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If you’re new to the business or maybe haven’t always done the best job of building a database, you might wonder how to get real estate leads. It’s possible to move pretty quickly to get names in your database and make connections. 

I’m not a huge fan of outsourcing my business and paying for leads on Zillow or Realtor.com or any of the other big companies. But all that being said, there are times when you or your business need a boost. 

Whether you prefer buying leads or have an external source of real estate lead generation, such as from a broker or third party, you have to keep your expectations for these leads grounded in reality. There are some drawbacks to working with the big companies, but every so often, you can get lucky and get a connection out of one of those paid leads – and that’s a name to add to your database. That’s the inherent value of a paid lead. 

We have a paid lead program at ROOST Real Estate Company, but when we talk about that, I’d like to be careful in saying that the 30, 40, or even 50 leads you’ll get every month in your inbox are not always going to be today’s business. But you can get into a habit of working these leads to find someone and build a connection. It’s worth seeking them out to find someone that’s a 5-star person, or at least willing to talk to you and have a conversation because that can be a jumping-off point to a more sustainable, lasting relationship. If you can put even some of those names into your database, that’s a real win from a paid lead. 

If you’re paying hundreds of dollars a month buying real estate leads from big companies and not getting new business to cover those costs, is it really worth it?

Instead, you should be on the lookout for diamonds in the rough. There are far more chances in a paid lead that result in getting a connection and an addition to your database, so that’s worth doing. Because of that, there’s a place for paid leads in your business if you need to build a database. 

Look at names in your database – and adding names to your database – as making deposits in your personal investment account. You’ve got to think about this practice like you would an IRA or a 401k or other retirement accounts because this database, and the connections you’ve built inside of it, are what will continue to generate leads for you throughout your career. As you add names, you’re putting money in your personal investment account for years and years to come. 

Another element to consider when thinking about the truth of paid leads – both good and bad – is the relative quality of these leads. My personal experience with Zillow and Realtor.com is that it’s a free-for-all. 

For example, someone wants to ask a question about a house. What happens?

That can mean that the lead quality isn’t great. Some avenues help generate better leads. At ROOST, we’ve partnered with a company called Real Geeks. So, if you go to the ROOST website and click the search pages, you’ll see a standard page that’s similar to what others have, but it’s set up to allow searches in the markets where we do business. 

Right now, we have it set up to search:

Through our website, we get approximately 50 to 60 leads a month that we circulate to our agents, round-robin style. The relative quality of leads sourced through a real estate lead generation website is better than what agents can pay for on Zillow or Realtor.com, too. In my opinion, a lot of people feel like they’re getting burned by the bigger companies because they can get bombarded by calls from agents. 

Our system helps people who come to ROOST look for listings they’re actually interested in vs. going to a site like Zillow and just liking houses because they look cool and not because you have any intention of moving. 

When people come to the website and actually spend enough time to enter their email address or phone number, that’s a better lead than you’ll get elsewhere. 

The Real Value of a Lead

There’s value in working with the right brokerage, and under the right business model, that benefit can extend to the quality and quantity of your leads. We waste a lot of leads because sometimes we don’t have available agents because they’re too busy. Some agents take all they can, but sometimes there’s still not enough coverage. 

However, we’re fortunate that we can provide that for our agents. We’ve got a solid database with leads, and we’re able to give our agents access to that for free. That’s the beauty of a referral-based model that stems from a healthy database of names. 

At ROOST, we work by a round-robin style of sharing leads. This is a great way to make sure there’s even distribution of what leads are incoming and available. One agent gets this lead, the next agent gets the next, and so on. We don’t ask for any monthly fees for access to our leads, we don’t charge a tech fee. 

I hope our database gets much, much bigger in the future – but regardless of how big it gets, I’m passionate about ensuring our agents have that access and opportunity available to them. I want people to be able to scale their database from zero to 100 to 150 or even beyond. 

Final Thoughts

At the end of the day, the names in your database are going to be a valuable tool that helps you keep a steady incoming flow of business. Paid leads do have value, but only if you’re using those leads to add names to your database and grow your business. If you get caught up in the shuffle of dealing with the big companies, you’re going to run into lots of competition, and you’re going to burn yourself out chasing down leads and fighting with other agents to close a sale. 

Look for those diamonds in the rough and try to find leads that are worth paying for – and that’s how you’ll make your time and energy more worthwhile. By applying some calculated strategy and having solid real estate lead generation ideas, agents can sort through leads and find the ones that seem most promising. From there, maintaining those connections and using them as a jumping-off point will lead you to other names – and more leads you didn’t pay for. 

It all comes back to that database full of people you know, trust, and like to work with. And, if the connection is strong enough, that feeling will be mutual. That’s where the true success in real estate is found, and you can’t always quantify its value because, for many agents, those connections are priceless. 

“It was the best of times, it was the worst of times…” – Charles Dickens

It’s no secret: Today’s real estate market is trying and complicated. We’ve been here before, and we’ll be here again. However, in this ever-changing market, what matters most is learning how to weather the current and future storms that will inevitably come your way and prepare to survive. 

Ideally, not just survive: I want to teach you how to keep a sustainable, thriving business even in the worst of times. The key is maintaining a mindset that focuses on professionalism and actionable habits to continue fostering professional growth and keeping your client roster stable, healthy, and toward an upward trajectory. 

Those of us who value relationships, work by referral, and have a professional mindset are taking care of our clients. We’re always interested in what’s in it for them. I promise you, you will be just fine. The hallmark of the new professional is our ability to stay calm when all the other realtors around us are panicking. 

Let’s go back in time and consider the Great Recession in 2008 and 2009. What brought us out of the recession was how interest rates dropped like a rock – and mortgage interest rates dropped like a rock – but it didn’t help because housing prices were dropping. People were turning their backs on houses and giving banks back the keys. The real estate market had so much inventory that some homes spent six months plus on the market, sometimes even bordering on 120 to 250 days. 

That crisis was a completely different situation than what we are seeing today. To be perfectly frank, I wouldn’t call our current situation a crisis. However, it’s a concern. Whether you lived through the 2008 and 2009 crash or heard about it like a spooky campfire tale, it’s crucial to acknowledge how those years were very different. 

Here’s where they are similar: The answer from the Fed’s perspective and the government’s perspective was – both back then and today – to cut rates.

If you were around during 2008 and 2009, rates weren’t only good, you were getting a tax credit to buy a house. In essence, we were being bribed by the government with tax credits if we bought a house during those times. So, it was interesting, to say the least. 

Today, we’re in a situation where property values are not dropping. Let’s think about this question: How do realtors feel right now? 

Based on my conversations with realtors – and I’m talking with realtors every day, both inside and outside the company – I think many of us are operating from a genuinely fearful place. Prices are stable or even up, but transactions are down. Some of the top producers in the market are down this year by as much as 40%. 

As a result, we’re seeing a ton of agents leaving the market. I’m interested to see the realtor population at the end of this year compared to the previous year. However, for many reasons, I think we have retained lots of agents. 

Some agents had a fantastic time over the last three or four years and perhaps are further along in their careers. However, many of these people are starting to back away from the business. I don’t know whether these people are out in the sense of retirement or are shuttering and selling their business books – but I feel many folks who once were incredibly successful have reassessed how they want to live for the foreseeable future.

