How a Real Estate Agent and Investors Work Together
Real estate agents and investors can build a mutually beneficial business model. Investors need a real estate agent to provide access to the multiple listing service (MLS) and public records in order to compare properties and more. A real estate agent who understands real estate investors’ needs benefits from quick sales and regular business.
Learning how to work with an investor-friendly real estate agent will give you an advantage for locating and analyzing investment opportunities. An investor-friendly real estate agent could open the door to greater returns and growth for your real estate investing businesses.
What Is An Investor-Friendly Real Estate Agent?
Real estate agents are not all the same. Some real estate agents specialize in one area — like commercial real estate or vacation rentals — while others have skills specifically for investors.
What is an investor-friendly real estate agent? It is a real estate agent with specialized knowledge to help you, the investor, reach your goals.
Generally, an investor-friendly real estate agent has worked with investors and understands their needs, including the need to close quickly under market value. They will also have specialized knowledge of the local area and be able to show you off-market properties and other investment opportunities. Many of these investor-friendly real estate agents are investors themselves and specialize in investment properties.
An investor-friendly real estate agent can share their experience and advise you on real estate decisions. Even within real estate investing, agents often specialize in one area of investment, such as wholesaling or house flipping.
It’s important to know the specialty and experience of your investor-friendly real estate agent. They should provide examples of past investment properties sold, as well as referrals from other investors.
Investor-friendly real estate agents will have a strong command of their specialty and be able to advise you on property opportunities. Regardless of specialty, these real estate agents should be familiar with all local zoning and ordinance requirements, as well as terms and procedures used by investors.
Here are some of the terms we regularly use as real estate investors that you can discuss with investor-friendly real estate agents in your area:
Common Investor Terms for Real Estate Agents:
- After Repair Value (ARV) — How much the property will be worth after any repairs or improvements.
- Capitalization Rate (Cap rate) — The ratio between the total income produced and the initial investment amount. The cap rate is used by investors to compare different types of investment properties.
- Net Operating Income (NOI) — The operating expenses and other expenses subtracted from the total income. NOI is a simple formula used by investors to determine the profitability of an investment.
- Gross Rent Multiplier (GRM) — The ratio of the price of a rental property to the annual rental income it produces, before subtracting expenses. The GRM is the number of years a property will take to earn back the initial investment through rental income.
- Cash on Cash Return — The amount of the total cash investment received back from an investment, calculated as a percentage. For example, receiving $130 on a $100 investment is a 30% cash on cash return.
- BRRRR Method — “Buy, Rehab, Rent, Refinance, Repeat” is a strategy used by investors to build passive income through rental properties over the years.
- Assignable Contracts — A wholesaling term used to indicate a contract that can be assigned to another investor (i.e., you enter the contract to buy, and then another investor agrees to fulfill the contract for a fee).
- Rent to Own — The option to purchase a property when the lease expires. A portion of the rental payment can usually be applied to the final sale price.
- Sandwich Lease Options — When investors have the option to lease a property to another tenant at a profit.
- Double Closing — The simultaneous purchase and sale of an investment property involving the original seller, an investor, and the final buyer. This allows investors to profit on a transaction without an investment of capital.
- Real Estate Owned (REO) — A property owned by a bank or lender because it failed to sell in a foreclosure auction.
- Short Sale — A home or property being sold for less than the balance remaining on the mortgage. Short sales are most often seen on foreclosure properties when the lender wants to sell the property quickly and is willing to write off the difference in value.
- Tax Liens — Claims the government makes on a property when the owner fails to pay property tax. As an investor, you want to purchase lien-free properties. Some investors choose to also invest in tax liens.
- Deed in lieu of foreclosure — A way to avoid foreclosure proceedings by transferring the property title to the lender, such as a bank. These properties are often excellent for real estate investing.
- Tax Foreclosure — A foreclosure due to a property owner failing to pay their tax for an extended period of time. This varies by state and region.
- Commercial leasing — The specialty of buying and leasing commercial real estate properties.
- Commercial listing and buying — Real estate agents who specialize in both buying and selling commercial real estate properties.
While not every investor will need a real estate agent specialized in all of these areas, the more broad and profound the real estate agent’s knowledge, the more they will be able to direct you to properties for your investment goals. They will be able to suggest which investment strategy (wholesaling, flipping, or buy to rent) is best for a specific property based on current local market trends.
How Real Estate Agents and Investors Can Work Together
Real estate agents and investors can work together for a mutually beneficial and lucrative business partnership. How this works will vary by type of investment — wholesaling, house flipping, or buy and hold.
Here’s what you need to know to work with a real estate agent for different types of real estate investment:
Wholesalers
Wholesalers work with investor-friendly real estate agents to get accurate, up-to-date information on comparable properties, or “comps,” that have sold in the last three to six months.
