By Doug Clark
Zillow for Pros Blog
Doug Clark
There are two groups of real estate professionals out there who might not realize how mutually beneficial their relationship can be: Agents, who are skilled at helping clients navigate all aspects of the buying and selling process, and investors, who are skilled at assessing deals and recognizing the potential for profit.
As an investor who’s purchased 1,000+ properties, I’ve worked with a range of agents and have experienced first-hand the value they can bring to the table. By combining their respective talents, these real estate pros can provide value to each other — and reap the rewards.
First, let’s look at some misconceptions on both sides about agents and investors:
- Real estate agents want the easiest commission.
- Real estate investors work agents to death with few actual deals.
- Real estate investors only want agents to provide information; they’ll do their own contract deals.
- Real estate agents do not understand the needs of the investor.
While there are always a few inexperienced or inconsiderate people out there, these statements do not represent the majority of agents or investors in the real estate marketplace — with the exception, at times, of the last one, but only due to a lack of understanding of the relationship.
Many agents aren’t sure how to meet the unique needs of real estate investors, but it’s not because they don’t care.
To better understand the investor mindset, agents need to put on their investor hat — shifting their thinking away from details like wainscoting and designer faucets, and toward details like rehab potential and the local rental market — learn some investment math, and then help the investor locate properties that “work for the numbers.”
Here are some of the ways in which real estate agents and investors can work together and both win in the relationship.
6 Tips for the real estate agent to work with investors
No. 1 – Understand how investors value property
Take the time and make the effort to learn how investors assess a property. Unless you know how they make investment purchase decisions, you can’t provide the best and most knowledgeable assistance. Don’t assume that a real estate investor only wants you to write up deals. That may be the case only because they don’t realize that you actually know what they’re looking for.
- Fix & flip investors: Learn the phases of a fix & flip and know who the final customer is going to be. Often, it will be another investor in rental properties, but fix & flippers are also selling to consumers in the retail market.
- Rental-home investors: Price is always important, but think beyond buying at a discount. You will also need to know the rental market: What types of properties command high rents, and in which areas are they located? Learn how to do the cash-flow calculations to show that after the mortgage and other expenses, there will be money left over each month to take to the bank. Even if you work mainly with fix & flip investors, you’ll need to understand rental cash flow since rental investors are frequent buyers of these properties.
No 2 – Stay on top of the markets your investor clients are interested in
Understand the investor’s desire for lots of market information and determine how you can supply some of what they need. Setting up automated MLS email alerts to inform them of new listings, sold properties and price reductions is extremely valuable. The beauty here is that technology makes it easy — do a one-time setup and the information just flows.
Plus, every alert they get reminds them of your value.
Also, remember that investors are not usually looking for homes to live in, so consider markets outside your local area or in other states. If there are deals to be had, many investors are willing to go where the bargains are.
No. 3 – Become efficient in your purchase offer and negotiation process
Sure, investors do make more offers, but this usually means you do more deals and bank more commissions. Use technology tools to make contract and counteroffer processes efficient so they don’t bog you down. Your investor client will appreciate efficiency as well.
No. 4 – Recognize the value of a client who is ready and able to make decisions
Unlike a first-time buyer who needs not only your expertise but often your emotional support as they wrestle with doubt and ask myriad questions, your investor clients knows precisely what they want and what they’re willing to pay for it. Once you help them gather the information, they’re able to make an immediate decision.
No. 5 – Understand that low offers are part of the process
The saying is that investors should “fall in love with the numbers, not the home.” Once the numbers are nailed down, most successful investors will try to see if they can get them a little lower (often, they can).
No. 6 – Start the first conversation off right
- Demonstrate a thorough knowledge of the market, especially property values related to rental income.
- Show that you’re technologically savvy and able to deliver information and transaction processes efficiently and quickly — and that you’re happy to do so for as many offers as they want to present.
- If you have experience working with investors or have invested yourself, definitely let them know.
Real estate investors can be a very profitable niche for agents, and they’ll need far less hand-holding. Here is a guide for real estate agents interested in working with investors.
5 tips for the real estate investor to work with agents
No. 1 – Understand the agent’s bottom line
Always appreciate that real estate agents only make money if there is a closing and commission. You can’t continually take advantage of their services and expertise if they don’t get to that closing table enough to make it worth their effort.
No. 2 – Be upfront about your requirements
Let your agent know what you’re looking for and what you need from him or her (and what you don’t). If you do a lot of research and property views on the weekends and want to call for information, set that expectation from the start.
No. 3 – Prepare an agent “cheat sheet”
Before you interview agents, lay out your specs. Consider it the Cliffs Notes of investor requirements. Tell them how you value a property, how deep a discount to current value you’re willing to pay, and your ultimate disposition of the property. In other words, let them know how to better serve you. The agent who’s already experienced with the things in your notes is a find — but the agent willing to learn how to do them the way you want is a gem as well.
No. 4 – Be clear about your offer and sale expectations
Tell agents how much you want them to be involved in your offers. Perhaps you just want them to do the paperwork and pass the offers back and forth. Or, you may want their input, especially if you are making an offer to an asset management company they work with on a regular basis — they might have tips for crafting a more successful offer. If you have different requirements for properties you’re selling, let them know specifically what they will be. Perhaps you will need less marketing and may want a commission reduction in return. Here is a blog post from investor Kevin Guz on how he got his investing career started with a good real estate agent.
No. 5 – Be honest about your partnerships
Investors often work with multiple agents for various reasons. Sometimes it’s because they invest in multiple areas and want agents with experience in each market, or work with different agents depending on the price point. If you do work with other agents, it’s a good idea to let them all know that you have other relationship niches.
Working together can be a win-win
For agents and investors, working together is often a win-win. Because these groups of real estate professionals don’t always recognize the value in partnering, there is a great opportunity for profitable transactions between those who take the time to understand and leverage the relationship for mutual benefit.
This post courtesy of The Zillow Team.
About the author:
Real estate investor Doug Clark has over a decade of experience in the industry. In addition to investing in real estate, he develops live wealth events and seminars to teach others the same techniques he has seen prove successful on his international TV show.
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