In my business model I need very motivated sellers. They need to be able to have a desire to sell at a reduced price and give me favorable terms. Most Realtors have been trained to only accept a cash deal (mortgage included), as there is no reason to do anything beyond this traditional method, especially if it is complicated financing that they don’t understand. So it is important to figure out how to work with a Realtor. Here are some tips that I have found to be effective when working with Realtors:
The Realtor’s sole job is to act as a fiduciary. The Realtor’s responsibility is to make the most commission for themselves, which has a benefit of making the maximum for the seller. The Realtor has no risk if either party makes a profit or loss. You see the conflict immediately between a Realtor and the investor. The goal of a Realtor is to get as much earnest money out of you as they possibly can. (Just like a wholesaler). This causes you to follow the money... your money. I was told by a mentor who was willing to walk from $5,000, if you do your due diligence and find the deal will lose more than your earnest money, then walk away. This was a big lesson for me.
If you are interested in investing in real estate as a new career, do your homework. The uneducated investor goes to the multi listing service (MLS) and starts making offers. They pay way too much to get out of their JOB fast. The pool of MLS is very competitive. You will compete with homeowner occupants who will pay more than you as an investor should. This keeps prices up!
Let the Realtor help you! Know what you want and don’t want. Have a plan. The Realtor has no desire to go on a wild goose chase, hunting for property you will never buy. Be respectful to their time and intelligence. Be specific in your hunt. If you don’t know what you want, then ask a professional investor, get some training, or get a mentor. Spend some money on your education. The education you get from TV personalities or book writers is no different than the education you can get at the local Real estate investment association. So seek any kind of education.
Once you know what you want to invest in, whether it’s wholesale, buy fix and sell or purchase a rental for long term wealth, then the Realtor can help you locate a property. Understand that a property with an 8% return on investment will not allow you financial freedom in the first decade, you will need to keep your job for the next 10 years. If you want to live off your investments then your will need a true rate of return at or above 15%.
I recently had a Realtor tell me in order to buy this property I needed to reduce my margins of profit. My thought was you are right. So I said “this is not a deal for me. Call me when you have something which will fit my ROI”, and I walked away.
The Realtor is a professional who is able to support you in your business just like a lawyer, plumber, accountant or contractor. They all have a self-interest. They want to get paid. They want to make a profit. Make sure your business model states clearly that you get paid first then everyone else gets paid.