Real estate investors and real estate agents base their working relationships on honesty, integrity, and trust. There is generally no binding contract between the wholesaler and the real estate agent, but there are benefits to both.
Wholesaler Benefits:
- Access to the multiple listing service (MLS) through the real estate agent.
- Access to local knowledge and tips from the real estate agent.
- Ability to work with more than one agent to increase reach and insider knowledge.
- Marketing and promotion through the real estate agent's network, bringing wholesalers increased influence and potential buyers.
Real Estate Agent Benefits:
- Increased number of listing or buying opportunities from wholesalers when helping with comps.
- Access to off-market opportunities from wholesalers to represent to buyers and investors.
- Ability to work with more than one wholesaler to increase commissions and access to properties.
House Flipping
Real estate agents are a wealth of knowledge and resources for house flippers — they can give you insider information on everything from local knowledge of market value to suggesting target neighborhoods or showing off-market properties. They provide access to the MLS and public records and can give you connections with title companies, local contractors, and real estate attorneys.
Investors and real estate agents generally have an open agreement to help each other without a binding real estate contract. However, if one passes on a listing or potential investment to the other, it is understood that they will work together.
For example, if the real estate agent helps the house flipper locate a property, the real estate agent will represent the house flipper in the transaction. This basic agreement works with an understanding of honesty, integrity, and the benefits for both the real estate agent and the investor.
House Flipper Benefits:
- Comps from real estate agents allows faster analysis and decision on investment properties.
- Real estate agents can advise and ensure compliance with state and federal regulations.
- Buying and listing transactions will be handled by the real estate agent of confidence.
- Exclusive access to expired listings, bank-owned properties, short sales, seller names and contact information, and history of property sales from the real estate agent.
- Ability to source opportunities from multiple investor-friendly real estate agents for greater reach.
Real Estate Agent Benefits:
- Can represent the investor while both purchasing and selling the property.
- Can become a double agent to earn double the commission.
- Faster closing since most investors will pay in cash and sellers are motivated.
- Opportunity to work with multiple house flippers to increase sales and commissions.
Buying Rental Property
Buying rental properties requires specialized knowledge of the market and an understanding of areas of growth and current demand for rentals.
Real estate agents will be able to provide investors with access to the MLS and public records to compare comps of current rental prices and trends before they invest. They will also connect investors with their network of property managers, attorneys, contractors, and title companies to ensure a smooth transaction.
Real estate agents and investors of rental properties generally have an open agreement without a binding real estate contract. However, it is commonly understood that they will work together in a binding contract to buy, list, or rent a property if an opportunity is passed between them.
Rental Investor Benefits:
- Access to past sold rental properties.
- Marketing of rental property. In this case, the listing agent will handle tenant applications, background and credit checks, employment verification, and past rental history verification.
- Repeated, reliable service from a real estate agent for new properties or to fill rental properties.
- Property management by one company if the real estate agent offers property management.
Real Estate Agent Benefits:
- The opportunity to represent the investor as the rental listing agent, as well as in buying or selling properties.
- Can earn a double commission and repeated commissions.
- New client leads by listing the rental. This can include prospective home buyers or new property listings.
- Opportunity to become the property manager for regular property income.
All types of real estate investors and investor-friendly real estate agents working together on the principles of honesty and integrity will create long-term mutual benefits.
Conclusion
For new and experienced investors alike, investor-friendly real estate agents provide access to knowledge, resources, and information to guide investment decisions. When investors and real estate agents align their goals and work with honesty and integrity, strong, mutually beneficial business relationships are the long-term result.
Whether you’re house flipping, wholesaling, or buying to rent, a real estate agent can help you locate investment properties, increase return on investment, and generate business leads. Working together, both investors and real estate agents can earn more and grow faster.
Want to get started in real estate investing or working with investor-friendly real estate agents? We’ve got you covered for buying rental property, wholesaling, or house flipping. You can also check out the FAQ below for advice on whether you should become a real estate agent and more!
Frequently Asked Questions
Getting a real estate license takes time and resources. Generally, a new investor’s time is better spent learning the ropes of real estate investing, understanding local markets, and locating investment properties.
The experience, resources, and network of real estate agents can help investors to locate better opportunities. Building long-term, mutually beneficial relationships with real estate agents will serve your goals and increase your profits.
You should consider becoming a real estate agent if that is your primary goal. If you want to become a real estate investor, it is better to work with real estate agents — at least until you have significant experience in the technical, legal, and practical aspects of buying and selling investment properties.
Someone can become a broker or real estate agent to save on commissions as an investor. However, the amount of money saved is not usually worth the time of investors. The 3% to 5% total commission paid to a broker to handle the real estate transaction will free up the investor’s time to locate new investment properties and opportunities, often at a much higher return.