Home Buying in 92024>Question Details

Chris, Other/Just Looking in Encinitas, CA

How do you find an agent that will only send you properties where you can make a positive ROI of 5%? thanks

Asked by Chris, Encinitas, CA Sat Sep 25, 2010

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My advice would be to ask for referrals from other investors who have had good experiences with agents in your marketplace. Another option would be to interview a couple agents and try to find one with experience in handling investment properties. Many agents are also investors themselves. Find an agent who owns multiple properties.
0 votes Thank Flag Link Sat Sep 25, 2010
We represent investors that require a minimum 6% ROI.

It seems most the properties we aquire for our investors are condo conversions in east county in the 75K to 125K range. Lately, there has not been very much of this type of inventory available, it's very competative and you must have cash!
1 vote Thank Flag Link Sat Sep 25, 2010
You and your agent need to decide on YOUR definition of 5%. The biggest problem I have sen is...everyone defines the term differently, and you can't just look for properties that have 5% or better return, so what you are doing is creating a situation where the agent must run numbers on every property before they send it to you.

It would probably be a better situation, if you looked at the properties online, and...if you are interested in the property, then do all the work to verify that you are getting at least 5% ROI, which by the way, seems low, but if you are putting everything into the formula...could be fine.

It is my Goal to Increase the Success and Profitability of Those I Serve


Thank you again,

Let me know if I can help you in any way!


Joan Wilson (Realtor, SRES, Ecobroker, Certified REO, HAFA, and Short Sale Specialist)



California Cool 4 Sale
Prudential California Realty
Direct Phone: 760-757-3468
800-975-7481 x 111
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JoanWilson@prusd.com
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1 vote Thank Flag Link Sat Sep 25, 2010
Hi Chris,

It is difficlut to find decent deals in coastal San Diego County. Prices for 2-4 units are still too high for me to recommend, especially with the deferred maintenance issue that most of these older properties have. As you go inland the prices seem to moderate and the number get a little better, but you have to consider what kind of area and tenants you are comfortable with.

One strategy that you might consider is cherry picking condos. Those prices seem to be softening quite a bit. In additional inventory at the low end of the market has significantly expanded and will probably continue to expand creating some downward price pressure.
0 votes Thank Flag Link Wed Feb 2, 2011
You might have to look in other places than Encinitas as well, I have bought investment condos in Oceanside / Vista for my clients and they have a 8% return after all the costs. The properties were bought all cash.
It is harder to get a certain return in the higher end markets.

good luck finding the right agent.


Oliver
Web Reference: http://www.oliverindra.com
0 votes Thank Flag Link Sat Dec 4, 2010
Because time is money, agents automate as much of the search process as possible. If you let one particular agent know you will commit to using their services, then they will likely go the extra mile to screen for the listings you want, rather than blast you with everything and have you pick the gems.

Likewise, garbage in, garbage out... if you review a comprehensive game plan to fit your goals and budget, the agent can still automate much of the process, saving both of you time and money, by narrowing down criteria and working smart and hard, rather than just hard.

Specifically, obtaining 5% ROI is a function of finding a solid property, that will retain renters (with low turn-over), that doesn't have too much deferred maintenance, that "pencils" out to 5% annual return AFTER accounting for roughly 25% operating expenses. To achieve this, you'll need to be looking in the low $300k's, and pay all-cash... in which case you can find a nice, 3bd/2ba sfr... but if all-cash isn't an option, you'll have to look to lower priced condos, or outside of the area.

Higher end homes won't offer as much rent per value, but they will appreciate at a faster rate.

Hope this helps :)
sc
Web Reference: http://www.SethChalnick.com
0 votes Thank Flag Link Wed Nov 24, 2010
Hi Chris,

We usually recommend the following prior to pursuing an investment property:

1. Talk to a tax expert that understands real estate investments. You want to understand the overall tax effect so you can determine a net ROI.

2. Talk to a real estate attorney to best determine how to hold title and what entity you may need to set up.

3. Do your homework. Understand the rental market, occupancy/vacancy rates, expected cash outlay per year in repairs, etc.

We hope this helps.

Best regards,

Mark and Kari Shea
Shea Real Estate
Real Estate Experts Serving San Diego County
Specialists in Investment Properties, Foreclosures, Short Sales,
Development Opportunities & Traditional Real Estate
0 votes Thank Flag Link Mon Sep 27, 2010
Start by calling a few of them and conducting a preliminary phone interview, to see if they even know what ROI is.
Web Reference: http://www.golftobeach.com
0 votes Thank Flag Link Mon Sep 27, 2010
You would need to buy a property either below or at the bottom of the market price range as a starting point - which many times equate to a fixer up. Keep in mind that today's ROI of 5% may end up to be less than 5% by the time you sell it due to market change and how long before you turn it over, or how much you end up fixing it up. What if you can't sell at the price and time frame you set out? What's your back up option? On the upswing, over your 5% is consider a bonus. I would also consider a minimum dollar amount rather than a percentage of return that you can bear with.

Interview a few agents/brokers who can put on their 'investor's hat' to rigorously work with you. Work with someone you can actually learn from and be comfortable sharing your requirements with. And be persistence in your search. There are as many opportunities out there as many hard working investors.
0 votes Thank Flag Link Mon Sep 27, 2010
What area are you interested in?
0 votes Thank Flag Link Sun Sep 26, 2010
Hello Chris asking for and agent to insure you receive at least a 5% ROI on prospective investment properties can be a challenge. First off properties listed for sale have projected figures in the listing and have not had current appraisals completed which will determine the actual and true ROI or Cash on Cash investment return. But here's the thing, it's a moving target based on the performance of the property itself and the only way to really know what the return might be is to underwrite the property using actually and historical information.

Now that being said we can usually get pretty close; at least those of us who really know what they're doing. I've underwritten hundreds of commercial and investment properties for my clients; it would be very helpful for you to elaborate on your request for a 5% ROI. What type of property are you looking to purchase, apartments, units, self storage, residential care facility, and the list goes on. How much money do you have to invest and do you have prior experience as an investor. How much will you be putting down and will you be holding this investment for short or long term.

There's still many questions to ask so let me just say that you need to choose an agent and lender that will listen to what you're trying to accomplish, and then ask you the questions necessary to then allow them to do their job. So many times I see investors think they know more then the agent or lender and then try and bully and sort of demand how they want the transaction to go, or withhold information from those people who are trying to help them, the agent and lender, because again they're trying to control things; some maybe even working with 3 or 4 agents and lenders at the same time. My advice to you is to be fair, don't do that to people!!!

Find an agent and lender and stick with them and only them. Give them the information and then time to do their job and allow them to feel like they're not working for FREE by giving them your allegiance.

I hope this helps you.
0 votes Thank Flag Link Sat Sep 25, 2010
Chris,

Also make sure you and your agent outline what your definition of ROI is. The basic formula is the same, but many tend not to include all buying costs involved. Your 5% could be my 2% ROI or someone else's 7%.
0 votes Thank Flag Link Sat Sep 25, 2010
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