I am often asked the question, should real estate investors work with a buyer's agent? The short answer is there is nothing really to lose and a lot to gain from working with a buyer's agent, especially if you are a newer investor and / or busy with other affairs.
Using a Buyer's Agent for Investment Property
Personally, when I represent an investor on an acquisition, I typically remain as Asset Manager, oversee the stabilization and perform on-going management duties of the asset. I assume my clients will measure my performance against the projections I originally presented during the sales process.
Maintaining this level of client - broker - manager relationship, my intention is to create long term, mutually beneficial relationship. When my clients do better, I do better.
In addition to this, working with a broker doesn’t cost you anything or put you at any sort of disadvantage. If you make an offer on a listed property without a buyer’s agent, the listing agent will also get the buyer’s agent commission. That means to the seller accepting your offer is no different than any other.
You likely will not have access to the interior until mutual acceptance and the contract needs to be structured in a way that makes it completely clear that if you don’t like what you see, you get the earnest money back. Usually, I present offers that don’t require the earnest money to be paid until after the inspection contingency is satisfied.
Buying a multi-family investment property is more complex than buying a single-family home. In addition to all the complexities involved in a traditional residential real estate transaction, multi-family properties have the following items to review during due diligence:
Tenant deposits and leases
Tenant’s rights and access to the property
Owner utility accounts
Owner paid utilities
An oversight in any of these areas will adversely affect your returns and any decent listing agent will go to lengths to minimize the obviousness of any of these issues. For example, if you don’t have a move-in
inspection you’ll need to refund the damage deposit to the tenant even if there’s damage when they move out because you can’t prove that the damage was actually caused by the tenant. That will cost you 1 month’s rent per unit and you’ll have to pay out of pocket for the unit turnover. An experienced, investor savvy buyer's agent will know how to look for any issues in these areas and ask for additional information when something seems off.
Every listing broker will make slightly different assumptions about market rent, maintenance allowance, vacancy rate, and property management fees. If you’re working with a good investment buyer’s agent, they should analyze most deals the same way with consistent variables; By doing so, you are able to easily compare 1 asset to another without getting lost in the details.
The best option is if the broker you’re working with offers property management services or partners with someone that does. The original deal analysis and proforma analysis used in the underwriting process can set the road map for the stabilization process after closing. As I mentioned above, my clients benefit from the full suite of service offered, so I am held accountable to the asset performance I originally presented as compared to a broker who simply sells you the asset and then wishes you luck on stabilization and performance!