Should I be an investor-friendly real estate agent?

Real Estate Agent · Saint Clair, MI · Member since 2015 · 34 posts · 6 votes

Hi everyone,

Ok, here is today's question: I have seen a lot of posts on BP about "investor-friendly" real estate agents. Some people say that agents don't understand investing. Others say that agents won't waste their time working with investors. Still others say they have a great agent that they work with all the time. BP has an ebook about how to be an investor-friendly real estate agent.

So, what's the scoop? I live in Michigan, and am about 40 minutes away from Detroit. I will be able to practice all over the area, and there is a lot going on. Is this a viable avenue as a new agent? Does it/can it work?

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Michael Noto

Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes

10y

The large majority of residential property (1-4 units) "investors" are a complete waste of time for an agent and will never buy anything. Sorry to be blunt but that is a fact. They will just waste your time.

To avoid wasting your time make sure the buyers are pre-qualified for financing at the least and if they say they are paying "cash" ask to see a proof of funds from the get go. Either will need to be submitted with an offer anyway so to go look at properties with someone who has no money, no access to it, or no access to financing does not make a whole lot of sense to me considering the only way you get paid is if they buy something.

Then just take it from there and just make sure what they are looking for in an investment property is even possible.

In other words make sure they are worth your time before you dive in and give them your all as an agent. Someone who is serious should already know you will be asking for a pre qual or POF and will already have a reasonable plan in place.