Realtors are the Canaries in the Economic Coal Mine

Realtors feel the next downturn – and the next upturn – before anybody else in the economy does. Interest rate fluctuations have a direct effect on mortgage rates. These increases have impacted us directly over the last 18 months while the broader economy has stayed strong. I’m not going to get into a long economic dissertation. I’m not qualified for that, but I try to keep on top of economic trends because I know, at some point, it will affect our agents.

There’s a strong case to be made that inflation will be with us for many years to come. 

Part of the reason we saw a high inflation rate was due to coming out of COVID, the supply chain disruptions, and so forth. The other thing that’s happening in the macro terms is, in the United States, we are actively bringing manufacturing back to North America from Asia and other places in the world. 

Here in Columbus, we’re getting an Intel chip factory outside the city. It’s a massive investment – and it will put thousands of people to work for years to come. It also means more people will see a wage increase, so there will be greater demand. We haven’t moved all the manufacturing over here yet, meaning prices will stay strong. If prices stay high and inflation – even at that 2%-3% rate year over year – can get down to that point and stay there, we must accept that higher interest rates are here to stay.

I’d love to be wrong, but I feel it’s far better to expect the worst and hope for the best. Today, we’re at roughly 7%, but still coming off of 3%. That’s more than double. I think what will help us into next spring is thinking about the mortgage interest rate forecast and when higher interest rates become less of a shock and more of an acute pain that becomes more chronic, manageable, and accepted. It takes time for people to get over the fact that we had ridiculous interest rates at 3% – or even less – and shift toward accepting those days are gone. 

At some point, time goes by, and the increases stop. However, it’s a fool’s errand to expect your business will pick up due to interest rates dropping anytime soon.

Final Thoughts

If we’re being candid, I don’t believe we will ever see mortgage interest rates as low as we did in 2020 and 2021 again, except maybe when the next crisis comes and the economy needs a shot in the arm. Since I’ve had my license, I’ve seen the Feds cut rates after 9/11; I’ve seen them cut rates after 2009, and now we’ve seen them cut rates again during COVID – but they’ve never been as low as they were coming out of COVID. 

We can’t sustain this country’s economy with sub 3% or 2% interest rates. 

Therefore, there must be an equilibrium. I would guess the equilibrium will be relatively close to where we are now for quite some time. As we move forward, my best hope is to experience a period of stability. Again, it’s my job to hope for the best – and plan for the worst. One thing we have to keep in mind as professionals is the knowledge that these booms never last. The busts don’t last, either. 

If you think the market is a little tough right now and feel like you’re struggling, my advice is to persevere. This, too, shall pass.

We have had owners kick themselves for making mistakes when it comes to a purchasing price that seems too good to be true – and sometimes, it is. Usually, the owners who experience this phenomenon are those who are purchasing properties in lower-income neighborhoods. The thought process is, how can you lose? 

However, the fact is that when they bought that property at a certain price, it was not occupied. It was not in service. 

Often, there are code enforcement orders against the property or reasons why the gas can’t be turned on. In reality, there are many things owners aren’t able to identify or find out about until after they purchase the property. 

Suppose you intend to hire a property manager to put a property back into service. In that case, I think the whole idea of separating the group, person, company, or team that is going to manage your property from the person who is going to help you purchase it is dead wrong.

They are two different processes. However, if those two processes aren’t connected and don’t talk to each other, it spells trouble. 

The last thing I want to do is have to explain to an owner a year into managing their property that, while I was the one who sold it to them, I feel in retrospect they paid too much. I want to avoid having that conversation. Instead, I want to be able to say these kinds of things up front when we’re looking at the property. 

I value being able to look someone in the eye and tell them exactly what I think is going to happen and what they can count on based on my professional experience. I want them to know my thought process from day one through purchasing, and I want to be available for them to discuss questions we should ask, as well as keep track of the information we’ve already gathered. 

Ultimately, I want them to see me as a collaborator and a partner, so they can be assured they are making the right decisions – and I’ll stand behind what we do together. I don’t want to be hired as a third-party manager after the fact because I can’t win many times – and if I can’t win, the owner can’t win. 

It’s easy to avoid falling into the trap of discovering a property with a “too good to be true” price tag when you’ve got all the information in front of you and are actively working with a team that can acquire anything else you need to make your final decision. 

Why Hire A Property Manager?

There are a lot of advantages to buying (and selling) with your property management team, especially if they function the way we do.  

First, just like we helped you price that property when you bought it, we’re going to be able to help you price that property when you sell. 

Second, we work with roughly 400 owners in Ohio alone. As a result, we have owners who are looking to buy or sell properties within our portfolio. Therefore, we’ve got the leases and the cash flow statements. Plus, we know what’s going on and all the requisite documentation about those properties. 

It’s easier for prospective buyers to make an informed purchase because we have the data and are intimately involved in that purchase. 

I’m a buy-and-hold person: Once I buy something, I never want to sell it. But if you do, those two reasons are part of what adds value to our team. By working together, you get a bigger advantage – and a greater overall knowledge – of what’s available and possible. We value transparency, so you can walk into every deal with your eyes wide open. 

From a pricing standpoint, there are some tax questions to ask. There is a different set of resources that need to be consulted when you go to sell. From a practical standpoint, we respect licensing, realtors, and not crossing the Code of Ethics. We keep things on the up and up; we’re professionals. 

However, if you do decide to work with us, or let your property management team help inform your future buying and selling decisions, it’s important to stay the course. There is nothing more frustrating for us as managers when one of our owners lists a property with somebody outside of our office or outside of our team. Then, the issue – especially if it’s an occupied property – becomes about tenant relationships and our interactions from that perspective. 

It’s in your best interest to have a positive relationship with your tenants, even if you’re trying to sell. 

That’s another major advantage of having a property management team like ours; we work well with tenants. 

When working with an occupied property, we aspire to maintain a positive relationship with tenants and make sure they’re comfortable paying the rent and or able to enjoy their tenant’s rights and so forth. It’s always a can of worms when you’ve got a listing agent who doesn’t understand why the tenant won’t let them show the property at a moment’s notice and so forth. 

Again, from a practical standpoint, it’s very, very hard sometimes to get tenants to cooperate with showing a property. There’s a far better chance of getting tenants to cooperate if the people showing the property are the people those tenants have worked with for a while. They trust us to look after them and value their needs.

Final Thoughts

In short, if something seems “too good to be true,” it probably is – and you likely need to take a closer look. When you venture out alone to invest in real estate, it can be challenging to determine whether a property that seems like a good deal actually is one. That’s where a professional can help, giving you a huge advantage as you navigate the world of real estate together. 

We strive to use our expertise to boost our clients’ know-how and capabilities in the market; our job is to guide, advise, and ultimately lead them to make the best possible decisions. We want you to find a property that will pay off and suit your needs. Whether you intend to buy and hold or looking for something you could flip and sell to another investor (perhaps someone we already work with), our job is to keep your investing goals in mind and help you get to where you want to go. 

You don’t have to fall into the “too good to be true” trap – and we sincerely hope you don’t. I always tell people that real estate investments are among the best risks you can take and that there’s never been a better time to invest. If your goals are to expand your empire, please know that you’re heading in the right direction. 

Expansion is achievable; it’s entirely within your grasp. A few smart moves, the right partners by your side, and you’re there. 

Restoring honor to the real estate profession requires a collective effort from broker-owners, leaders, and individual agents. 

I think brokers need to take some key actions that, in my view, should be taken to enhance the profession’s reputation and promote ethical practices.

First, we should no longer outsource our ethics or standards to NAR, the states, or, God forbid, Zillow. 

Second, we have to take an interest. 

