Introduction
As a Real Estate Professional, Investor, Instructor, and Coach, there is one thing that continues to challenge me, why aren’t more Real Estate Agents and Brokers focusing on making successful Real Estate Investors their clients? The following article will try to highlight this opportunity and offer some suggestions on how to align yourself with Investors and grow your business.
Why Work With Investors?
– Investors are much more focused on the types of property they will purchase than end users, if it meets their investment criteria, they will usually buy it. You will not show them every house in town and still not get an offer!
– Unlike the end user who may only be looking for a new home every 3-7 years or longer, active Investors typically will buy multiple properties each year or even per month! If you do a good job for them, they will continue to come back over and over again which means to you a potentially endless commission income stream. In addition, they typically have a significant network of other Investors they could align you with.
– Most Investors will be presenting all cash offers on the properties they are interested in, so any mortgaging issues are not a concern
– You can leverage off of their experience if you want to consider investing for yourself
– Regardless of the economic conditions, successful Real Estate Investors, are busy in each of the four market cycles. Aligning yourself to Investors can provide you with a model that will sustain you during difficult times and provide explosive results during good times.
How Can Real Estate Professionals Prepare to Work with Real Estate Investors?
This is an area where many RE Professionals can use some improvement. Savvy and successful Investors do not have the time or desire to work with anyone who doesn’t understand their business model and in speaking with thousands of Investors coupled with my over 30 years of investment experience, this is a big problem. Here are a few things to consider as you prepare yourself to work with Investors
– Generate a Business Plan that will help create the foundation of your journey. You may want to consider aligning yourself with Coaches and Mentors to help guide you through this process
– Consider becoming a Buyer’s Agent and Buyers Agent Certified, this is a critical item for many Investors; they want to make sure they have someone on their team who will be able to negotiate outstanding offers on their behalf
– Get your skills honed, you need to take stock on your current skill set and determine where the shortfall may be. Once the skill deficiency has been identified, you should implement an action plan to mitigate it. There are many options available to you for your skill development plans. What Will You Need From Your Investors? The following is a high level checklist of what you should expect from your Investors
– Proof of Funds. Like your retail buyers, you would never start showing them properties until you have verified they are qualified borrowers. You should handle Investors the same way. In addition to the standard pre-qualification or pre-approval documents, since many Investors will be paying cash, you will need to get a bank statement or other documents showing where the capital is coming from. Be cautious on any capital source like a 401K Loan in process because there is no guarantee that there will be an approval.
Request their investment goals and strategies and should include the following:
Is this a Flip, Wholesale, or Hold property
Try to get information on their past experience
To better support their short and long-term acquisition goals, request their Business Plan
When will they be ready to purchase
How will they be purchasing it (cash, in an LLC, etc)
Targeted investment areas
Price range
Criteria for the property and structure
Minimum number of bedrooms and baths
Age limitations
Amount of rehabilitation work they are willing to do
Getting Compensation From All Angles When working with RE Investors, your compensation stream can come from a number of sources as follows:
– With a Flip Investor, you can earn a commission on both the front end as well as on the back end from the retail or wholesale buyer. You may also be able to get the listing for sale from the person looking to buy the Flip property!
– With a Hold Investor, you can earn a sales commission on the purchase as well as a rental commission every time the property turns over with a new Tenant. In addition, where applicable by law, you can also provide property management services, talk about a great business model!
– Don’t forget about referrals or commission splitting. As with many successful Real Estate Investors, they may eventually decide to explore investment options outside of your area. By connecting your client to other Real Estate Professionals, you can earn considerable referral fees or commission splits in either handing your client over to them or work as a team. Make sure to discuss these arrangements in advance with your Broker and ensure compliance to any applicable real estate laws.
What Will Real Estate Investors Typically Need From You?
Constant monitoring of the market for properties that match your client’s criteria. This will include new listings as well as any price changes.
Comparative Market Analysis performed
Current rent rates
Your experience and guidance in special housing programs (like Section 8)
The potential market price and turn over time on a property after it has been renovated. This is essential because most Investors will work from this number and work backwards to determine their Maximum Allowable Offer (referred to as MAO).
How Do I Meet Real Estate Investors?
– Attend real estate and home shows
– Speak with your Real Estate Broker
– Respond to ads placed by Investors
– Call on all “We Buy Houses” signs
– Attend social and professional business meetings
– Using your local MLS database service, track the people who are buying investment properties and do a search on them and make contact.
– Join local Real Estate Investors Associations and clubs (you can see many options by conducting an internet search) – Join internet social groups
“Wishing you the very best in your path to success and happiness”
Carl Schiovone, President
“Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy. ” Dale Carnegie
“He who fears being conquered is sure of defeat.” Napoleon
Carl Schiovone has been actively involved in real estate investing for over 30 years. As the co-founder of Cypress Investment Properties, he specializes in the acquisition, rehabilitation, and property management of residential properties.
Carl has lectured on various investment topics to numerous investment organizations and is currently working on publishing a series of real estate investment textbooks.
Carl is the Founder of East Coast REIA in NY which provides networking,