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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
10y
Anything can usually work. It's about how YOU define success and what you like working on.
You have to research available inventory in your area to see what is moving. Used to about 2 to 3 years ago a lot of sales occurring were investor related in the residential space. Today the pendulum has shifted to the other side where most markets the sales are now regular buyers. The sales price on new construction properties and regular sales are higher. So for every investor sale you might have to do 3 of those to equal 1 regular sale.
If you are working with buy and hold investors they usually just want strong rental properties with a little bit of equity. It's the rehabbers that have to buy ultra cheap to immediately fix up and resell. So generally you can find more buy and holds at higher prices for investors versus what's available for flip properties.
My market in commercial real estate is always an investors market so I do not deal with the regular home owner versus investor debate like in residential.
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Brad A.
Plainwell, MI · Member since 2015 · 28 posts · 10 votes
10y
I think being an "Investor Friendly" agent is very different then a normal agent. My opinion is that Realtors are focused on the present deal and when they learn that an investor is trying to low ball a deal it means the Realtor may get less pay.
But the larger picture here is that an investor that finds a Realtor that is willing to work hard for a good deal and maybe paid less is going to use this Realtor again and again and again.
So is to more important to get the large payout on one property or create a relationship with an investor that could equal more but smaller deals for the long term.
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Sam Ball
Investor · Farmington, MI · Member since 2015 · 37 posts · 12 votes
10y
here are my thoughts,keep in mind I'm not an agent. In the Detroit area there is,in my opinion,going to be a lot of people wanting to go back to the city. More and more companies are moving back and there employees will come with them. There are also a lot of distressed properties in Detroit. I think there is an opportunity for the fix and flip crowd to move in and do some deals in the right areas. Wouldn't it be better for an agent to get the deals for the investor and then also get the deal when the property has been rehabbed and sold again? Two deals one client.
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Sam Ball
Investor · Farmington, MI · Member since 2015 · 37 posts · 12 votes
10y
@Brad A. great minds think alike.lol
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Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
The large majority of residential property (1-4 units) "investors" are a complete waste of time for an agent and will never buy anything. Sorry to be blunt but that is a fact. They will just waste your time.
To avoid wasting your time make sure the buyers are pre-qualified for financing at the least and if they say they are paying "cash" ask to see a proof of funds from the get go. Either will need to be submitted with an offer anyway so to go look at properties with someone who has no money, no access to it, or no access to financing does not make a whole lot of sense to me considering the only way you get paid is if they buy something.
Then just take it from there and just make sure what they are looking for in an investment property is even possible.
In other words make sure they are worth your time before you dive in and give them your all as an agent. Someone who is serious should already know you will be asking for a pre qual or POF and will already have a reasonable plan in place.
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Mike CumbieBusiness Member
REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
10y
Hi @Kelly Choate
I think "Investor Friendly" means different things to different people. There are plenty of investors I would happily work with and there are plenty I would not. I suppose working for an "agent friendly" investor would be good :)
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Account Closed
Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
10y
as you can see "investor friendly" has many definitions and as a new agent you should not get tunnel vision from just definitions. It only takes a short time to evaluate a client and to find out if they are serious and capable of buying real estate from you. The more people you come in contact with the more business you will have. After experience you can better choose what client you want to work with.
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Kelly Choate
OP
Real Estate Agent · Saint Clair, MI · Member since 2015 · 34 posts · 6 votes
10y
That's what I was thinking, @Sam Balland @Brad A.....looking at the bigger picture where there is lots of property bought and sold over time, rather than just residential customers where it could be decades before they move again.
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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
10y
Kelly, I think Mike stole my line, find agent friendly investors!
Absolutely work with investors, to a point. Understand where they are trying to come from, many here don't really know and as an Agent, you're in a leadership role to guide new investors. Keep them and yourself out of trouble, inform them why some tactics are not acceptable and offer solutions.
They can be a great asset for you as well. Consider a team approach, find your lenders and money partners and introduce those willing to work and learn.
Keep your position and reputation in mind at all times, you'll be successful by helping others be successful! Good luck :)
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Kelly Choate good feedback so far..
I echo @Michael Noto thoughts.. at least in your market if your going to be trying to move sub 100k SFR type properties to buy and hold investors.. I would spend time finding through public records the companies that are actually buying.. then I would cold call them. there simply is not enough money to drive some beginner buy and hold investor around to buy one 60k property.. Not a great use of your time or resources.. try to find the bigger players and court their business.
The big money is made in What Joel does though it takes a lot of apprenticing but if you can crack the commercial world and only work on multi million dollar deals you can make some good money over time.. and it just gets better as you get a deeper book of business. Plus your dealing with sophisticated accredited investor generally... But same with those that buy 50 homes a year...
We work with great agents in every market we work in that are pretty specific to investors but they know we buy in volume and take up little to none of their time... And when we make an offer WE CLOSE always or almost Always unless there is a title issue or the house gets totally trashed during the escrow period.
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Colin Reid
Investor · St Petersburg, FL · Member since 2014 · 231 posts · 221 votes
10y
I'm not an agent, but I've been the son of an agent for 20 years or so, and learned a lot from that and even more from the few deals I've done. All the agents we've worked with have been good except for my first one (left the closing table to show a house), but only one team has really been able to support me as a buy-and-hold investor so far. They are buy-and-hold investors themselves, the PM on the team is an agent, and they go out of their way to support me as a landlord while keeping the tenants happy as well. The last agent I worked with on that team had a HOLD worksheet (from Gary Keller's book, HOLD) prepared and stapled to the listing for each house we toured. Everything I've done with them has been a win-win-win. That's what makes them "investor friendly" to me.