Third, we must stop treating our agents as numbers and non-people because they are 1099 contractors and not employees.  

Frankly, we treat agents worse than employees. We expect them to pay us while offering nothing because we hold their licenses.

Here are 10 actionable steps every broker-owner should take to help turn the tides of the industry and make a better business model for all involved parties. 

1. Establish and Enforce the Real Estate Code of Ethics

Broker owners and leaders should establish clear and comprehensive ethical guidelines that outline the expected behavior of all agents within their organizations. These guidelines should address issues such as honesty, transparency, fair dealing, and adherence to all applicable laws and regulations.

Listen, you can make meetings mandatory. You may not be able to tell someone to be at work at 8 a.m. if they’re not traditionally employed, but you can still have standards. 

A meeting is something doable, and it is something a professional will make time to attend when it’s required. You can hold your agents accountable for attending a meeting. Not all agents can hold themselves accountable, so that’s where you come in to help them learn and grow. You’re a mentor; that’s your job. 

If they don’t like your standards, they can hang their licenses elsewhere. 

2. Provide Training and Continuing Education for Real Estate Agents

Broker-owners should provide comprehensive training and continuing education opportunities for their agents to ensure they are up-to-date on industry knowledge, legal requirements, and ethical practices. 

This training should cover topics such as fair housing laws, conflict of interest avoidance, proper disclosure obligations, and, most importantly, any changes to licensing law. That’s exactly why I’m doing this guide – it’s an important thing for all agents to know about. 

3. Ensure Agents Understand Fiduciary Responsibilities

Brokers must be able to ensure agents understand their fiduciary responsibilities and how they relate to fair compensation. 

The agency defines the legal relationship and fiduciary duty in real estate between agents and their clients, while compensation outlines the financial arrangement for the agent’s services. 

Both agency and compensation are essential components of the residential real estate brokerage business, ensuring that agents act in the best interests of their clients and are fairly compensated for their work. In a perfect world, these align. 

4. Center a Workplace Culture Around Accountability and Transparency

Why does accountability and transparency matter?

All good brokers should encourage open communication, provide clear channels for reporting ethical concerns, and promptly address any complaints or allegations of misconduct. 

This not only helps your agents do their best work, but it also protects you from potential issues that could arise if agents don’t know what they’re doing. 

5. Embrace Integrity and Client-Centric Values

To be perfectly frank, if you’re not already emphasizing the importance of integrity and client-centric values within the organization, you’re doing it wrong.

I recommend encouraging agents to put their clients’ interests first, prioritize honest and transparent communication, and avoid any actions that could compromise the trust of their clients. 

6. Have a Reward System

Everyone loves being told they’re doing a great job – and taking the time to recognize your best agents is going to work in your favor. 

Publicly recognize and reward agents who demonstrate exceptional ethical conduct. 

This could involve highlighting their achievements, providing incentives, or nominating them for industry awards. Remember: The goal is to support and retain good people; we need to do everything we can to achieve this. 

7. Collaborate with Industry Organizations 

We saw what happens when our industry standards and best practices fall by the wayside and aren’t valued as highly as they should be. The NAR lawsuit opened many eyes to the deeper issues within our business – but we can fix it. 

I suggest making a point to work collaboratively with industry organizations, such as the National Association of Realtors (NAR), to promote ethical standards and best practices across the industry. 

We should all agree to support initiatives that enhance professionalism, transparency, and consumer protection. It’s in our best interest. 

8. Be a Champion for Consumer Protection

We always aspire to do what’s best for our clients. Therefore, all brokers should strive to champion consumer protection measures that safeguard the interests of buyers and sellers.

I think it’s important to support legislation that promotes fair disclosure practices, combats fraud, and ensures that consumers have access to accurate and reliable information. Ideally, you should be able to articulate the value of an exclusive buyer-agency agreement. 

9. Educate the Public

We know the ins and outs of the real estate industry – but our clients don’t. That’s why I think it’s so important for brokers and agents to commit to educating the public about the importance of ethical real estate practices and how to identify and avoid potential scams or unethical behavior. 

Provide resources and guidance to consumers to help them make informed decisions when buying or selling property – and get the facts on your websites. 

10. Build Your Business For Today AND Tomorrow

There’s nothing easy about being in real estate. So many people get the wrong impression of what we actually do. There’s a lot of misleading information. However, you need to focus on running your business so it has the chance to be successful today and in the future. 

This is a big ask; it has never been easy to accomplish in any industry. Owning a business is always harder than you think it’s going to be, but doing the right thing pays off. 

By implementing these measures, real estate broker-owners and leaders can play a crucial role in restoring honor to the profession, fostering a culture of ethical conduct that prioritizes the best interests of clients and upholds the integrity of the real estate industry.

Final Thoughts

Here’s a tough pill to swallow: We don’t do well by ourselves. 

The last four years have proven as much; we lost our ability to relate to customers and clients and each other. The fallout is negative public perception and lawsuits like this.

Realtors® should be held to a higher standard – and brokers even higher than that.

It’s time to take back what is ours and assume our responsibility and rightful place at the center of this transformation. 

We are entering the golden age of the new real estate professional. It’s time to get with the times and be prepared to move our profession into the future through whatever means are necessary.

The Real Estate Business After Sitzer Bennet v. NAR et al

For me, this is where the whole thing gets interesting. It’s a little ‘inside baseball,’ but I think it is critical to separate what has happened from what may happen.

The four most well-known defendants in the lawsuit were Keller Williams, Home Services of America, RE/MAX, and Anywhere Real Estate. Keller Williams and Home Services chose to go to trial. RE/MAX and Anywhere Real Estate settled out of court rather than go to trial.

Why Did Home Services and Keller Williams Go to Trial?

There are a few possible reasons why Keller Williams chose to go to trial in the case against them.

Strategic Reasons:

Financial Reasons:

Ultimately, the decision of whether or not to go to trial was likely a complex one that weighed a variety of factors. Keller Williams and Home Services may have ultimately decided to go to trial because they believed that it was the best way to protect their interests and their reputations. 

Why RE/MAX and Anywhere Real Estate Settled

RE/MAX and Anywhere ultimately decided to settle their lawsuits with the plaintiffs rather than go to trial for several reasons.

In conclusion, RE/MAX and Anywhere’s decision to settle their lawsuits was a strategic one that weighed the potential benefits of settlement against the risks and uncertainties of going to trial. Settling allowed them to avoid significant legal costs, protect their reputations, maintain control over the outcome, focus on their businesses, and preserve relationships with buyer agents.

RE/MAX and Anywhere Real Estate Settlement Terms Explained

The terms of the settlement between RE/MAX, Anywhere, and the plaintiffs were as follows:

  1. RE/MAX and Anywhere agreed to pay $55 million and $83.5 million, respectively, to the plaintiffs.
  2. RE/MAX and Anywhere agreed to stop requiring their agents to be members of the National Association of Realtors (NAR) or follow its Code of Ethics or the MLS Handbook.
  3. RE/MAX and Anywhere agreed to implement revised policies regarding offers of compensation to buyer agents.
  4. RE/MAX and Anywhere agreed to provide training for their agents on the antitrust laws and the implications of the settlement.
  5. Both companies agreed to cooperate with the Federal Trade Commission (FTC) in its ongoing investigation into the antitrust allegations.

The settlement was approved by the courts in February 2023 and is now final. The plaintiffs have until October 2023 to file compensation claims.

