What’s the biggest mistake a real estate investor can make?
Not hiring a realtor.
Yes, they can be a big expense, but a realtor can be an invaluable asset when scoping out properties that you plan on investing a lot of money into.
Reyna Gobel, of InvestingAnswers, lays out the pros: “For a percentage of the purchase price, they’ll negotiate, help you pick a property based on appreciation value, help you verify repair quality and help verify leasing contracts for rental properties.”
How to pick a realtor: Like any homebuyer, referrals from friends, coworkers and family are a great place to start. Just be sure to cross reference any realtor on sites like Yelp, Zillow, and Angie’s List, where you can check out their reviews.
Gobel offers a handy list of questions to bring with you on your first meeting with a realtor:
- How can they help you assess the neighborhood appreciation potential? A Realtor can pull up detailed reports of current and past home prices in the neighborhood. Especially important for negotiations are recent sales from nearby properties. They also need to have a good understanding of the local economy. Sales values don’t increase when people don’t have jobs.
- How will they help you assess the quality of repairs? A good Realtor will recommend you ask for receipts for remodeling repairs, as well as Schedule D of their tax returns that lists repairs as well.
- Will they run a title check? This is easy. All Realtors will do this, as well as recommend you have title insurance just in case.
- How will they help you evaluate rental property? If you’re planning on renting a property, it’s extremely important to get details on the current tenant situation. Is the lease enforceable post-sale? Did they pay a deposit? If so, you could be responsible for refunding it when they leave if it’s after the sale. With first month, last month, and a security deposit, you could be looking at paying anywhere from $2,000 to more than $5,000 out of your pocket.