Buying investment properties is not like buying a home to live in. The goal is profit, rather than personal preference and comfort. This changes the concerns a buyer has as well as the questions they need to ask a real estate agent.
Not just any realtor will do when buying an apartment building or other rental property. It is important to find someone who is investment-focused in the listings they handle.
Investment real estate requires a different skill set than finding homes for individuals. Buyer’s agents for houses will spend a considerable amount of time learning about a family’s needs and wish lists so they can help them find a house where they will be happy. Agents for investors also get to know their clients, but more from the perspective of their business goals, so they can offer buildings with earning potential.
The first question to ask a potential agent is about their experience with investment and rental properties. What is their knowledge of the local rental market? What connections do they have in the rental real estate community? How many successful deals have they made?
In addition to all of the questions a buyer should ask an agent, they should also look for a realtor who asks them a lot of questions.
A good real estate agent will take the time to find out a buyer’s business objectives for the property. They may have different suggestions for someone who is venturing into investment property for the first time as opposed to someone adding to an already extensive portfolio.
Some buyers would like to find a property that is well established and already occupied by tenants. Others may have aspirations to renovate and update an older apartment building. Or repurpose a commercial property or large home into rental units. The more an agent knows you, the buyer, the better they can help you zero-in on the right property.
Real estate agents make it their business to know the current trends and statistics of their local real estate market. For investment-focused agents, that means knowing the characteristics of local renters and the places they live.
The questions that buyers ask should include the following:
As a buyer, you might already know a lot about the area in which you are shopping for investment properties. But real estate agents can fill in the gaps to be sure that you can find the types of properties that fit your goals. For example, someone looking for quiet, long-term tenants might not be interested in a building full of college students with short-term leases.
As with any real estate purchase, the condition of the building is obviously important. Inspections will show if things are not up to code or will need attention. When buying investment property, there are a few additional concerns, not just about the state of the building, but the status of its tenants.
One question that can be helpful is this: “Why the owner is selling?'' Are they retiring and simply getting out of property investment altogether? Or are they liquidating just one of the buildings in their portfolio? If it is the latter, why this particular building? Has it been a bad investment for them?
Reduced property values in the neighborhood or crime might make it a bad choice. Other issues, such as tenants who don’t pay, rundown conditions, or a lack of effective management might be able to be fixed with the right amount of attention and capital.
Owners can sell a property while people are living there and transfer the leases to a new owner. This can be a benefit because revenue will be coming in immediately. But an owner could potentially fill their apartments without doing a proper screening, then use their 100% occupancy rate as a selling point. Buyers must be sure the data they get is about “effective” occupancy—meaning tenants who are in good standing and paying their rent.
Buying investment properties means becoming a landlord. Will the buyer self-manage the property or use a leasing and management company? Will they stick with the existing management company or hire their own? These decisions will shape the next set of questions for a real estate agent and any management company that is currently taking care of the building.
The following questions are important to ask of any property management company, whether deciding to buy the building they manage or looking for a new company to contract with:
In some cases, a real estate agent may know the answers to some of these questions, or they can arrange for a buyer to meet with the management company to discuss these and other issues.
Some leasing and management companies work closely with one or more real estate agencies. Those realtors do not require that a client use the company, but it is one of the many connections they can offer to enhance the services they provide.
Select Leasing & Management in St. Louis, for example, is affiliated with Berkshire Hathaway HomeServices Select Properties. Together the two companies help many real estate investors find lucrative investment properties, and help manage them so they retain their value for years to come.
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