Why RE/MAX and Anywhere Real Estate Left the National Association of Realtors

RE/MAX and Anywhere Real Estate left the National Association of Realtors (NAR) in 2023 for several reasons.

Antitrust Concerns: Both RE/MAX and Anywhere Real Estate were involved in class-action antitrust lawsuits against NAR. The lawsuits alleged that NAR’s Clear Cooperation Policy (CCP) artificially inflated real estate commission rates by requiring sellers to pay buyer brokers a commission, even if the buyer is not represented by an agent. As part of the settlements, both companies agreed to no longer require their agents to be members of NAR or follow NAR’s CCP.

CCP Restrictions: RE/MAX and Anywhere Real Estate also objected to other NAR rules that they believed restricted competition and harmed consumers. For example, they objected to NAR’s rules that limited transparency around commission rates and prohibited agents from sorting listings by commission amount.

Strategic Flexibility: By leaving NAR, RE/MAX and Anywhere Real Estate gained more flexibility to experiment with new business models and pricing strategies. This could allow them to better compete with other real estate brokerages and online real estate companies.

Cost Savings: NAR membership fees can be expensive for large brokerages like RE/MAX and Anywhere Real Estate. By leaving NAR, these companies could save millions of dollars in annual membership dues.

Consumer Choice: RE/MAX and Anywhere Real Estate may have also believed that leaving NAR would give consumers more choice and improve the overall quality of real estate services. By not being required to be members of NAR, agents from these companies would be free to choose which trade organizations they want to belong to and which rules they want to follow.

Overall, the decision by RE/MAX and Anywhere Real Estate to leave NAR was a significant event in the real estate industry. It remains to be seen whether other large brokerages will follow suit, but it is clear that NAR is facing increasing scrutiny and competition.

Final Thoughts

The settlement between RE/MAX, Anywhere, and the plaintiffs has significant implications for the real estate brokerage industry as a whole. It represents a major victory for antitrust advocates who have been challenging the anti-competitive practices of the NAR, particularly its mandatory buyer-broker compensation rule.

The settlement is likely to lead to increased competition in the real estate industry, as buyer agents will now have more freedom to choose how they are compensated. This could result in lower commission rates for sellers and more transparency in the pricing of real estate services.

The settlement could also have a significant impact on the NAR, which has long been a powerful force in the real estate industry. The NAR’s mandatory buyer-broker compensation rule was a major source of its power, and its removal could weaken the NAR’s influence over the industry.

In addition, the settlement is likely to lead to more lawsuits against the NAR and other real estate organizations. The plaintiffs in the RE/MAX and Anywhere cases have set a precedent for other antitrust lawsuits, and other plaintiffs may be emboldened to file similar lawsuits.

Overall, the settlement between RE/MAX, Anywhere, and the plaintiffs is a significant event that will likely have a major impact on the real estate brokerage industry. It is a victory for antitrust advocates and could lead to increased competition, lower commission rates, and more transparency in the pricing of real estate services.

Free Guide for Realtors - The Real Estate Business After Sitzer Bennet v. NAR et al

The civil case of Sitzer Burnett et al v. The National Association of Realtors et al, U.S. District Court for the Western District of Missouri has caused a tremendous amount of handwringing in the media and among many of our Realtor colleagues.

To be honest, until I had several of our Realtors asking me about it, I wasn’t paying attention. This subject turned out to be way more interesting than I anticipated. Maybe you’ll agree. As always, I’d love to hear your thoughts and perspective.  

Here’s the basic run-down: A jury in Missouri found NAR and co-defendants, including Home Services of America and Keller Williams, liable. 

The plaintiffs claimed:

The ruling found that NAR’s Clear Cooperation Policy (CCP) violated antitrust laws, potentially opening up the industry to increased competition, changes in traditional business practices, and a fundamental shift in the power dynamic.

What is the NAR’s Clear Cooperation Policy?

The National Association of Realtors (NAR) Clear Cooperation Policy is a mandatory rule that requires listing brokers to submit property listings to the MLS for cooperation within one business day of publicly marketing a property. The policy was adopted by NAR in 2019 to address concerns about the use of pocket listings, which are properties that are not marketed on the MLS and are only available to a select group of buyers.

The Clear Cooperation Policy is intended to:

The Clear Cooperation Policy has been met with mixed reactions from real estate professionals. Some agents support the policy, arguing that it will help to increase transparency and competition in the market. Others oppose the policy, arguing that it will be too burdensome and will not achieve its intended goals.

In Defense of the NAR’s Clear Cooperation Policy

The NAR has always reminded Realtors to avoid misleading claims about buyer agent services in keeping with the spirit of the clear cooperation policy. NAR’s Code of Ethics prohibits Realtors from advertising or representing their services as “free” or “at no cost” unless they will not receive any financial compensation from any source for those services.

This reminder comes in response to a recent uptick in complaints about Realtors who are using misleading language to describe their services. 

For example, some Realtors use phrases such as “no buyer agent fees” or “buyer agent services are included with the listing price” when they will receive compensation from the seller or another source.

NAR is concerned that this type of misleading advertising is harming consumers and could lead to disciplinary action against Realtors. Therefore, NAR is urging its members to be clear and transparent about the cost of their services.

Here are some specific guidelines for Realtors:

NAR encourages its members to follow these guidelines to ensure they are providing consumers with accurate information about the cost of their services.

In addition to the above, NAR also reminds its members of the following:

The NAR is committed to protecting consumers and upholding the highest standards of professionalism in the real estate industry. By following NAR’s Code of Ethics, Realtors can help to ensure consumers receive accurate and reliable information about the costs of their services.

Cooperative Cooperation Laws Explained

In the context of Missouri law, cooperative cooperation is a concept that refers to the willingness of different entities, such as businesses, government agencies, or nonprofit organizations, to work together to achieve common goals. This can involve sharing resources, information, and expertise to improve efficiency, effectiveness, and overall outcomes.

The Missouri Cooperative Companies Act, codified in Chapter 357 of the Revised Statutes of Missouri, provides a legal framework for the formation and operation of cooperatives, which are businesses owned and controlled by their members. The Act recognizes the cooperative business model as a unique form of enterprise that promotes cooperation among its members to achieve shared economic, social, or cultural objectives.

Cooperative cooperation is also a significant aspect of Missouri’s procurement laws. The state’s cooperative purchasing program allows eligible local governments, political subdivisions, and quasi-public governmental bodies to participate in cooperative purchasing agreements with the state, enabling them to leverage their collective buying power to obtain better prices and terms on goods and services.

Missouri’s emphasis on cooperative cooperation extends to various other areas, such as education, healthcare, and environmental protection. For instance, the Missouri Department of Elementary and Secondary Education (DESE) encourages school districts to collaborate on initiatives that improve student learning and achievement. Similarly, the Missouri Department of Natural Resources (DNR) promotes partnerships among businesses, environmental organizations, and government agencies to address environmental challenges.

In essence, cooperative cooperation is a fundamental principle embedded in Missouri’s legal and regulatory landscape, fostering collaboration and shared responsibility among diverse entities to advance common interests and achieve positive outcomes for the state’s communities.

What is Decoupling?

In the real estate industry, decoupling refers to the separation of buyer and seller agent commissions. 

Traditionally, real estate agents are compensated through a commission-based system, where they earn a percentage of the property’s sale price. In a decoupled system, buyers and sellers would pay their respective agents directly rather than the listing agent typically covering the buyer’s agent’s commission.

