Although they're lucrative to work with, investors come with their own set of challenges. And unlike working with homeowners, representing investors requires a different set of skills. Here are a few you need to master.
I’ve been a real estate investor for over a decade and only relatively recently became an agent as well. As someone who’s worked with many real estate agents on the buyer’s side, I can tell you some of the key skills I found to be essential for buyer’s agents representing me (or any other investor).
Many of these tips are the same for all agents, but some are specific to investment-minded agents. Here are a few things to know.
1. Think numbers first, aesthetics second
Don’t get me wrong; aesthetics are always important in housing. There will always be an end user, be it the homeowner, the renter or the homeowner your client flips the property to. This end user will care about how the house looks and feels, and that will affect the bottom line.
That being said, investors care about the dollars and cents. A house may not be a “dream home,” but it can still be a very good investment. Agents who work with investors need to focus first and foremost on the numbers of the deal.
That “beautiful kitchen” or “spacious walk-in closet” needs to be thought of in terms of what they do for the resale price or rental value — not in terms of what boxes they tick in a prospective homeowner’s home. This can be quite the mindset change for some, but it’s a critical mindset to master if you intend to work with investors.
2. Learn rehab costs
Before I got my license, one of the most valuable assets I found in a buyer’s agent was a general knowledge of rehab costs. Indeed, our agent used to be a contractor, which is rather rare amongst agents.
As a relatively new investor, this was a great benefit for me in evaluating properties. It’s simply not possible to ask a contractor to view each property before you make an offer, and so, investors need to have a decent idea of what a rehab will cost ahead of time.
Even after I gained more experience and improved at estimating rehab costs, it was always helpful to get a second opinion on what needed to be done and how much it would cost. Many mistakes were avoided this way.
Of course, you don’t have to have experience in construction to learn the basics of rehab costs. Talking to contractors and investors about the approximate costs of various fixes and how much they spent on different sized rehabs can be a great benefit.
Regardless, this is a critical skill to learn when working with investors. After all, investors often focus on fixers.
3. Speed up communication
Just in case you have been sleeping under a rock for the last five years, the real estate market is extremely hot right now. Even when the market is not particularly hot, good deals don’t last long.
For this reason, a good buyer’s agent needs to be fast. If a good deal pops up on the market, you need to be on it like white on rye.
In the same vein, good communication is critical. An agent who “waits until the next day” to call back is not going to cut it here. Too much time is wasted, and too many good deals will fall by the wayside.
4. Make a lot of offers (but within reason)
Working with investors is a numbers game. Generally speaking, it will take more offers to land a deal with an investor than it will with a homeowner. (Although you won’t necessarily need to look at more properties as homeowners tend to be picky about which properties they make offers on.)
And some of these offers might even be rather low.
Now, I’m not saying you should become a lowball connoisseur, nor should you tolerate working with an investor who shoots out nothing but lowballs. Still, working with an investor will often mean putting up with a lot of rejected offers.
The nice part is that, unlike a homeowner, many investors will be back to buy another property shortly after they buy the previous one. Some will be ready right away. It’s a tradeoff you have to be willing to make.
5. Stay organized
This is true for all real estate agents but especially for buyer’s agents for investors. Investors will tend to make more offers and thereby also be in the middle of more negotiations than homeowners.
They are also generally more willing to buy fixers, which will require more due diligence. In other words, there’s simply more to keep track of.
No matter what, it’s worth some time to get organized and create a trusted system you can put everything you need to track into. And then keep it up to date! Don’t try to keep everything in your head. You’ll inevitably forget most of it. It’s critical to make organization a priority, and it’s even more so when representing investors.
Investors come with their own set of challenges but can be very lucrative to work with. It does, however, require some different skills than representing homeowners. It’s worth the time and energy to master those skills.