly cash flow, numbers are involved. Additionally, you must be able to predict how a specific investment will look in five or ten years.
You may also locate deals using numbers. You have a better chance of spotting a deal if you are good at understanding numbers. You want the real estate broker you're working with to be able to tell if this is an opportunity or simply another listing since they will spot the opportunity first. Real estate brokers with an eye for investing can spot deals more quickly since they are acquainted with opportunities in various markets.
The majority of opportunities in real estate are "value-add" investments. This indicates that you are purchasing a home at a bargain price because you plan to make additional investments after closing. This is achieved through renovation works that increase the property worth 90 to 120 days following closing.
A real estate broker can provide you with assistance in calculating these numbers or refer you to others in their connections who can. A top-notch broker will also provide advice on how much work should be done to a home in order to get the maximum return.
Understadning the Market
Investing in Real estate is location-dependent, and it takes a real estate-minded broker to comprehend the type, supply, and renter base of the housing stock.
It is essential to understand how an opportunity appears given the market at the time. When the market will only bear a 7-8% cap rate, you do not want to be pursuing a 10% cap rate.
A real estate broker can give you information about the neighborhood. This will enable you to adjust your route or investment approach to reflect reality.
Some neighborhoods or suburbs are also preferable for real estate investments because of their pricing, tenant base, job prospects, schools, or government control could all be factors. Based on their expertise of the local market, an investment-minded broker will greatly assist you to the best opportunities.
Look for the following characteristics:
Here are some characteristics you wish your real estate broker to possess when helping you in expanding your real estate empire.
Brokers who are self-made investors will guide you on the do's and don'ts of real estate investments because they had already made the mistakes and learned the lessons firsthand. The broker you want to work with has bought and sold a lot of houses in the past.
Partnership with other investors. A broker that collaborates with other investors will find more prospects for you than a typical broker. Brokers who are interested in investing have a network of other brokers, and investors, including service providers who are also interested in investing. Every day, deals are shared across their network.
Has knowledge of off-market real estate. The local MLS is a terrific source of existing inventory, but they aren't always great opportunities when the housing supply is scarce. You want to work with a broker who could really find listings out of the MLS. Off-market properties available for sale are an example of this.
Has a wide-ranging network. If your real estate agent does not have an extensive network or worse, has never tried to create or join one —then they might not be a suitable fit for you.
The greatest investment-minded brokers can be recognized by this. They are not only seeking agreements or clients to assist, but they are also expanding their network. They will turn around and share the resources with you from the start. This way the majority of the problems are already been eliminated, significantly shortening your learning curve.
When new investor uses someone else's network, they join a team that has already shown to be successful.
I'm writing from the perspective of what's working in today's market. All of this may be obsolete in five to ten years. There will be numerous platforms that can achieve most of what is mentioned above, if not better. If you are currently purchasing real estate, this is all still current.
Evaluate your team after reading this. You must assess whether your existing real estate broker is the right individual for your team. Don't be scared to hurt someone's feelings. If you are not working with the right broker, they are very often aware of this.
It is uncomfortable for the broker when investors work with brokers who do not understand the investor attitude. That broker is frequently out of their element. Often, that particular broker would like to suggest you to someone with an investment attitude.
Best wishes on your journey. Remember that your broker is one of the most crucial players on your team.