Decoupling has been proposed as a way to increase transparency and fairness in the real estate transaction process. Proponents of decoupling argue that it would give buyers and sellers more control over the fees they pay and would incentivize agents to represent their clients’ interests more effectively. 

However, critics of decoupling argue that it could lead to higher costs for buyers and sellers, as agents may charge higher commission rates to compensate for not receiving a portion of the seller’s commission. 

Arguments FOR DecouplingArguments AGAINST Decoupling
Increased Transparency: Buyers and sellers would have a clearer understanding of how much they are paying in commissions and would be able to compare rates more easily.

Fairer Representation: Agents would be incentivized to represent their clients’ interests more effectively, as they would not be reliant on the listing agent for their compensation.

Greater Choice: Buyers would have a wider pool of agents to choose from, as they would not be limited to those who are affiliated with the listing agent’s brokerage firm.
Higher Costs: Buyers and sellers may end up paying higher commission rates, as agents may charge more to compensate for not receiving a portion of the seller’s commission.

Reduced Efficiency: The transaction process may become less efficient, as agents would need to negotiate two separate commission agreements instead of one.

Potential for Conflicts of Interest: There is a potential for conflicts of interest if buyers and sellers are paying agents directly. For example, an agent may be incentivized to recommend a property that is more expensive to earn a higher commission.

Overall, the potential impact of decoupling on the real estate industry is still uncertain. It is important to weigh the potential benefits and drawbacks carefully before deciding whether or not to support decoupling.

Final Thoughts

There’s a lot to unpack when we discuss this civil case and its potential impact on the real estate industry. Everyone should be paying attention, because staying informed is the key to our continued success. As we learn more about the direction the industry will take in the wake of this case, we’ll have to make some changes to how we operate our businesses. 

Change is inevitable – but how we approach and embrace it is up to us. I still believe that real estate is going to be a fantastic industry to be in for the next 25 years and beyond. Stay optimistic. This, too, shall pass. 

Investing in residential real estate presents a tremendous opportunity. It makes perfect sense for many people right now – but that doesn’t mean there aren’t inherent risks in investing in real estate or any kind of investment. 

This year, we’re working with a lot of owners who purchased properties either right before the pandemic or during it. These people, typically speaking, were able to buy homes with incredibly low interest rates. Granted, some of those interest rates were adjustable, so they’re struggling a little bit now. 

However, in every single case where we have somebody struggling or going through a tough time with their residential real estate portfolio, it’s because they didn’t have a trusted partner or advisor in their corner to counsel them when they initially purchased the property. 

I can’t tell you how many folks we’ve talked to this year who bought their properties sight unseen.

A lot of people live out of state. They see something on the internet and get all excited even if they live in California. Everything in Ohio is cheaper than where they live in California. So, how could they possibly lose? 

You have real estate agent licensees out there whose job is to sell real estate; their interest is in pocketing the commission and moving on. Therefore, you can’t necessarily count on the fact that any Realtor you speak to is going to be able to accurately assess the condition of a property or communicate what it will truly cost to put it into service or maintain that property for the long term. 

I know that sounds like a cliché, but if you don’t go in with your eyes open and arm yourself with an absolute understanding of what your return on investment can – and should be – you could be in a lot of trouble. You also need to be aware of what it will cost to put a property back in service, which is part of your capital investment. If all these factors are a surprise to you and your property manager, who had nothing to do with purchasing that property with you, it’s a horrible thing. 

While all investments carry some level of risk, there’s an even greater one when you purchase a property without proper counsel or the knowledge of which questions to ask. You also can’t count on getting lucky with finding an agent who’s going to have your best interest at heart, show you why you’re paying X for the property when Y is a better number, and so on. 

Now, there are numerous times when we have clients who “overpay” for a property because they’re counting on appreciation or have a specific reason for wanting a specific property in that neighborhood, et cetera. 

Whatever you do, make an informed, adult decision to go in with your eyes open. That said, if there’s one particular risk to avoid as a property investor, it’s purchasing something at the wrong price. 

That’s part of why we want to recast ourselves as Invest with ROOST rather than Manage with ROOST. 

Our jobs are almost impossible some days when we find ourselves suddenly taking on the responsibility of helping an owner manage a property profitably when, quite frankly, we have no chance – at least, not in the short term – of helping that owner make any money due to what the property needs and the additional capital investment, which is often required.

Conflict of Interest vs. Conflicted Interest

Let’s discuss the difference between a “conflict of interest” and a “conflicted interest.” 

My concern with you buying properties without the input of your property manager – and vice-versa – is that the interests of your buyer agent and your property manager are very different. 

Not good, not bad, just different. 

If you’re buying a property, your buyer agent is concerned with getting your offer accepted, getting to the closing table, and collecting a commission check. 

On the other hand, your property manager is concerned about your ongoing monthly profitability hopefully for years to come.

These two professionals hold what I think of as ‘conflicted interests’ and it is your job as the investor to keep that in mind when it comes time to expand your empire.

It’s important to strike a balance. You don’t want your property manager engaged to the point where you never buy another property. By the same token, you don’t want your buyer agent to be bringing you deals that may never be profitable.

Is there a conflict of interest between having the same person represent you as a buyer’s agent and as a property manager? In my opinion, the answer is no. I have zero concerns about that provided the professional involved has a clear track record of long-term success with the clients they work with.

What to Know Before Hiring A Property Manager

You’ve got a lot of decisions to make before hiring a property manager. Most importantly, you want to make sure someone is aligned with your values and is excited to help you meet your goals as an investor. Look for someone who specializes in a specific neighborhood or the area where you want to invest. For example, someone who knows all about buying multiple-unit apartment complexes may be a great fit for you if you want to expand into that space. Your rental property manager and management team are responsible for ensuring your investment is cared for while you’re off focusing on other things, so you want to make sure it’s in good hands. 

At Invest with ROOST, our business model extends to four main principles, which we use to help shepherd our owner-investors toward achieving their goals. These principles are what we consider to be our greatest benefits as a property management company alongside the wealth of expertise we possess. 

First, we want to help you acquire analytically.

We want to help you take the emotion away from a potential purchase and help you look at the numbers, figure out what you can expect to collect in rent, what it’s going to cost to put it in service (and keep it in service), then calculate a purchase price based on a suitable rate of return. 

Second, we want to be your resource to manage profitably. That’s where we come back to our Landlord Profitability Playbook. Start every month as day one. Automate your rent collection. Take care of the tenants. Have we earned a five-star review today? Did we get your maintenance request fixed within 72 hours? If it was an emergency, were we on it within the proper time? 

Remember, we succeed when you succeed, so we have to work together as a team and look out for each other because it’s in all of our best interests to do well in this business. 

Third, we want to teach you how to leverage wisely. I think that there’s a space where we want to bring in some knowledge and resources from different lenders – and lending opportunities.

At the end of the day, we can help with any number of things, but we don’t lend money to our owners. Therefore, we want to make ourselves a resource to get you in front of lenders and investors that we know share our views and see the world the way that we do. Hopefully, we’ll be able to connect you to other people and you can work with them going forward. 

Finally, we’re in your corner to assist you with expanding confidently. Whether you get your first property or the next property, we’ll make sure it’s managed profitably – and that gives you added confidence in your decision. We want you to make money. If we do our jobs right, you’re making money on that deal. 

From there, if you need to take cash out, we’re going to help you leverage wisely. Once you take that cash out, we’re going to help you expand confidently to the next property. That’s the essence of Invest with ROOST in a nutshell. 

