Thursday, November 6, 2008

Now More Than Ever Utilize An Expert To Go To War For YOU

I don't often toot my own horn and say "hire me," or "you MUST hire a real estate agent" in these pages. Though I will admit I have urged readers to get qualified counsel (your neighbor or favorite uncle who sells real estate part time really doesn't count).

Today I am going to deviate from that general policy. I want to discuss the importance of partnering with a real estate agent who understands commercial/investment opportunities. It has been said that there are no problem properties, just problem ownerships. This is a fairly true statement. When a property isn't working out for the owner, chances are they bought it wrong (at the wrong price, for the wrong terms, etc.) or are managing it poorly. Those two bugaboos probably add up to more reasons than not why an investment does not work for its owner.

Some 15, 20 and 30 years ago, there were people who bailed out of the stock market and invested everything they had into real estate. Those who bought right, did well. Those who thought they knew it all, and did it on their own, did not, on average fare as well. And therein lies the rub -- with today's technology providing exponential increases in access to data, a lot of potential investors want to do it on their own. "I don't need a real estate agent," they say, believing that they can somehow save the money they would be paying an agent to represent them on the buy side.

Well here's a little secret . . . nine times out of 10, on the buy side, you pay no real estate commission. It comes out of the seller's side, funds that already have been allocated to pay commissions to get a property sold.

We are in that same climate today. People, smartly, are working to move money from other investment vehicles into commercial real estate.

But let's put that aside for a moment. Adversity most often creates opportunity. People and companies sell for any number of reasons -- death in the family, retirement, just cashing out, moving up to better properties, have used up depreciation and want a new property where cash recovery will start over, planned 1031 exchange, etc.

Buying "right" is the key. Moving out of stocks or moving under performing IRA or 401(k) money into real estate is likely a smart move at this time. But thinking that because Bill Gates or Google put lots of electronic gizmos at your fingertips and that you can go it alone . . . well, you can. But remember what I said about the folks from 20 and 30 years ago? Same potential for disaster. Only it might be worse because of a false sense of security that all the software tools available make it idiot proof to buy an investment property. There are far more pitfalls than you can imagine.

Here's one way to look at this discussion. I have told many people that I think Quicken is an incredible tool for accounting. But does using Quicken make me an accountant? No. So why would I try to do accounting on my own? Too many risks, for one.

So why do so many people feel they are at risk in the stock market, but then take the risk of buying "wrong" by pretending they have all the skills of a seasoned real estate agent? Not all, but many real estate agents will represent themselves in transactions, and that is because they understand the nuance, the negotiation, and the marketplace. Smart residential agents use experienced commercial agents to handle the former's investment purchases and sales.

But for regular folks, the potential for harm is astronomical. There are horror stories by the thousands of many who invested in far-off exotic locales, like Florida, because a neighbor did it. Did it themselves, they add. And now they are hurting. They are among the many who bought in because they didn't know what was happening with the market, bought in too high, and now are waiting for their bailout (don't get me started on that) if they happened to buy a house to use as a rental. Not all will be bailed out.

Bottom line. Find an agent who understands investment properties. Not sure how to start? Contact me and I will refer you to someone. My expertise is in Ohio. Not elsewhere, and I would not pretend to try to represent clients in other parts of the nation, but I am hooked into a network of smart, reliable people who can get the job done.

There are investment opportunities everywhere. Your comfort level is a key factor, but then there is always professional management who can take on a project and send you mailbox money once a quarter so you never have to worry about your investment. If you are looking at the millions of single family homes available as potential investment opportunities, the INCREDIBLE period of opportunity for investment at a rock-bottom price may only last another year.

Regardless of whether you are looking at an office building, a multifamily complex, or even a duplex or a couple of houses for rentals, I urge you not to blow it by trying to take on the task of buying an investment property on your own.

Please, please PLEASE do yourself a favor . . . Get someone who knows what they are doing to go to war on your behalf.

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