The others have tried to sell us houses we'd love to live in, but the numbers don't work for investment. They may be good agents for regular buyers/sellers, but not super investor friendly.
I would guess that an agent who is an investor will be well equipped and inclined to help investors in a similar niche (i.e. if the agent does buy-and-hold, he/she may be better suited to work with other buy-and-hold investors, but maybe not a flipper).
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Jeremiah B.
Investor · Portland, OR · Member since 2012 · 266 posts · 128 votes
10y
I think that becoming an investor friendly agent isn't for everyone. Here are some of the pros and cons:
Pros:
- Gap in the market that can be filled.
- High likelihood of repeat business from high volume buyers.
- Because many investors lean heavily on their agents to do legwork, you have a fair bit of control over your sales volume/performance.
- Your customers tend to be savvy.
- If you do well, referrals will fly in and you will have a full book of business.
Cons:
- Requires several unique skillsets which are not required in traditional real estate. Some examples include wholesale, rent estimates, rehab estimates, etc.
- May require (or benefit from) work beyond the traditional real estate agent role. For example, if you can also find a tenant or oversee the rehab, those are big pluses!
- Rarely results in a big sale. As such, your salary is largely dependent upon volume.
- Requires a lot of leg work including finding properties, putting in lots of offers that will be rejected, etc.
Just my two cents.
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Jonna WeberPro Member
Moderator
Investor · Boise, ID · Member since 2011 · 1k+ posts · 736 votes
10y
I have a personal aversion to the term "investor friendly". I feel like it sounds like as an agent, I will "put up" with investors. I like to work with great clients, whether they are looking for an investment or a home to live in. I work about 50% with investors, 50% with retail clients. I have really benefited from learning to work with investors just like I work with retail clients...and that is to get them pre-approved before we go look at properties. I also give new investors several action steps to take before they purchase that first property, so that they might zero in on what they are after. In my market, flip deals are rare on the MLS right now - so most that I work with are buy and hold. It is exciting to see a new investor client start generating a little cash flow, and know that the property will eventually make a big difference in their retirement.
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Kelly Choate
OP
Real Estate Agent · Saint Clair, MI · Member since 2015 · 34 posts · 6 votes
10y
Fantastic feedback! Thank you everyone!
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
10y
It can work....but the thing is you need to be able to differentiate between a real investor, someone who will actually close deals, and someone who thinks that they are an investor. I work with real investors, and quickly identify the people who are not serious so I can move on from them. I may write an unrealistic contract once or twice for someone, but if it at that point they do not want to move on to a realistic price on a property, then I move on from them.
The market is what it is. If you are in a hot neighborhood where every property is going 20% over asking, Im not going to write offers at a 40% discount. In the same respect there are areas where I can write that offer. So you have the job of both creating realisitc expectations for your client, but if they do not bend to what reality provides, then you need to move on.
Not that long ago I was contacted by someone, off of BP actually, who said they wanted my assistance in helping them purchase an investment property. So in going over his criteria for investment he said he wanted a minimum 35% yearly return on the property. I sent him a few properties with realistic returns, then moved on. I told him if I could find properties with guaranteed 35% returns that I would just buy them for myself, and I would also retire right now.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Kelly Choate great idea on the Crash pads by the way... that's is a fantastic niche for someone knowledgeable about the industry and with connections in that industry. beats the heck out of low to mid range monthly tenants that's for sure.. !!!
Best of luck to you
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
10y
Kelly never buy into the sales trap of an investor telling you to take a small fee today for the chance at a higher return on the back end.
The back end payoffs are great but you need to MAXIMIZE return today just like the investor is doing on their property.
A broker/agent has a business to run and not a charity. Lot's of investors in the residential space will wheel a deal and promise things later that never materialize.
On the residential side your comment about regular home buyers staying decades is generally not true. Most properties will trade hands in under a 5 year span. Even if those owners go past the five years you can still get ongoing referrals from the their friends and family.
The reason under 5 years is because generally they are starter homes, then move up homes when the family is growing, and then the largest size home. Some seniors will keep those and some will even sell those and downsize. The home owners might get into investing as well. So it's possible even without them referring anymore business to you that over that lifespan you get many sales from them just like an investor.
Where brokers and agents mess up is not keeping the relationship going after the sale. Many brokers and agents focus on a sale until it closes and then tries it again with another new client instead of working the relationships they already have. It's great to add new clients (only when they meet your screening criteria) while still providing a high level of service to your existing ones.
The POF letter needs to be from a bank in the last 30 days with their name on it showing the money. Lot's of people say they have money but it is a POF funds letter from someone else tied to a bunch of conditions to access the money.
Someone like Jay is a "professional buyer" and that is very different than working with a new to barely seasoned investor who needs a lot of help. I do this on the commercial side and spend sometimes months educating on the process but I do not make 3k or 5k but over six figures per deal.
When new investors in the residential space on very small deals want to take up a lot of your time you will have to closely analyze the relationship and if it makes sense to do business.
You might find you really enjoy working with investors over home owners. You have to try things out and see what you gravitate to.
I do wait to try and find investors the right property in commercial but I can afford too. A residential agent might be clearing 1,500 a deal on those low end properties after a broker split.
I can do one deal and get 100 times that in one shot. Now residential tends to be a more easy and straight forward process. It has challenges but on commercial those get much more amplified on problem solving to close a deal. Lenders are more forgiving on a 50,000 house loan then a 4 million commercial loan as risk exposure is amplified so different worlds.
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Ronald Bourgeois
Real Estate Agent · Wareham, MA · Member since 2013 · 112 posts · 67 votes
10y

