A Broker as part of your Money Making Team

One of the invaluable people to have on any real estate team is a finance broker. Apart from knowing what loan options will get you into the deal you have found, many brokers are also experts in their local real estate market.

For example, the broker I use knows in detail almost every area within a minimum of half an hour's drive from my house. Considering that within each suburb there are micro areas, even streets with different dynamics to the rest of the suburb, this is valuable information to have. Learning this would take me years of experience. While I learn, I can leverage my broker's knowledge and make great investment decisions.

Another thing is that many brokers have access to the same information banks use to value a property. Even if you aren't planning on obtaining bank financing, this is VERY important to know as it helps you determine what the property is worth, so you know when you're getting a good deal. And if you're planning to sell the property it's good to know how much a bank will lend to your buyer- will they afford to buy it off you?

One caveat to be aware of when looking for a good broker is that finance brokers are paid by the banks for selling you a product. They do get a commission off the loan you apply for. In some cases the worst loans can pay the highest commissions, so it's important to know that you have a broker looking after your best interests, not theirs.

One way to test out if you've got a good broker is to test them out on how helpful they are with their property knowledge. See how much help they'll give you on valuing a property. If they're happy to give you free information about their experience with an area it is a good sign. Mine will email me a CMA (comparative market analysis) anytime I'm interested in a property because he knows if I do buy one I'll probably go to him if I want bank financing. He also gives a dollar value on what he thinks it's worth and so far he has been on the dollar EVERY time. Every single time.

Another way is to find past clients and see what experience they've had. You can find reviews on the Internet or check with your local investor club and see what anyone there has to say. Lastly, when using bank financing with or without a broker, always make sure you read the loan document fully to make sure you are aware of any hidden fees or conditions on the loan or property used as security.

Get to know your Area BEFORE you Invest if you want to Make Money in Real Estate

Yesterday I spoke to a Broker in my area to check out financing for the 29 lot subdivision, and a smaller deal. I'm glad I did.

He gave me the lowdown on the property, why it hadn't sold (the past developer asked for $80K above market value), and also some useful information on the area.

Apparently, the suburb has two sides. After living in the area for just over a year I've only ever driven through the new housing estate and seen upmarket homes. However, apparently on the other side of the suburb there are some issues with violence. So what, properties still sell in these areas right?

Yes they do. But he also told me that the land across the road from the property I've been looking at took THREE YEARS to sell. Three years, apparently because of the bad name of the suburb. Well, three years of financing would take any profit away. You might be able to make money in this deal, but you might not. It's got too much gamble in it.

There's always the argument that if you price a property right it will sell anyway. But you've got to find enough people who want to live in that suburb who would be willing to buy there, no matter what the price is. I could market the lots as first home buyer cheapies but then I'd be competing with even cheaper suburbs with the same violence issue. Bottom line: product is upmarket but location is bottom market. What does this mean? Longer selling times and lower prices.

With one or two lots, you could sell to people out of the area, but with such a large number you'd rely on local buyers too.

It just goes to show how important public opinion is in buying an investment property. It can give you a great bargain and can also stop you from making money. Even though this area is miles from the rough area, because they share the same suburb name the stigma exists. So get to know your area, or if you don't, ask someone who does.