Real estate investors are a unique type of real estate buyer than some real estate agents are not accustomed to dealing with. While agents are trained to deal with retail home buyers, real estate investors are looking for specific deals and profit margin. Some realtors often will not take the time to learn what goes into being a real estate investor along with the differences involved in representing investors. But, for realtors that do take the time to understand investors, it is a very beneficial relationship.
#1 Purchase Price
Realtors struggle with the fact that most investors will not offer more than 70% of market value or retail price, depending on the condition of the property. This is true of short sales and REO's (bank foreclosures). If the property needs any type of work, the investor will reduce their offering price to reflect that along with holding costs. The basic purchase price formula that many investors live by is retail price multiplied by 70% (mostly 65% in today's market), minus repairs and holding costs. This is contrary to the 90-95% of retail that home buyers are willing to pay. But remember, the investor is not buying to live there.
#2 Financing
What's most important these days is getting deals closed. Investors make a lot of cash offers that are closed with short term loans from private investors and "hard money" lenders. Investors make cash offers knowing that they have this type of short term and short close funding available to them. While this short term financing can be considered expensive at 8-18%, investors realize that this is a numbers game and that the cost of short term financing is a cost of doing business and is a fair trade off to get the deal done. This should be a benefit to realtors in that a fast close is also a fast trip to the bank to make a deposit as opposed to the current 45-60 days to close on homebuyer deals.
#3 Exit Strategies
Investors create their end profit when they purchase the property, but they can't realize it until their exit strategy has materialized. Successful investors know a multitude of exit strategies. These exit strategies range from a traditional sale, to owner financing, lease optioning, renting, and wholesaling the deal for quick cash. Realtors that are open minded are huge assets to investors, but those that are not are more of a liability than they are worth and can destroy a good real estate transaction. Investors are excited when a realtor wants to learn more about what their business and understanding multiple exit strategies is a huge key to both parties being successful.
#4 Outside the Box Thinking
Investors are known for creativity and are often able to come up with non-conventional solutions to problems. Realtors that are resistant to the concept of various techniques such as subject to and owner financing, short sale offers or combinations of these strategies will often do so at their client's expense. To assume that an idea is illegal due to lack of knowledge when, in fact the idea is completely legal and viable, can be damaging to their clients. A good investor with a strong track record can be a wealth of information and a cash machine if a realtor chooses to learn how to work with investor buyers.
#5 Quantity
This alone should have realtors scrambling to work with investors on a regular basis. Most realtors are scrambling to attract new buyers that will buy one property on average every five to seven years. Successful investors are buying multiple properties every year if not every month. The down side - investors may ask their realtor to submit twenty plus contracts each week on REO's or short sales to close on one deal. But would you rather spend time chasing buyers all over town or spend time with a guaranteed buyer who can close and who is also patient. Let's see - chase five buyers for five deals or one buyer for five deals. The answer is pretty obvious.
#6 Multiple Deal Streams
Investors will often work with multiple realtors to ensure that there is a steady flow of deals. Even though a realtor may prefer that the investor work with only them, it's very unlikely that they will be able to do that. Remember, for investors, it's a numbers game. Realtors usually specialize in one area, one type of deal, or a specific price range while an investor may have a broader buying criterion than just what one realtor can service. So don't get your feelings hurt when an investor is getting deals from other realtors. This is their business, it's not personal. But consider also, if you take the time to learn how to invest, this would almost guarantee that investors would take the time to turn more of their business over to you as their main realtor. As an investor myself, I know how much it would mean to me to have a realtor that actually understood the position of an investor. It can be a mutually rewarding relationship that can last for years to come and can set you apart from the competition. It's much more lucrative than chasing the conventional home buyer.
