Do-It-Yourself Landlord's Blog

Many real-estate gurus strongly believe that investors should avoid agents at all costs, with special emphasis on the dreaded real-estate agent. Over the years, I've heard this mantra repeated over and over. However, the longer you remain in the industry, the more you realize that an older mantra trumps that teaching every time:
Time is money.

Every business detail you do yourself takes time that you could spend doing something else. Savvy real-estate investors learn through years of experience about which jobs to retain themselves, and which jobs to outsource cost-effectively. If you have the time, money, vast practical experience, and an extensive real-estate education, it is true that you don't need a real-estate agent. However, if you aren't endowed with all these superpowers, consider hiring an agent who can keep your best interests at heart. A real-estate agent is no superhero, but he or she can become a vital team member who increases your efficiency and productivity.

So what can you expect from your agent? Again, remember: time is money. Ideally, your agent will do all the legwork to track down available properties that fit your needs or adhere to the requirements of your real-estate portfolio. Real-estate agents have access to the Multiple Listing Services (MLS) database and can often generate automatic updates that are emailed to you as soon as a property becomes available on the market. This will increase the likelihood of finding exactly what you want. Agents can organize your initial visits to properties to maximize time efficiency, and can make sure you get the best possible deal on properties you decide to purchase. You won't spend hours driving around trying to find the right property when you could be putting that time to better use. This service especially comes in handy if you live in a different city, state, or country than the area where you are investing. After you've developed a relationship with your agent and he or she knows exactly what you need, you might consider allowing your agent to place offers on a property sight unseen, because you trust that your agent has your best interests at heart.

Later, when you're ready to sell one of your properties, your real-estate agent will take care of all the details and concerns of the selling process. Agents are responsible for placing advertisements, showing the property, running open houses, and navigating the closing process. Additionally, most agents are trained to generate a Comparative Market Analysis (CMA) of your subject property to determine whether the asking price is relevant for the area and the current trends of the market. This analysis is also important when you consider buying a property. By running a CMA, your agent will be able to tell you if the subject property is priced appropriately. On a legal note, the insurance that an agent's broker holds will cover each transaction in which you use their services, should issues arise in the future.

On top of all the perks of a real-estate agent's inside knowledge and information, you should also expect a strict fiduciary responsibility from your agent to ensure that your best interests are being represented in each transaction. If your agent is a member of a local and/or national Board of Realtors, you have the added assurance that they are held to a very strict code of ethics by an organization that takes their reputation seriously and does not look lightly on infringements of its rules and regulations. In Texas, agents are also required by the Texas Real Estate Commission to complete additional hours of continuing education each year in order to remain licensed. Therefore, your agent will be expected to represent you at a very high standard of competency by agencies that have the clout to enforce it.

If you're brand new to investing, you might be surprised to learn that the commission of a buyer's agent is typically paid by the seller of a property, unless explicitly stated otherwise. In this case, having a real-estate agent on your team makes all the sense in the world.

If you're still determined to become a do-it-yourself investor, you might decide at some point that it is worth the time and effort to become an agent yourself. I know many such investors, including some who have become full-time agents (me included). However, you must again assess whether your time and energy could be better utilized in other ways. As I've stated in previous articles, it is not considered a weakness to outsource responsibilities of your business to others. Most serious investors have a whole team of professionals whose individual areas of expertise help make the investor's business a more well-rounded and profitable endeavor.

Your goals, minus your doubts, equal your reality.
—Ralph Marston

Landlords fall into two categories: those who dabble in real estate as a hobby and those who see real estate as their business. The former are having fun and making a little money in the process. The latter know what they want and have a plan to get it. It is precisely this plan of action that turns a dream into a goal and ultimately into reality.

If you are a new landlord, you may not have a plan of action yet … or maybe you have one, but it is still safely locked inside your head. Whatever you do, don’t allow it to stay there. Many people refuse to write down their goals because they are afraid of not achieving them. This fear can hold you back indefinitely. When you develop a plan for your business, it is absolutely essential to sit down and put pen to paper for several reasons.

One reason for writing down goals is illustrated by Mark McCormack in his book, What They Don’t Teach You at Harvard Business Schools. He cites a Harvard study conducted with MBA graduates over the course of 10 years (1979-1989). The researchers concluded at the end of the study that students who had clear written goals upon graduation were earning an average of 10 times more than the other graduates in their class.

Written goals provide you with a clear vision and a direction to focus your efforts. Even if you are currently managing your properties yourself, your goals will determine whether you should consider outsourcing aspects of your business, so you can better utilize your time to achieve your goals. The bottom line is that you need to know who you are and where you are going before you can decide to take others with you.

Use the following three steps to define your goals in concrete, written terms.

Step One: Long-Term Goals

The first step toward building your plan is to ask yourself some basic questions about the direction of your business. Once you know what you need, you can develop a plan to achieve it.

• Do you want to work at an additional full- or part-time job?
• Do you want real-estate investing to become your primary source of income?
• Do you plan to own multiple properties?
• Do you own properties outside the city where you currently live?
• Do you plan to own properties outside of your city/state?
• Do you want to develop an investment portfolio?
• Do you view your real-estate ventures as part of a financial retirement plan?

Step Two: Team-Building Goals

The next step in setting your goals is to build a team that supplements your knowledge and experience base. Most serious investors have a group of professionals who help with a variety of responsibilities. It is not a weakness to admit you need help, but rather a necessary step toward achieving success.

• How much experience do you have with property maintenance?
• How much free time do you want to spend with your friends/family?
• Do you prefer to hire others to do repairs on your properties?
• Do you have difficulty telling people no?
• Do you generally like working with people?
• Do you understand how to keep clear financial records?
• Do you have a strong back-office system to provide administrative support?
• Do you have illnesses that are debilitating in nature?
• Do you have a lawyer who can provide legal counsel?
• Do you have a reliable appraiser?

Step Three: Support System Goals

Your third step in goal setting should include the development of a personal support group. Real-estate investing can be a rollercoaster at times and it is vital to establish a system from which you can draw support and motivation.

• Have you joined an investors’ group?
• Have you networked with other investors/landlords?
• Have you subscribed to any daily motivational newsletters?
• Have you subscribed to any real-estate periodicals?

You can find many resources to help you stay on track. For example, landlords in Austin, Texas have a number of investors’ groups available, such as the Real Estate Investors Club of Austin (REICA). To my knowledge, it is currently the largest investors’ group in Austin. For more information about this group, visit www.yourreica.com. REICA’s meetings focus on the needs of local investors and provide moral support to all group members. If you need daily motivation, one wonderful resource is Ralph Marston, another Austinite. Marston is a published motivational writer whose website at www.greatday.com is dedicated to daily inspirational messages.

After you have determined what you need from your business, write it all down. You can automatically convert each need into a goal that will add substance, stability, and structure to your business. The final step is simply to take action!