Your real estate agent has a lot of knowledge at their fingertips and experience to draw on when guiding your investment decisions. Don’t let this gold mine go untapped. Instead, ask your agent targeted questions that can help you make better decisions.
There are three main kinds of questions you should be asking a real estate agent when you’re investing. To be sure you’re partnering with the right agent, you should ask about their experience and strategy. If you have an experienced agent, it is also smart to ask about your own strengths and weaknesses as an investor, which can help you avoid common pitfalls. The last questions you should ask are about any specific property you’re considering.
First, ask questions about the real estate agent’s own experience.
1. How Are You Different From Your Competition?
If they don’t say that they are more experienced guiding investors than the average agent, a beginner investor is wise to find someone else. Especially for your first few properties, you need a real estate agent who can give you the information and advice you’ll need to make the best investment decisions.
2. How Will You Find a Property that Meets My Investment Goals?
When you began to consider investing, you hopefully narrowed down an investment strategy that will work for your goals and skills. When you ask your real estate agent about that strategy, you can assess whether they understand it and whether they have a solid plan to focus on the types of properties that work best for your strategy. Top-performers will know how to find a new investment property that is likely to succeed for you.
If your real estate agent has proven experienced and focused, you can also ask them to assess you. This guidance is invaluable as a beginner investor, because you may not know what kind of weaknesses you have.
3. How Do I Compare to Other Investors You’ve Worked With?
Ask this question to discover your weaknesses and learn how to protect against them. Your agent may suggest that you need a backup funding plan, like crowdfunding. Or, they may suggest your skills are a better fit with a different property type.
Generally, real estate is a safe investment. However, all investments come with risk. If you understand your own weaknesses, then you can reduce your risk and make sure you’re setting yourself up for success.
Once you understand your own goals and strategy more strongly, you’ll start looking at specific properties. A few targeted questions can help you assess a specific property more thoroughly.
4. Why is the Owner Selling?
Many of the reasons an owner is selling may be neutral to you, such as selling because they are retiring or have moved too far from the property in question. However, they may be selling because of a problem with the property, such as decreasing demand for rentals in the area. You shouldn’t necessarily write off a property that faces challenges, but it is important to understand the risks that you’re taking on by purchasing the property.
Another thing to be on the outlook for is if the owner is selling the property soon after purchase and there are a string of other recent owners. Quick sales could indicate that the owners are discovering an issue with the property that they do not want to resolve. The roof could need a replacement, or maybe the whole HVAC system is broken.
5. What is the Vacancy Rate in this Neighborhood and Building?
In multi-family units, the vacancy rate of the building itself will be very telling. Be sure to make projections to ensure you can make the building profitable at its current or estimated vacancy rate. Or, develop a plan that can lower the vacancy rate, with the understanding that this is taking on more risk.
To make this plan, you will also need to estimate the operating costs of the building, including the property tax, cost of utilities and estimations for maintenance. Your real estate agent can help you gather the information you need to do so.
If you are investing in a single-family dwelling, these calculations will still be valuable. However, you should also investigate the vacancy rate in the neighborhood as a whole. This metric will help you estimate how quickly you can fill a vacancy and what the overall market trends are in the area.
For example, if the vacancy rate is high, there may be a diminishing supply of renters in the area. If that’s the case, you’ll want to ensure that your property has advantages over the other properties in the area that can help drive demand.
6. Which Direction are Mortgages and Rents Trending?
In 2019, mortgage rates are going up, which means it is wise to invest in real estate quickly, rather than leaving it to late in the year, or next year. As an investor, you’ll also need to assess if rents are increasing, stagnating, or dropping in your neighborhood. This will help you assess the long-term prospects of the property.
7. Which Risks am I Taking On?
If your questions so far haven’t discovered any risks with the property, it is wise to lean on your real estate agent’s experience and ask them directly if there are any risks you’re not seeing.
When it comes to real estate investment, two eyes are better than one. When you choose a Clever Partner Agent, you gain an experienced, top-performer who can help you maximize your investment and avoid common errors. Whatever your experience with real estate investing, you can trust a Partner Agent to answer the pressing questions you need to make the best decisions.