Learn More About Property Management 

If you want to learn more about property management, download our Profitability Playbook and get a quote for property management services. If you want to get deeper into the services we offer, go to roostrealestateco.com. On the main page, as you scroll down to the Investor section, you can download that brochure.

Structuring a purchase offer for an investment property is quite a bit different than structuring a purchase offer for a house you’re going to live in. 

Remember: Purchasing real estate for investment purposes is a business transaction, not an emotional transaction. 

Because it’s an investment and not your dream home, it needs to be very pragmatic and very analytical. You need to take a cold, calculating attitude toward this purchase. 

This property is very different than your first house where you’re going to raise your family or that retirement home on the beach that you want to make perfect for how you want to live out your Golden Years. Therefore, we need to look at this with a cold, clear eye and remember this is business.

There are many steps to consider before you’re prepared to make your best offer, all of which will help you determine whether it’s a sound investment in the first place. After all, while you might be willing to pay more for your dream home, you should always think with your business brain and focus on what will yield the best long-term profit – and where your money is best spent. 

Here are seven factors I encourage our owner-investors to consider before making an offer on a property. Because sometimes, a good deal might not be a good deal after you take a closer look and weigh the pros and cons. 

1. Don’t Underestimate the Costs

The most common mistake we see people make when they purchase investment properties is underestimating the cost of putting a property back into service. 

A couple of years ago, during the pandemic, there was a rash of people from all over the country – but the majority seemed to come from California – who would source properties online. 

Maybe this was because they had too much time on their hands during the pandemic, but they would find these properties in places like Dayton, Ohio where the houses were extremely cheap. 

The thought process of these buyers was, “How could I buy that and not make money?”

So, they would find local agents who were happy to write contracts on these properties and pocket a 3% commission. These agents were comfortable writing these contracts and closing on properties remotely all day long. After all, they were getting paid.

I am not faulting the agents for this. If you’ve got somebody in California who appears to have unlimited funds and is telling you they plan to buy up everything under say $50,000 in the area, a motivated agent is going to do exactly what they are asked to do.

The buyers of course expected to close on the property, hire a local property manager, and get the property rented in just a few days. This did not happen because the reason for the “too good to be true” price was that the property had been vacant for months – if not years.

We get calls all the time from new buyers asking us to lease and manage their new property. When we go out and inspect the property as part of our due diligence, we often find the property boarded up.

FYI – The reality of what we find is not always reflected in the MLS description.

We have to report back to the new buyer that we can’t turn on the gas without a gas line inspection, that the water bill is thousands of dollars in arrears because it hasn’t been paid for years, the electric meter has been stolen, or that there are code enforcement orders on the property. 

All buyers, but especially out-of-state buyers buying properties sight unseen, have to be serious about their due diligence. They have to educate themselves. Be serious. Do the work. If you can afford to buy investment property you can afford to buy a plane ticket and take a fact-finding trip.

Do your homework. If something seems too good to be true, it probably is.

2. Get an Honest Real Estate Agent

You want an agent who’s going to be honest with you, especially if you’re buying sight unseen.

If you are going to invest in real estate – especially if you don’t live in the area – you need a partner who understands that neighborhood. This person should be able to tell you exactly what houses are truly renting for in that neighborhood and what houses are transacting for in that neighborhood. 

Oftentimes, the reality is different than what you’re going to find on Zillow or Trulia. So, you’ve got to know what is really happening. You’ve got to know what the rents are, exactly what needs to be done to the property to put it back in service, and how much everything is going to cost.

An honest real estate agent – again, someone who is invested in you and your continued success – is going to want the best for you. When they’re comfortable and confident in the sale, operating from a place where they know you’re getting a good deal, and able to give you all the vital information you need, you’ve got the best advantage heading in to make an offer. 

A local agent with expertise in that area is going to know the ins and outs better than agents who are just motivated to sell anything. 

3. Spring for a Home Inspection

This is especially important if you’re trying to purchase a property remotely, but I encourage everyone to think long and hard about home inspections. While some might hesitate, my advice is to go ahead and pay the $500 to get an inspection done. 

In Ohio, property inspectors have to be licensed by the state, so they have a set of guidelines that they have to follow, a set of rules, canon of ethics that they have to follow.

Go ahead and spring for the 500 bucks. Don’t rely on your agent, don’t rely on a contractor, but go ahead and have a licensed property inspector go through the property. In my opinion, you should pay the money and let them show you every little horrible thing that’s wrong. It’s better to know than not to know. 

The inspections that you get may result in 150 items on that inspector’s list. The problem is that some of those items are really important and others are less so. 

For example, one item might be a missing light switch cover that you can easily replace. Another more crucial item would be a five-foot-long crack in the foundation on the east-southwest side of the building. That’s going to be a bigger issue than a simple missing light switch cover. 

Your agent should be able to help you go through the inspection list, figure out what matters most, what everything is going to cost, what issues are more cosmetic, and what repairs make the most sense financially.

You should not be going through the inspection process because you expect to buy a perfect property, or because you expect the seller to fix anything. 

Many times, you’re buying a property from another investor. In this case, your goal should be to make the sale as easy and drama-free as you possibly can for the seller. That’s what you would hope for if you were on the other side of the transaction, isn’t it?

Remember, you can always walk away from the deal if the numbers don’t add up after your inspection is complete.

At the end of the day, getting a property inspection done is so you know what you’re buying – and you know what it’s going to cost to fix it. Now, if you offer $100,000 for the property contingent on an inspection, with an estimated after-repair value of $130,000, and the inspection comes back with an estimated $30,000 in repairs that need to be done to put it back in service, then it may be time to renegotiate. 

4. Be Prepared to Renegotiate the Price

Depending on what you discover from the inspection, you may want to ask the seller to make repairs or, you may choose to renegotiate the price as is your right. In extreme instances, you may elect to do both but you will likely not get far in today’s market.

Do not, however, expect the seller to be receptive to your counteroffer. Their price may be firm and you may not want to risk killing the deal with an insulting proposal when they have multiple offers to choose from. Again, the seller likely won’t want to do anything – and you have to prepare yourself for that possibility. 

Whatever you do, don’t argue about the inspection. The inspection is part of your due diligence – not the seller’s. Re-negotiating post-inspection should not be seen as an opportunity to get something over on somebody. You want this to be a win-win. You want to buy a property so it makes money for you and, ideally, you want to be able to give the seller what they deserve.

If you leave the deal on good terms, maybe you’ll do it again someday. 

5. Get to Know the Property

An inspection gives you information, the seller may provide information, and your real estate agent should absolutely help you gather information about the property as well. 

You want to know everything about this property from every angle before you purchase it. Why? You don’t want to make a mistake. When you have all the information, from what needs to be fixed, to what repairs and maintenance will cost, to information about the neighborhood and potential tenants and rent prices, you’ve got all your bases covered. 

As an investor, you can have the peace of mind that you’ve done your due diligence – and your investment will likely pay off. You can’t cut corners. You can’t skip out on something vital like a home inspection just because it costs money upfront; it will save you money on the back end, in most cases. 

I want you to buy as-is – but I want you to buy informed. You may have a property inspector come through, and maybe you also have a contractor come through after to be safe, but again, you’re buying as-is. Stay informed, hang onto realism and pragmatism, keep the emotions out of your deal, and you’ll be on the right track to acquiring a property that’s a great fit for your investing goals. 

