What Are the Benefits of Working With Real Estate Investors?
There are many paths to success in real estate. Some choose to specialize in selling single-family homes, others help flippers find properties fit for a quick fix-and-flip, and some specialize in vacation homes. But one of the most lucrative paths is working with real estate investors. As a real estate agent, working with investor groups can be a great way to increase your number of transactions while nurturing your growing client base, among many other benefits.
Build Relationships That Lead to Multiple Real Estate Transactions
Residential real estate clients typically only purchase once or twice and may refer a friend or family member to you at most. Working with investors is a much different story.. Experienced investors are often buying and selling properties — sometimes several at a time — meaning you could unlock a new stream of business and referrals that move at a fast pace.
Work With Real Estate Savvy Clients
Real estate investors typically have a good grasp of the real estate market, the state of the rental market, as well as the buying and selling process. That means that working with investors is more about finding properties within their parameters rather than finding a property and then coaching the client through the homebuying process. Buying or selling on behalf of an investor with real estate know-how is often an effective and efficient way to drum up extra business.
Quick Real Estate Transactions
When working with investors, real estate transactions happen quickly. Investors often have their real estate strategies and finances aligned to strike when you present them with the right type of property. Whether it's commercial real estate, where lending becomes slightly more difficult, or adding to a residential portfolio, investors are ready to make it happen.
High Commission Potential
Each relationship and commission structure can be slightly different, but if you consider the average real estate commission, one or two investors might make up the bulk of your yearly business and take you from being a part-time agent to full-time in no time.
Access to a Large Pool of Clients
Like regular homebuyers, investors talk and move around. There’s significant potential to get referred to other investment groups, property management firms, or high-profile clients as you build strong, lasting relationships within various investor circles. Not to mention, your investors are usually homeowners too and might need you to help them on the residential side of things.
Why limit yourself to just residential markets? If you want to work with commercial real estate investors, then it’s highly recommended that you become a Certified Commercial Investment Member (CCIM). The CCIM designation is a rigorous program of advanced coursework and training in financial and market analysis that will help you earn the trust and confidence of commercial real estate investors.
How to Build Relationships and Get Real Estate Investor Clients
In the real estate business, networking is the catalyst of success. Of course, that remains true for those looking to build relationships with investors, too. Whether you attend networking events, market directly to investors, or just use word-of-mouth strategies, always keep the real estate conversation going and business will follow.
Tips for Real Estate Agents Working With Investors
Investors take a slightly different approach to real estate, so it’s important to take a slightly different approach to help them meet their goals. To get a better understanding of what that looks like, here are some curated tips to working with real estate investors:
Understand Your Investor’s Needs
Like a typical residential client, real estate investors have different needs. Some are individuals just looking to diversify their investments with a rental property or two, while others are groups of investors looking to execute large wholesaling strategies. With that said, it’s important to understand your investor’s needs to deliver the properties relevant to their interests.
More often than not, investors want to move quickly, so it’s important to streamline your entire process as much as possible. That means staying organized and using tools like a Customer Relationship Management (CRM) platform to stay up to date with various initiatives, lead generation (if needed), and being as fastidious as possible with contracts.
Take the Emotion Out of the Transaction
Investor-friendly real estate agents know that investors usually don’t have an emotional attachment to their investments, so keep it strictly professional and more business will follow. In other words, when presenting listings to investors, stress the projected growth of local markets, use the Zillow data, and strength of the rental market to express the bottom-line value rather than highlighting ornate architectural features.
Understand the Investing Language
Real estate investors have a more business-minded approach to real estate, so they’ll often use terms such as cap rate (the capitalization rate, meaning the net operating income divided by the current market value) or cash flow when evaluating properties. Investors usually make money by renting property as well as through appreciation, so it’s good to know both the cap rate and cash flow potential of a property. Familiarizing yourself with the language of real estate investing is a must to build a successful career in this niche.
Types of Investment Properties
Every real estate investor, or investor group, takes a unique approach to real estate investing. Some stick to what they’re familiar with, others are trying new things, and some try to up their cash flow by doing a little bit of both. As an agent, it’s important to be your client’s go-to resource when they’re looking for different types of real estate investment opportunities.
Commercial properties are generally thought of as office buildings, retail spaces, warehouses, and industrial manufacturing facilities, but the term also applies to any multifamily apartment complex with four or more units. That’s important to note because lending on commercial properties is significantly more difficult. Unlike traditional 30-year residential mortgages, commercial real estate loans typically require more money down, have different amortization schedules, and have higher interest rates.
Residential Rental Properties
Residential rental properties are exactly what they sound like. They’re great for investors of all types because lenders are typically more flexible, not to mention there’s a lot of data out there that suggests residential rentals are a relatively safe bet.
REITs, or real estate investment trusts, are portfolios of properties owned by companies that allow investors to invest in shares. From an investor’s standpoint, publicly traded REITs are great because they allow the investors to own fractions of every property while maintaining a certain level of liquidity. Of course, those who manage the portfolios are the people who actually choose which properties to purchase or sell.
Perhaps the most traditional form of real estate investment is raw land. Today, land investors will need both a substantial amount of capital and, if they wish to develop the land, an innate knowledge of local zoning laws. Typically, real estate investors looking to develop land have years of investing experience.
Regardless of the type of property, the real estate agent looking to work with investors should be well versed in as many aspects of the real estate industry as possible because of the wealth of opportunity it presents. Simply put, referrals from land developers could translate into residential investors or commercial real estate investors looking to make deals happen. By following our tips, you’ll be prepared to take your slice of this lucrative pie.