As a UCLA undergrad, Farooq Ahmed’s eyes were set on building a career in real estate. What steps did he take to get to his current position as a Home Mortgage Consultant for Wells Fargo? What advice does he have for those interested in the real estate profession? Additionally, a primary component of Farooq’s job is to make the housing market more approachable for potential clients. What can we, as prospective property buyers, do to make sound investment decisions? Read on for answers to these and other related questions.
1. How did you break into the real estate business?
I started out working at Wells Fargo Bank (in Westwood) while I was an undergrad at UCLA. I was working part-time, and I started out as a teller. I knew I wanted to get into the lending end of the business, so I worked my hardest to break into the mortgage side of the office. I had to make a transition, albeit a short one, to personal banking before I would get my chance at working in home mortgage. I was hired on as a personal banker at Wells Fargo Bank, Century City office, in Jan. 2003, and I worked in that position for approximately five months.
My ultimate goal was to move into home mortgage, and I got my big break in the summer of 2003. By that time, I had referred over $4 million in loan volume to the mortgage department. The senior loan consultant in that office (who was ranked No. 5 in the nation for mortgage bankers within Wells Fargo), saw that I had the drive and that I wanted to excel, so he gave me a shot. He hired me on as his junior loan officer. I worked in that position for about a year, during which time I built up my pipeline and referral network, and the rest is history.
2. What is a typical day like for you?
My typical day consists of getting up early in the morning – around 6:30 a.m. – to check the bond market. The yields on certain treasury bonds are a good indicator of what mortgage rates will look like later in the day. By the time I get into the office around 8 a.m., I usually have a couple messages that I follow up on. After that, I send out an e-mail to a group of my referral sources informing them about the day’s interest rates on certain loan programs. This is a good way for me to keep my name in front of my referral sources.
During the normal course of my business day, I field calls from clients that have pending loans, and also from clients looking for financing. I have an assistant that handles all calls from borrowers that have current loans in process.
Also, several days a week, I venture out of my office to meet with my existing referral partners and to meet with new potential partners. This entails me going to meet with realtors at open houses, scheduling lunch appointments with business managers and meeting with CPAs to go over their business plans and how we can work together. My typical day is never the same, day after day. I always have something new and exciting going on, and that’s why I love my job.
3. In a relationship-based career like real estate, how do you build clientele?
I build my clientele in numerous ways. First and foremost, realtor relationships are a cornerstone of our business. Refinances and cash-out transactions tend to come and go, but purchase business is the key, and mortgage bankers who can establish and maintain relationships with successful realtors end up doing well in the long run. If you do one good deal for a realtor or his or her client, that realtor will remember you and want to continue working with you in the future.
Also, my book of business is a good source of referrals for me. I maintain monthly contacts with everyone whose loan I have closed. This helps to keep my name in front of them, and as long as you treat a client well, he or she will refer more business to you. The key is keeping in contact with them, doing a good job setting expectations and following up in a timely manner.
4. How do you think the housing market differs from other forms of investing?
The housing market differs from other investment vehicles in many ways. The housing market is a long term investment, similar to investing in treasury bonds. However in the long run, the housing market can, and will, pay off better than the treasury market, as long as you are patient and invest wisely.
It is subject to fluctuation, as is the equities market. But the equities market has so many different avenues for investment, whereas the housing market has a couple fundamentals and subtle variations along the way.
The housing market has proven in the long term to be a solid investment. It does not require you to have a vast knowledge of any specific product or company (unlike the equities and commodities markets).
The housing market is a smart investment avenue, but like any form of investing, it has some risks. I always suggest to clients that a diversified investment portfolio is the best way to go. The old saying, “Don’t put all your eggs in one basket,” holds true for the housing market.
The key to investing wisely in the housing market, or any market for that matter, is to do your research. Make sure you explore all options before making a decision.
5. What signs do you look for in the market to indicate strength or weakness?
Strength or weakness in the housing market really cannot be quantified by any set of indicators. You have to look at the market as a whole and the factors that have the most influence on the market.
One factor that affects the housing market is consumer confidence. For instance, if consumers are confident that the economy is doing well or is on an upward trend, they are more likely to spend money on their homes or possibly purchase other homes.
Another factor that has a salient effect on the housing market is interest rates. When interest rates are low, consumers have more buying power, and in turn end up buying “more home for their dollar.” Recently rates have been very low, but as of late, we have seen more of an upward trend in both short and long term rates. Despite this recent rise in rates, the market has remained robust.
Yet another sign of strength or weakness in the housing market is the number of people employed in a certain area. For areas that have higher employment rates, the housing market tends to do better than markets where unemployment rates are high.