I would also say that if you are purchasing a property with somebody (another realtor who is not your property manager or on your property manager’s team), at minimum, you should ask your property manager to walk through the property with whatever information you have before you buy it. 

Get a second opinion as to what the true condition of that property is from your property manager. Even if you’re working with two different firms – or two different people – you want to make sure everyone is on the same page. 

Your property manager is looking for problems that are going to cause him to disappoint you, or cause disappointment down the road – and they’re not going to want to do that. So, there’s some healthy pushback there. Or, maybe your property manager is going to say, “Man, this is better than anything we’ve seen in a long time. Move forward. I’m excited to help you with this property.” 

Regardless, your property manager’s perspective and motivation are going to be very different from your realtor’s perspective because they have different motivations. Even so, get everybody’s perspective before making a deal. 

Again, I want you to make this transaction as simple, painless, and quick as possible for the seller. So, once you’re armed with all the necessary information and confident in your choice, make the offer and finish the process. 

6. Do a Comparative Market Analysis

Sometimes, as buyers or buyer’s agents, we have to educate a seller. 

When you’re going out to make a property an investment property, you should use a comparative market analysis to value said property based on what other properties in a similar condition have sold for in the neighborhood. 

Another analysis – a financial analysis using a local cap rate – can come up with a very different number. 

A property is typically based on sales of other houses in the neighborhood. Let’s say the one you’re looking at is estimated at around $200,000. But, when you go through and figure out that you need to make 7% on this property in year one, based on local rents, you might discover that you can’t pay $200,000 for that house. That’s okay. Not every neighborhood lends itself to being a rental property neighborhood.

In some situations, it may be beneficial to pay extra for the house anyway because you want the appreciation. However, you must remember that the financial analysis using the local cap rate and the local rent as defining factors can often yield a lower number for a purchase price than what a comparative market analysis will. 

Again, this comes back down to math and some basic investment skills knowledge. That’s why I strongly encourage investors to work with a realtor who understands those distinctions and can not only coach you through it but coach the agent on the other side through it. Sometimes, we have to help them work with their seller, too. 

7. Verify Zoning Laws and Opportunities for Short-Term Rentals

When structuring a purchase offer, another thing you want to keep is verifying the zoning and the land use. You don’t want to get into a situation where somebody happens to be renting a property, but the zoning doesn’t lend itself to rentals. 

There are some areas where I love mixed-use properties. I love the idea that I can do a little bit of commercial, but I’m always going to be okay because I have some residential rentals in that space, too. The office that we have in Springfield, Ohio is a mixed-use property, and it’s glorious. We have two rental units and we have the office space, so we get the best of all worlds there. 

Check your zoning, and check your land use because if something’s being rented out today, it doesn’t mean that that’s truly what the local land use is for that property. 

Another area to consider is a big deal these days. If you’re buying something, say on the Space Coast of Florida – where we work – and you want to be able to rent that property out via Airbnb or Vrbo as a short-term rental, make sure it’s allowed in the neighborhood. 

Don’t simply accept or believe that any property that you look at will be able to be a short-term rental. There are many neighborhoods and homeowner associations out there these days that are doing everything they can to restrict short-term rentals. 

If your numbers depend on short-term rentals – or what you want to do with that property depends on short-term rentals – double check to verify whether or not you can operate it as such in that neighborhood or community. Your title company can help, and your agent certainly should be able to help check the deed restrictions, check the HOA, and so forth. 

Don’t get yourself into a situation where you wake up one morning and discover that you’re not allowed to operate your Airbnb – or your hopes of running a property as one – are dashed due to zoning laws. 

From a personal perspective, we bought a house in Florida that is about 10 minutes from the beach, so it’s inland. We can go down there between two and four times a year for three to four weeks at a time; we rent that property out via Airbnb when we’re not there. It’s been wonderful because, since we’ve done that, it’s paid for itself – and our visits have been free. 

When we bought the property, we checked the bylaws, the restrictions, and so forth, and there was no restriction whatsoever on any sort of rental. However, a year or so after we started renting the property out, we got a letter from the Homeowner Association saying that we had to stop. They decided to change the rules and didn’t want us to do what we were doing. 

To make a long story short, we had a good attorney. We reminded them that we were grandfathered in; there’s some conflicting Florida state law and so forth. We’re okay on that property, but the second house I bought in that neighborhood will never be able to operate as a short-term rental. That’s going to be a traditional rental, and that’s fine. 

Whatever you do, be careful, do your homework, and ensure you’ve got your ducks in a row if you’re looking to buy something to be a short-term rental versus a traditionally rented investment property. 

Final Thoughts

The best investors know that buying a property is more than just getting a good deal. The goal is to buy a property that wins and wins and wins. We want that mailbox money for the long haul. We want a steady, reliable income from these investments – and we want our efforts to pay off. Doing your due diligence, springing for inspections, and staying on top of your ongoing education about the real estate industry takes time, but it’s worth doing. 

After all, you only get one chance to do it right. Why risk making costly mistakes when you could give yourself peace of mind – and a solid investment – instead?

2023 has been a tough year for all of us, so it’s important to temper our expectations for how the next year is going to go. We’ve been dealing with inflation, the cost of getting things fixed, getting things turned around to rent to new tenants, material costs, and borrowing money. 

Truly, everything has gone up. Our costs have gone up, too, and we have had to pass that along to our owners. As a result, investors feel like they’re getting hit from all sides. I try to do this regularly, but last spring, we had an open house where about half a dozen owners came in just to visit with us. 

I asked them all individually, “What are the dangers that you’re dealing with?” They said all the things I just mentioned were the major pain points in their existing businesses.

In terms of the dangers, these were pretty obvious focal points – and every property owner is struggling with them, regardless of their other strengths or experience in the business. At this meeting, each person I spoke to had different strengths. 

These were some of our best investors. And, even better, these are all people who like to be involved, whether this involves doing some of the maintenance, doing the turns, or managing some other aspect of the business. 

We also work with other folks who have full-time careers, and they trust us to take care of business for them so they can focus on earning more capital to buy more real estate. The strengths are there, but the key strength that every one of these people had, was resources. 

Let’s face it, if somebody’s upset or unhappy with us or unhappy about a bad year, they’re less likely to come and have cheese chunks and fruit punch with us at an open house. The people who spoke to me at this open house were people who are in the business for the long term; they have resources, and they have cash. 

What was missing in that scenario? Every person I spoke to this year who was doing okay, and less than overly stressed, cited their number one issue as being that they could not find anything to buy. 

This is the other wild thing about this year: When it comes time to expand your portfolio, there are fewer and fewer houses on the market. 

That is going to change as people have to refinance some of the loans they have or get out of hard money and realize they can’t. So, I think they are going to have to sell into next year.

However, even though these folks had cash and were not beholden to any bank or arbitrary interest rates, finding a property where the numbers made sense this year was virtually impossible. 

These days, the act of expanding your portfolio isn’t as simple as going through the MLS to see what’s for sale and making a purchase. 

Many of these properties are so overpriced that there is almost no way to make an operating profit. Simply put, the cash flow is not there. 

Now, in some situations – especially if somebody has cash and you go in with your eyes open –  you may decide it’s okay to break even or maybe be a little upside down on a month-to-month basis because you know the appreciation on that property, or the bet you want to make on appreciation, is solid.

For example, we’ve got areas of Columbus where Intel is building a chip factory. It may make sense to buy property in that area of Columbus right now, even if it looks like a high price and doesn’t quite play out on paper because it’s a good bet that in the next five to 10 years, those properties are going to go up dramatically in value. 

