In order to find the best real estate investments for financial growth, you need to have at least one broker on your team. Brokers are the gatekeepers to the types of properties you want to buy. Their goal is to sell properties and make money through commissions. Your goal is to make money in real estate by buying quality properties. You both are uniquely qualified to help the other attain their goal.
Large MSA’s will have a multitude of brokers. The high quantity of deals usually allows those brokers to specialize in certain asset classes like office, retail, multifamily, etc. In the smaller micropolitan statistical areas, brokers are less plentiful. These brokers tend to be more generalists and frequently will represent all of the asset classes at their firms.
Brokers are not hard to find. A simple internet search will often yield the results you are looking for. Most MSA’s will have a variety of brokers that are tied to either a national, regional, or local firm. You can also ask for a referral from your property manager
THE BROKER – BUYER RELATIONSHIP
Even though you are looking to buy a physical property, make no mistake – real estate is about building relationships. That doesn’t mean I recommend asking your broker out to dinner and a movie. Nevertheless, you will need to spend time building a relationship. Your broker needs to know that you are who you say you are and that you can perform as promised.
Brokers are in the business to sell properties. At the end of the day, they want to know that if they bring you a property that fits your criteria, you can close. Consequently, it is imperative for you to build credibility. Credibility starts with doing what you say you will do. Returning phone calls in a timely manner and providing feedback are critical pieces to being taken seriously. Let’s discuss some other necessities.
As the saying goes, if you are going to walk the walk, you have to talk the talk. Just like doctors and other health care workers have their own language, so do real estate brokers. As an ER doctor, I can only imagine what the on-call Orthopedist would think if I called saying, “the leg bone is broken in several pieces just under the round thing.” Their expectation of a competent professional sounds more like, “there is a comminuted right intertrochanteric hip fracture.”
While the vocabulary won’t come overnight, it will come with education. This is what NestEggRx is all about. So please sign-up to the website, download the free interview, and continue following the blog.
Before making that initial first contact, know your criteria. You only have one chance to make a first impression. Brokers are busy people and they are in the business to sell properties. If they believe you are a serious buyer, then they will provide you with deal flow. If they don’t believe you are serious, they are not going to waste their time. You need to describe to them what you are looking for.
-Asset Class (Office, Retail, Industrial, Multifamily, Hospitality, Land)
-Asset Grade (A, B, C, D)
-Area Grade (A, B, C, D)
-Asset Specifics (Depends on your asset class, but for multifamily I like garden style, pitched roofs, more two bedrooms than one bedrooms, etc.)
During your first call you will be creating a first-impression and describing your criteria. You will also be interviewing the broker to determine if he or she is someone you want to work with. Some of the things I look for are:
-Specialized in my chosen asset class
-Minimum of 5 years experience
-Access to adequate deal flow evidenced by a minimum volume of transactions ($30+ Million a year)
-Local market reputation with anchoring to the community evidenced by network affiliations
-Willing to spend time discussing the market and understanding your strategy
Rarely will that first contact lead to a home run. More than likely, the broker will not have the exact property you are looking for. You will need to contact the broker regularly to assure that he or she is working on your behalf. Don’t do it so much that you become a pest, but do it enough that you stay in the forefront of their mind.
It is not uncommon for a broker to test you. Among their inventory of properties is a spectrum of deals. Some may be great, others good, still others that are mediocre. Rest assured that the broker will also have some bad deals amongst his or her inventory. As you can imagine, the broker likely has little problem moving the quality deals, those that make the best real estate investments.
However, as the deals get worse and worse, they are less likely to sell. These deals can be bad for a myriad of reasons – some as simple as the seller wanting too much money or undesirable location. It is not uncommon for a broker to float these types of properties by a new contact. They want to sell their dog properties and perhaps you are just the sucker who will buy it.
You might think this is short-sided, but look at it from their point of view. They only make commissions when they sell and their problematic properties are going to sit unsold. If you are not able to differentiate a good property from a bad one, then you won’t be in business very long. Consequently, you won’t be a repeat buyer anyway.
I am in no way endorsing this behavior, nor do I think it’s right. However, it happens all of the time and you should be aware of it. After you have evaluated the submarket and looked at the numbers, if it doesn’t look like a winner, then politely decline and explain to the broker why it doesn’t meet your criteria. After a time or two of this, they will quickly understand that you know what you are doing.
Brokers are a critical piece to your acquisitions success. A seasoned high quality broker is crucial if you are going to find the best real estate investments. Be aware that most brokers do not have the time nor do they feel obligated to hold your hand and walk you safely past all of the landmine properties in a market. In fact, they might be the one presenting one of those properties to you. Initially, some of that is to be expected. However, once you have proven your credibility and developed a relationship with a broker you should be able to start making some offers on quality properties.
To Your Wealth!
Dennis Bethel, M.D.
P.S. If you are going to find the best real estate investments and make money in real estate, then a quality broker is a key component to your financial growth.