Every so often I'll get a phone call from an 'Investor' who wants to buy Foreclosures for 25 cents on the dollar. hmm :) Not in my market!
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Rick SantasierePro Member
Real Estate Broker · Granby, CT · Member since 2015 · 694 posts · 317 votes
10y
I agree with @Michael Noto, especially being in CT (on the 1-4 family topic). Also, the POF AND Pre-approval is a must!! There is a lot of wasted time with investors. I am a broker and investor, so I "waste" my own time often. I am working with a brand new investor who has $90k in cash and they want to buy a condo... The pay day won't be much, and finding her a condo that nets a small return will be a challenge as well in Class A areas, but my hope is that I am able to grow a relationship with her and maybe she will some day purchase many more!! So, while I agree with not wanting to waste time with some investors, don't just label them all. Try and sift through the ones that could add value to your business down the road, even if it means you don't get much of a return up front. As a broker, there have been several times, where I "wasted" my time with someone, but it then got referrals from those people, that made me a lot of $$.. Just my $.02
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Richard Ball
Real Estate Agent · Port Huron, MI · Member since 2012 · 295 posts · 82 votes
10y
Are you knowledgeable enough about what investors do to be an agent for an investor? Do you enjoy what investors do enough to keep learning and adapting in that field and market? If both those answers are YES then the last questions would be can you hustle and how long can you maintain that hustle? Instead of an offer on 1 - 100k house getting you 3k you are going have to put in 5 - 20k offers to make that same 3k. As you will find, offers come with problems so the more offers, the more problems and in the above equation that doesn't lead to more money.
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Wilson Churchill
Madison Heights, MI · Member since 2014 · 471 posts · 132 votes
10y
When I used to work with buyer's agents, they would normally just give out the lock box numbers so that I could go look at the homes (if they were vacant). I always wanted to look at several inexpensive homes... It probably makes more sense for an investor to work with a buyers agent when they are prepared to buy several properties in a shorter period of time, otherwise. I would say that it's probably a good idea to have a "buyers list" of investors that you could market your listings to, at least.
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Kelly Choate
OP
Real Estate Agent · Saint Clair, MI · Member since 2015 · 34 posts · 6 votes
10y
Thanks @Jay Hinrichs for the vote of confidence on the crash pad niche idea.
I don't remember how I originally stumbled across BP, but I am glad I did. Nothing can replace real advice and opinions by real people already doing the real work. Thanks again. Your feedback is priceless.
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John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
10y
I have worked with some that were great. Working with someone may lead to other opportunities such as JV. Evaluate your "buyer" for ability to perform. Find out their guidelines. If you can produce what they want, you have the chance of closing and building more business with them. If their approach is unrealistic, you need to educate them.
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Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
10y
Originally posted by @Michael Noto:
1. The large majority of residential property (1-4 units) "investors" are a complete waste of time for an agent and will never buy anything. Sorry to be blunt but that is a fact. They will just waste your time.
Totally disagree - - opinion, not fact. Lookie Loos are the bane of the industry, and serious investors will not waste the agents time because it wasteful for them too.
1. To avoid wasting your time make sure the buyers are pre-qualified for financing
Totally useless - - get the Proof of Funds AND the Loan Pre-Approval letter and submit with the offer.
1. Either will need to be submitted with an offer anyway so to go look at properties with someone who has no money, no access to it, or no access to financing does not make a whole lot of sense to me considering the only way you get paid is if they buy something.
We agree on this one at least
1. In other words make sure they are worth your time before you dive in and give them your all as an agent.
So forget all first time SFR buyers?
1. Someone who is serious should already know you will be asking for a pre qual or POF and will already have a reasonable plan in place.
Already addressed
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Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
fair points @jbeard. Have a good New Years.
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