Real Estate Investing: 9 Tips for Working with Investor Clients
The real estate investing niche can be a boon for real estate agents, thanks to laid-back, professional transactions and multiple closings per client. At the same time, investors are a different breed of client with unique needs and demands. Before you dive into this potentially lucrative market, make sure you know the keys to success.
Know your business.
Because they are often active in numerous timely deals, real estate investors value efficiency. If you take a lot of time at each point of a transaction, this is probably not the market for you. Make sure to do your homework and tighten up your game. There’s no place for hand-holding in the investor market.
Learn the language.
Investors don’t look at properties like general homebuyers. At the same time, they also talk differently. Make sure you understand terms such as “income vs. capital gains,” “internal rate of return,” and “hurdle rate.” You should also understand exactly how 1031 exchanges work, and your real estate math must be flawless.
Investors expect timely answers to questions and quick turnarounds on paperwork. If you don’t have the staff or bandwidth to complete paperwork quickly, don’t bother dipping your toes in the investor real estate market.
Avoid the full-court press.
Because they make a living beating the streets, investors aren’t likely to be interested in MLS listings. In fact, most are able to target a property before it even shows up on the MLS. Limit the scope of your engagement at the outset. When the time comes, the investor will probably have much of the front-end work completed and need you only for the offer process. If the investor’s efforts have reduced your workload, consider giving up some of your commission as an investment in a long-term relationship.
Hold your own.
While it pays to nurture a continued working partnership, you shouldn’t give away the store. If you do decide to forgo a piece of your commission, be sure to get a commitment to represent your investor client on the flip side of the deal when he or she decides to sell the property.
Don’t waste your time.
Make sure you don’t end up doing a lot of legwork only to find out the client can’t get financing for the properties on which he or she bid. You don’t have to be overly nosy; however, you do need to verify that they either have their own money or are preapproved for a loan.
Play your cards right.
Many sellers don’t realize they benefit from your errors and omissions insurance policy. For a seller flirting with the idea of a for-sale-by-owner approach, even one to two percent coverage can make a big difference by allaying liability concerns. Make sure to leverage your E&O policy, especially if the client isn’t aware of the risks of going it alone.
Assess the client.
Is this person a mature, experienced individual? Or someone who will alienate the market by making absurdly low offers on numerous properties? Understand that some investor clients love to make low-ball offers, hoping to luck into a desperate seller. This can force you to waste time on the front end, while also souring the market against your long-term interests. You may be judged based on who you associate with, so vet potential clients before agreeing to represent their interests.
Real estate investor clients may make requests that fall outside your traditional role. They may want you to limit your involvement to handling paperwork and offers. They could also want your broker’s license to handle leasing and renting. Some investors merely desire consultation, especially when they are new to the market. Whatever the case, try to establish the scope of the engagement with an eye toward planning sustainable, win-win solutions before you get started. While you’re bound to cross paths with some frustrating clients, the best investors will appreciate the value of having a reliable representative for their real estate investing interests.
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