While most real estate agents cater to the “retail” home buying and selling market, much fewer act as an agent for real estate investors. We’ll discuss why you may want to consider working with an investor, what you’ll need to know in order to become the best agent possible, and what to look for when partnering with an investor so that you can choose the right one to work with.
Why Would a Real Estate Agent Work with a Real Estate Investor?
Real estate investors represent a growing group that should not be overlooked, a study reported that real estate investors accounted for more than 11% of U.S. home purchases in 2018, more than ever before. For an agent, the lifetime value of a relationship with a successful investor can be 100x or more than that of a traditional home seller or buyer who may only buy and sell two or three homes in their lifetime and can provide you a nice long-term income stream.
Real estate investors are easy clients
For traditional buyers who are making one of the largest financial decisions in their lives and will have to live in the home they buy for years, there is a lot of emotion for a purchase. However, a real estate investor approaches each house as an emotionless business transaction. A successful investor buys and sells many homes a year and may even have staff that is specialized in coordinating the transaction to relieve yourself from that burden. As long as you can find a profitable deal for the investor that fits their buying criteria, they aren’t concerned with much else.
They move quickly
Investors know that deals come and go very quickly so they are ready to jump on a deal at a moment’s notice. They will do a very simple “inspection” themselves so they can plan the rehab and make sure there are no glaring issues, or sometimes even buy sight unseen. Financing is often the source of most delays, but an investor will pay cash or have easy access to less traditional financing sources like hard money or private lenders. Lastly, investors already have a real estate attorney or title company they work with, so there’s zero wasted time moving forward. If you are an agent for real estate investors, you’ll experience the quickest closings of your life – the only thing you’ll have to wait for is title.
Earn 3-4x higher commissions
In addition to being able to perform a large number of transactions with a single client, the other beauty of working with real estate investors is that you can dramatically increase your commissions. If you have a seller that is a good fit for an investor’s cash offer, the investor will have you represent him and you’ll get a double-ended commission (2x). What’s even better is that many investors will even let you list the house after it’s flipped where you’ll get the sellers commission (3x) and have a shot at getting the buyer’s side too (4x). Aside from being able to earn up to 4 commissions on the same house, the investor will invest money into improving the property and your second listing will likely be at a 30%+ higher list price than the house sold for originally.
How to Become the Ideal Agent for Real Estate Investors
Successful real estate investors are buying and selling dozens of houses a year so developing a relationship with one of them can be invaluable to a real estate agent. However, you must know that working with a real estate investor is different from acting as a normal buyer’s or seller’s agent. They have different expectations, different needs, and different goals and you have to learn how to adapt in order to successfully work with real estate investors. Here are the top 5 tips for making yourself the ideal agent for real estate investors.
1) Know the terminology
When working as an agent for real estate investors, you’ll want to make sure you understand terms like “cap rate”, “ARV”, “1031 exchange”, and “ROI.” It may be a different language than you normally speak, but it is important you speak in and understand investor terms so that you don’t get lost in conversations.
2) Understand the numbers & how they evaluate deals
In addition to speaking the language, you’ll want to understand how real estate investors think, and that is about the numbers and maximizing their returns. You aren’t going to sell an investor on a deal based on emotion, focus on the after repair value (ARV) comps, what the home could be worth after their investment, how much investment is required, and what they’ll make. You’ll want to understand your investor’s buying criteria which include the margins they look for, areas they buy, level of rehab, etc. and you don’t want to waste their time if you have deals that don’t fit into their “buy box.” Lastly, don’t waste your money on glossy proposals for an investor, they just want the down and dirty details.
3) Condition doesn’t matter
You can forget about what a property looks like cosmetically, investors don’t care whether there’s shag carpet or if the kitchen is from the 60’s. If anything, those are the types of things that an investor loves to see. Investors are not afraid to move walls, rip out kitchens, and tear the place down to the studs. Don’t even worry if it has what you would normally consider to be deal breakers for a traditional buyer, like structural or foundation types of issues – an investor knows that everything can be fixed for a price and will adjust their offer accordingly.
4) Focus on off-market deals
Investors are looking for the hidden gems that everyone else can’t find. They don’t want an agent who is going to send them automated emails from MLS whenever a property is listed that mentions the home needs some “TLC.” The MLS gets scoured over by a ton of people and good deals on listed properties are few and far between. Real estate investors are primarily looking for properties that aren’t available to everyone else such as in-house exclusives, pocket listings, or any property where you know some insider info that the others don’t know which will give them an edge.
5) Provide additional value
As an agent, you are out there dealing with retail buyers daily. Leverage your first-hand market expertise and share with your investor what’s hot and what’s not – what buyers are starting to look for and what’s going out of style. The investor is one step removed from the buyer so this type of feedback is helpful to them to guide their decisions. Other ways to add value can be simply driving by properties that the investor is working on and make sure everything looks ok – no break ins, squatters, etc. or sending the investor distressed looking properties you encounter.
What to look for in an investor
Capable of closing
The most important thing you want to evaluate when working with a real estate investor is to know that they can and will close. Feel free to ask them for a history of deals that they’ve done and have them show you proof of funds. Many investors will show you proof of funds from a lender, but you’ll ideally want to find one that can show you the funds in their bank account so you can be assured that there will be no financing delays or issues. It’s also a great idea to ask for professional references from other agents, attorneys or title companies that they’ve worked with in the past and you’ll want to avoid investors that have a history of backing out of deals.
Willing to let you list their homes
As mentioned in the benefits section, acting as an agent for real estate investors can be extremely lucrative. Assuming the investor isn’t hanging onto the properties they buy as rentals, you’ll want to work with someone that will let you relist the properties you bring them – and even better if they have other properties that they’ll be willing to let you list.
If you are a great agent for real estate investors are looking for a successful investor to partner with, learn more about how we work with real estate agents and reach out to us.