6. The housing market can be intimidating for people who have never gotten into it. Do you have any advice for new potential buyers or those looking for investment properties?
The housing market can indeed be intimidating, especially for first time homebuyers. I have a couple pieces of advice that I like to impart to my clients.
First and foremost, for those clients that are currently renting, I sit down with them and ask them how much they pay in rent. I will then take this number and compare it with how much it will cost them to pay for a mortgage. In almost all cases (with a few exceptions) it ends up that the mortgage payment is higher than the rent payment. But, the one thing to consider is that the federal government. gives you a tax break for the interest you pay on a mortgage, and also for your property taxes. So in reality, a mortgage payment that seems to be higher than a rent payment, at face value, sometimes ends up being close to the amount of rent that most clients are paying.
The other bit of advice that I give to clients looking to purchase an investment property is to do your research. Real estate has historically proven to be a good long-term investment, but be careful about the market you are looking to buy in. Some buyers feel that they can buy a property and sell it within months and make a nice profit. This might be true in the current real estate market, but will not always be true. Real estate values tend to work in a cyclical manner, with certain anomalies along the way.
My most important piece of advice to buyers: Buy real estate, just be prepared to carry your debts, and never stretch yourself beyond your means. Real estate can be a very lucrative, and fun, way to invest but you have to be smart about it, and you have to be able to make your payments, without “breaking the bank.”
7. What should people look for when choosing a mortgage broker?
First of all, I would like to clarify the difference between a mortgage broker, and a mortgage banker. A mortgage “broker” is someone that works for an independent firm, and has to go to the bank to obtain a loan for his or her clients. The mortgage broker charges his or her clients a fee for obtaining the loan from the bank. The bank also pays the mortgage broker a certain amount of money based on what type of loan the broker has sold his or her client.
A mortgage “banker,” in contrast, is someone that works directly for a bank or a major lender. The mortgage banker does not need to go outside his or her bank or lender to obtain a loan for his or her clients’. In turn, the mortgage banker does not need to charge his or her clients a fee to obtain a loan, because the mortgage banker is paid by his employer for originating loans, based on total monthly volume.
I fall into the latter category, as I work for Wells Fargo Home Mortgage, the largest retail mortgage lender in the nation. Having said this, the things that one should look for in a mortgage banker or broker is someone who has knowledge of the different loan products that are available, and has the ability to find the right product for each client. Another characteristic that is very important is the ability to be able to close the deal. Anyone can take a loan application, but the true test of a competent loan officer is being able to close the deal. Clients should look for someone who has proven to be an outstanding performer.
Clients should also look for someone who knows their particular niche. Basically, this means that, if a loan office is sitting in a call center in another state and is used to doing $100,000 loans, he or she won’t be able to handle a $1 million loan as well as a loan officer that has experience working with these larger loans. Do your research, and work with someone who knows what they are doing.
8. Are there common mistakes that people make about the housing market?
I don’t think there is such a thing as a common mistake when it comes to the housing market. I do believe that some people fall victim to over-speculation. Namely, some people feel that their primary residence has gone up in value so much in such a short time, so they think that any real estate they purchase should appreciate in the same manner. These people sometimes end up purchasing homes that do appreciate in value, but not as rapidly as they had expected.
Another mistake that I see some buyers making is that they don’t obtain proper inspections for the properties they are looking to purchase. Inspections don’t cost the buyer much, but if not done before the close of escrow, the buyers can be left with a lot of work to do and end up having to spend more money to fix up the place than they had anticipated.
9. What are the three most important things to look for when choosing a property?
The most important things to look for in a property depend on what you intend to purchase the property for.
If you intend to purchase the property as your primary residence, then of course you want to look for a property that will suit your needs (and your budget). You want to make sure you get a home inspection done to ensure that the property does not have any significant design flaws.
If you are purchasing the property as an investment, then you want to look at your return on investment. This means, more often than not, that you will be purchasing a property that you might not picture yourself living in, but as long as the rental income is sufficient, and has potential to maintain or increase, it might be a good investment.
I know plenty of clients that live in multi-million dollar single-family homes, but also own small apartment complexes that generate positive cash-flow. The key to choosing the right property is determining what your need is, and then searching for the right property to fill that need.
10. What made you decide to get your first investment property?
I purchased my first two investment properties in Arizona about a year ago. I decided to purchase these homes after having done a lot of research about the area I was purchasing in.
Since I bought two newly constructed homes, I looked around the area to see what companies were moving there, what infrastructure was being developed, what provisions the builders were providing, and what appreciation the existing homes had experienced.
After having done my due diligence (and believe me, it took awhile), I decided to take the plunge. These two homes have proven to be smart investments, as they have both appreciated in value.