Buying an investment property as a real estate investor is probably the largest financial transaction you will ever make. Since the process of investing in real estate is very expensive and complicated, working with a realtor is crucial. If you are buying your first investment property, an investor-friendly real estate agent will help you navigate the process and help you find the best positive cash flow real estate deals available.
Related: Do I Need a Real Estate Agent to Buy Investment Property?
However, it is very important to interview several agents first before settling for one. Real estate investors can conduct this interview over the phone, email or in a face-to-face meeting.
10 Good Questions to Ask a Realtor
Here are some good questions to ask a real estate agent before hiring one for purchasing investment property:
1. What credentials do you possess?
Real estate qualifications and credentials are very important when choosing a realtor. Here are some of the credentials to look out for:
- Certified Residential Specialists (CRS)
- Accredited Buyer Representative (ABR)
- Accredited Seller Representative (ARS)
- Senior Real Estate Specialist (SRES)
- Member of the National Association of Realtors
A qualified realtor should also be able to understand terms such as capitalization rate, cash on cash return, occupancy rate, and vacancy rate.
2. How long have you been in business?
When interviewing a real estate agent, find out how long he/she has been in the real estate business. Find someone that has been working full-time as a realtor for at least four years, and avoid people for whom real estate is a side job. The real estate agent should also be experienced buying houses in your desired location. For example, if you are planning to buy a house in California, it wouldn’t make sense to hire an agent that specializes in Nevada. A local realtor will be able to provide a comparative market analysis (CMA) for the properties being sold in the real estate market. This will help you compare different homes using specifics such as the number of bedrooms, square footage, and price.
Related: Comparative Market Analysis: A How-To Guide for Real Estate Investors
3. How many clients are you currently working with?
While it is not possible to tell how many buyers an agent can handle effectively, look out for numbers that are too high. For example, if an agent is representing 50 clients at the same time, it is possible that their time will be divided. This means that you might not get as much attention as you wish. On the other hand, too few clients could indicate that the real estate agent doesn’t have much experience.
4. Are most of your clients buyers or sellers?
Most real estate agents specialize in working with home sellers or home buyers. Since you are buying investment property, hiring a realtor that specializes in buying homes would be advisable. And one with experience in buying rental property is even better, of course. However, a realtor that does both can still come in handy since they understand both parts of the process.
5. How many real estate deals have you closed?
This is one of the most important questions to ask a realtor. Just because a realtor works in your target neighborhood doesn’t mean that they have successfully helped people buy property there. Find a real estate agent that has a proven track record of closing deals in your desired zip code. When interviewing the agent, ask for references from previous customers. Call the references and ask them about their experience with the realtor. Was he/she easy to reach? Did he/she always keep you updated? Were you happy with his/her work? Would you recommend him/her to others?
6. What is your commission?
The commission charged by real estate agents is a percentage of the investment property’s final sale price. Though the commission is usually 6% of the final sale price, it could vary depending on the circumstances. This is why this is one of the crucial questions to ask a realtor from the onset. However, this does not mean that you should settle with the agent that charges the lowest fees.
7. What will be the primary means of communication?
Working with a real estate agent involves a lot of back and forth communication. Poor communication will result in frustration and time wasted. Do you prefer email or texting? Or are you more comfortable with phone calls? Whatever you prefer, be sure to find an agent that can work with your primary communication method. Some agents even use smartphone apps to provide important updates for their clients.
8. Do you work alone or with a team?
A busy real estate agent that works alone might not be accessible when you need them. This will lead to frustration and delays when buying investment property. Therefore, be sure to look for a professional real estate agent that works with a team. This will ensure that you get more personalized service and attention during the buying process.
9. What are the terms of the buyer’s agreement?
Most agents require real estate investors to sign a buyer’s agreement which is valid for a specific period. Be wary of agents that write contracts that favor them, but are a disadvantage to you. For example, some agents charge a fee for the cancellation of contracts. Ask the potential agent if you can terminate the contract without a penalty if you are not happy with their services.
Related: 4 Types of Real Estate Contracts: A Beginner’s Guide
10. What else should I know about buying investment properties?
Pay close attention to how the realtor responds to this question. There is always something important that you need to know that you forgot to ask. A good agent will take the time to share useful information to ensure that you feel secure and comfortable. They will also ask the right questions so as to know how best to serve you.
These are the most important questions to ask a realtor before making an investment. While interviewing real estate agents is important before buying rental properties, don’t overdo it. Limit the questions to ask a realtor to the most crucial aspects for you and your needs. And don’t make the mistake of interviewing different agents from the same company.