This post is the fourth in a five-part series that examines best practices for hiring an investment sales broker.
The importance of choosing the right investment sales broker to work with cannot be overstated. Whether you’re selling or buying an investment property, it’s best to work with a broker who is committed to the relationship rather than simply to the transaction. Look for signs of genuine interest in what you are trying to accomplish and the motivations for your investments. Sellers and buyers often act for specific reasons, i.e. to resolve a problem, or to take advantage of an opportunity. The right broker will seek to understand these underlying concerns before suggesting a course of action.
For those looking to purchase or exchange investment properties, a key criterion to look for in a broker is someone who understands that you aren’t just buying a property – you’re investing in a business plan. A broker with this mindset can both proactively alert you to investment properties that meet your criteria and provide expert counsel on how best to structure the deal in order to minimize risk and maximize returns. Here is an overview of how the right investment sales broker can help you to successfully execute your business plan:
Understanding investment goals
Strategy is a core component of buying and selling real estate investments. Your broker should take the time to understand your timeline for buying, long-term investment goals, and where the property you are seeking fits into your larger portfolio. This information will allow your investment sales broker to proactively identify properties that are aligned with these goals.
Learning investment criteria
How much are you looking to invest in a property? Are you open to a mixed use property offering retail space and multifamily units, or do you prefer a property that is single use? If you’re looking at multifamily properties, how many units are you looking for the property to house? How important is geography? Are you willing to look in suburban areas where prices are lower and there is an opportunity to add-value through capital improvements? Is buying in a downtown area a must?
The right investment sales broker will understand these criteria and clearly articulate the business plan for properties he or she advocates. Smart business plans focus on minimizing expenses and maximizing returns. With investment real estate, this translates into lowering the operating costs for a building and creating the potential to raise rents. For example, if you convert the building’s heating system from oil to gas, install energy efficient lighting and windows, and convert from gross leases to net leases, you can not only reduce your operating expenses, but make your property more attractive to future investors. An investment sales broker can help with identifying the improvements with the potential to yield the greatest returns and also outline the projected Net Operating Income (NOI) for the property based on its current state and future state (once value-add improvements have been made).
By choosing a broker with a strong track record and local market expertise, you will also gain the counsel of someone who is adept at working in a given market and can offer alternative markets to explore if high competition is often leading properties to sell above their asking price in your first choice area. A seasoned broker will also be well-versed in what is driving market performance and trends – job growth, relocation of a major employer to the region, economic development initiatives to attract small businesses, etc. Knowing who is moving to an area and what their buying power is can help to inform a smart investment.
When you partner with a broker who understands your short-term and long-term business goals, is well-versed in market trends, and has experience structuring deals in your given asset class, you gain the expert counsel necessary to help successfully execute your investment real estate business plan. This strategic approach will allow you to minimize risk and lay the foundation to help maximize returns.
Adding value to investment real estate properties is a smart way to help maximize returns. For actionable tips, download our value-added real estate investing guide today.