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Posted almost 7 years ago

5 Tips for Working with Real Estate Investors

If you’re interested in exploring the lucrative world of working with real estate investors, here are five tips that will help you get started.

1. Choose an Area of Expertise

Most real estate agents are intimately familiar with their local market area. However, a market area that is good for residential real estate may not be the best for investors. To be successful in selling to investors, you need to broaden the scope of your search for good investment deals.

Take the time to identify neighbourhoods that are good for investors. You can look into municipal or association restrictions on renting property to identify those that allow short and/or long-term rentals. Also, consider neighbourhoods that would attract renters because they are close to universities, military bases or vacation attractions, for example.

2. Identify Investment Potential

In order to spot a good investment, you need to analyze the potential of the listings you find on the market. For example, calculate the Cap Rate to determine the potential return on investment. It is a calculation you need to do based on the Net Operating Income and Current Market Value.

The Net Operating Income is calculated based on the annual income less all the expenses that are required to maintain the property. The Current Market Value isn’t always the list price, so review the prices in the target area to determine if the list price is actually higher or lower than the current market value.

Once you’ve completed these calculations for all of the listings in your target area, you will start to identify those listings that offer the most potential profit, and you’re getting closer to presenting those opportunities to your investor client.

3. Prepare a CMA

Before you can make a recommendation to your client, prepare a Comparable Market Analysis (CMA) to illustrate the relative potential for your targeted listings. Estimate the income and expenses for each of your target properties to show the investor the differences. You may find that one home costs more, but will be less expensive to maintain. If that’s the case, it might be a better alternative than a property that will require a lower initial investment, but will cost more over time.

4. Prepare a Presentation

Investors are typically “bottom-line” oriented. Your presentation should be very concise – don’t use a 30-page report generated by your MLS. The investor will be interested in your evaluation of the type of renter that a property will attract, the Cap Rate and potential profit for each property you include in your CMA.

5. Reap the Rewards

There are a number of advantages of working with real estate investors. For many real estate agents, investors are their primary source of income. Consider these facts about investors.

  • Investors Buy and Sell Often: Investors buy and sell much more often than a typical home buyer. Some investors may only buy one or two properties a year, but if you find the right investor, you may handle dozens of transactions for them each year.
  • Investors Buy Based on Consistent Criteria: Rather than catering to the needs of individual home buyers, you’ll be able to create repeatable processes to simplify your business.
  • Investors are Good Referral Sources: Investors know other people involved in real estate and are typically a good source of referrals.

Some real estate agents shy away from working with investors because they don’t think they have the skills to be successful. If you use the right tools to support your work with investors, you’ll find that the work can be much easier than working with home buyers and sellers, and much more profitable!


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