How to get Realtors to work for you – the “scrappier” they are, the better. The secret is finding them. Here's how…
If you've gotten this far, you already know my take on real estate investing: buy multiple housing units in low to moderate income areas that will immediately generate positive cash flow. It's a proven method that allowed a high school dropout like me to become financially independent by age 27, while lots of guys my age with Ivy League MBAs were still punching a clock.
I did this – and am still doing it 30 years later, and teaching thousands of people like you to do it, too – by buying distressed properties from distressed sellers. Maybe the properties just need a little love to spruce them up, maybe the buyer is desperate to get rid of them, and maybe it's a little bit of both. It's what I called “forced appreciation”, and it's the cornerstone of my proven real estate investment method.
“Ok Russ,” you say, “I get it. I'm ready to achieve financial independence, quit my chump job, and have the freedom and the control I deserve. I'm ready to roll.“
But there's one thing still holding you back – you're not sure how to find those distressed properties and distressed sellers. When you're trying to get started, and you're still working for someone else, you don't have the time to search for them – and you may not yet have the experience to recognize them. So what do you do?
Find yourself a good Realtor, that's what. I don't mean the ones with their pictures in the paper, with their lipstick just so and a scarf knotted to one side around their neck, talking about a property's granite countertops and the neighborhood pool. These types are what I call the “cream of the crop” Realtors. Hey, they work hard and help people find lovely homes and they can make a lot of money at what they do. But that's not who you want when you're looking for investment properties.
You also don't want your nephew Louie who got his real estate license on the side three years ago and sells one or two houses a year for extra money. Nothing against nephew Louie, but he probably doesn't know much about the type of real estate investing you want to do. You're not in this to help Louie make money, you're in this for your own financial independence.
What you want is what I call a “scrap Realtor”. What's a scrap Realtor? It's a Realtor who deals almost exclusively in low to moderate income housing, much of which is multi-family and most of which is sold to investors – which is what you want to become. Scrap Realtors know the neighborhoods, know which properties have potential – and many of them are investors themselves. You may think that the term “scrap Realtors” sounds insulting, but that's the point – these guys don't care. They're not in real estate for the glamour or prestige; they're in it to make money. And so are you.
I've said it before and I'll say it again – nine out of 10 Realtors don't know anything about investment properties. Yes, they all have access to the same information on the MLS, but that's where the similarities end. Real estate is really about circumstances – what's the vacancy rate in the neighborhood? What is the rent now? What's going on with the seller that makes him or her motivated to sell (and possibly offer financing)? No computer system can tell you that – to get that type of information, you have to pound the pavement and build relationships.
Sure, once you're experienced and financially independent you can do that yourself – or hire others to do it for you. But when you're just getting started, a good scrap Realtor is invaluable.
You may have never noticed scrap Realtors before, but once you start looking I bet you'll see plenty of them. Their ads are smaller, and don't usually include a photograph. Their listings are usually for multi-unit properties, and are usually in the working class neighborhoods, not the hot parts of town. You won't see words like “charming”, “quaint”, or “cozy” in their property write-ups.
But these guys can help you make money. And if they're good, they'll be willing to spend some time educating you on opportunities in your area, because they know that once you start getting the positive cash flow that comes from a good real estate investment, you'll be coming back for more.
How to Find a Scrap Realtor
- Look for independent real estate agents. Most scrap Realtors don't work at Century 21 or ReMax. Independent agents are more likely to also be investors who understand the types of properties you're looking for.
- Check out the classified ads in the paper. I don't mean the big splashy ads with photographs. I mean the small column ads that list properties for sale and express interest in buying properties. Many of these agents will work with investors, too.
- Ask questions. Making blind calls to real estate agencies can be intimidating. Here's a sample script to get you started: “Hi, my name is _________. I'm a real estate investor and I'm trying to find a real estate agent who specializes in income properties such as apartment buildings, duplexes, five-units, etc. We also look for properties that need cosmetic repairs. Is there someone in your office who fits that description?” When you get a prospective scrap Realtor on the phone, ask about his or her experience with private financing and seller financing. Ask about his or her's own experience investing in real estate, and their results over the last several years. The reactions and responses you get to these questions will give you a good idea if the Realtor knows about real estate investing – and if he's able help you learn more, too.
In my training and mentoring programs, I always include a session with a good scrap Realtor, so people get to see how these guys operate first-hand. It's just one of the invaluable things you can learn from our programs. Once you learn to identify and work with a scrap Realtor, you can find one in any town, city or state in the country – and start investing.