Perhaps the most interesting thing about 2023 was the fact that our most successful investors were telling us that what they want is to expand their empire, but they’re struggling with finding anything to buy. You have to temper your expectations when times are tough – and in general – to ensure that your hopes and dreams can hold up to the reality of the situation. 

How to Start Investing in Real Estate

Being a first-time investor in a market is a little bit different than being someone who is searching for their second or third house in a given market. That’s different if it’s your first rental property anywhere, but it is sort of a “the chicken or the egg” conundrum. 

Here’s what I think is the number one strategy to consider when you’re figuring out how to grow a real estate portfolio. 

You have to determine whether your first relationship should be with your potential property manager or an agent. There is a commonly held belief that you will get a better deal by purchasing a property through the listing agent versus through a buyer’s agent. I want you to just put that entire idea to rest. 

If you’re dealing with a listing agent who is somehow going to cut their commission to put you into a property, I can tell you this: If they can’t negotiate on their behalf, they certainly can’t negotiate on your behalf.

There is zero benefit to you trying to save a few dollars by making a deal with a listing agent who plans to cut their commission versus making a deal through an agent that has your best interests at heart. It’s a tough decision, but if you’re fortunate enough to meet somebody who does both – like we do at ROOST – I think that’s great. 

But, if I had to hazard a guess as to which is the better option for first-time property investors, I would want you to be looking for a property manager first. 

You may find somebody you like and not be ready to buy a property until six months down the road or even a year – and that’s fine, too. However, whether it’s your realtor or your property manager, you want to know that the person you choose to be in your corner, your closest ally, is somebody who wants to work with you as your partner. This person should succeed when you succeed in the long term. 

Final Thoughts

I would say, as a rule, make sure that you find a property manager first. However, that doesn’t mean that you won’t get lucky and find that perfect unicorn agent who will refer you to a property manager who has your best interest at heart. Keep your eyes and options open. 

When you’re faced with difficult times, especially when your career and livelihood are on the line, it’s important to be realistic about your options and ask questions as needed. A good property manager will be able to help you weather the storm and redirect you toward the path that is going to ultimately result in the best outcome. 

It may not be everything you hoped it would be – especially at first – but it’ll prevent you from making costly mistakes or being reckless with your investment. 

Tough times pass; the storm always runs its course. You, too, will prevail… just be smart, trust your property manager, and remember that you’re making the right decision to invest in residential real estate. 

I’ve learned the hard way why it’s so critical to have a trusted advisor and partner when you buy an investment property, especially early on. 

I got my real estate license in Springfield, Ohio in early 2001. Within three months, I bought my first rental property. 

Did I consult my broker? No. Did I consult any other people who are investing in real estate? No. 

I genuinely thought I was smarter than the rest of them. 

I went out and bought this thing because I had the money, I had the loan, and it was something I wanted to do. And yes, I blame myself, but I also have to blame a book because it made me too smart for my own good. In the aftermath, I made every mistake someone could make. 

I remember sitting on my back porch when we were living on Long Island and I was still working for Target. At the time, I was ready to get out of retail; I didn’t want to work for Corporate America anymore. As I’ve said before, I was a terrible employee and felt the need to do something for myself. So, I started reading this book called Rich Dad, Poor Dad.

While I was reading through it, I couldn’t help but think, “Oh my God, anybody can do this. I’m going to be able to pull this off. I’m going to go out and buy a whole bunch of real estate, and I’m going to get all this passive income. I’m going to get rich, and it’s just going to be so simple. It’s going to be incredible.” 

Well, it didn’t turn out that way. I’m sure if I went back and read Kiyosaki’s book today, I might get a different impression of it, but I got sucked in because I wanted to be sucked in. I wanted something new and different, and residential real estate looked like a great place to land after working at Target stores for all those years. It inspired me and got me going – but it did not prepare me for the realities of owning my first handful of residential investment real estate properties. 

Here’s my advice: Beware of the dangers and perils of the late-night infomercial and beware of the perils and dangers of the latest get-rich-quick investment book. 

They’re out there. There are a ton of people out there who are telling folks that this is an easy way to make a fortune, get monthly income, mailbox money, and leave a legacy behind. 

And it can be – if you do it right. It’s never going to be a get-rich-quick situation, however. 

All of my early mistakes revolved around the fact that I didn’t know what the hell I was doing when I purchased those properties, so I overpaid. Beyond that, I didn’t understand what it was going to take to get a property back in service or maintain it. I just thought I was the smartest guy in the world – and that’s what some of these books and infomercials are very good at communicating to their audiences. 

You don’t know what you don’t know. As you’re learning how to become a successful real estate investor, getting help is essential. But that’s not all. 

When you’re expanding your portfolio, it’s important to recognize the role luck plays in the bigger picture. 

Sometimes, people get lucky the first couple of times, and through no fault of their own, things work out very well. When you’re on top and doing well, it makes sense to go out and buy some more, right?

The fact is, when you’re expanding your portfolio, the last thing you want to do is put all your hard-earned money at risk over a mistake. 

Get yourself a partner, a collaborator, preferably somebody who’s going to help you manage it so they have a vested interest in helping you buy it. 

When it comes time to expand your portfolio, I believe it’s critical that whoever will be looking after your property for the long term needs to be involved upfront in purchasing that property. You need to get their perspective before you dive in with your hard-earned cash.

Working With Professionals Gives You A HUGE Advantage

I don’t want anyone to interpret that Invest with ROOST is a money grab. Yes, it is important that we offer a service in the market that people value and that we get paid for it. After all, we’re professionals. 

The fact of the matter is, it doesn’t make sense for a real estate investor to not do everything they can to make sure that they’re going to buy that property the first time. This way, you have a better chance that it will pay off – and cash will flow into your pocket throughout the life of that property. We’re able to do that. 

If we can work with our owner group and become market makers to facilitate a connection between you and somebody in our group who wants to sell, the entire process is going to be faster and easier. Another fantastic part of working with investors is the fact that the best investors we work with go by the numbers.

With them, there’s no emotional attachment to these properties. They bought a property to do something; it did something. Now, they’re at a point where they feel it’s time to move on to something else. That makes our job quite a bit easier, of course, and it makes your job acquiring a property quite a bit easier. 

I can’t undersell how critical it is that you’re able to get the leases at a moment’s notice because we already have them. You can also get the financials at a moment’s notice because we have them. 

All these factors and accessibility make it easier for you to make an informed decision. 

Final Thoughts

It’s tempting to think you can cut out the middleman and do the work yourself, especially if you’ve been lucky and achieved success on your own. However, you can’t underestimate the value that professionals bring to the table – and the priceless advice they have to offer, no matter your level of experience. Real estate investing, like any other type of investment, carries some level of risk. We don’t have to take unnecessary risks – and that’s where knowledge comes into the picture. 

Armed with knowledge, you’ll be able to make smarter investing decisions, mitigating some of that unwanted risk. Your partner – a licensed real estate professional and, ideally, your future property manager – will be invested in the process with you because they win when you win. Everyone likes winning. 

I think the value added by working with Invest with ROOST kind of speaks for itself. However, we want to prove to you how valuable that is, which is the purpose of this guide. 

The last thing I want to do is continue to sign up owners who are coming to us with a bad situation that we could have helped them with upfront. That’s what I want to change for us – and what I want to change for you. 

When you’re ready to start expanding your empire, give us a call. We’d love to show you how we can help you achieve your goals as a property investor.