How is representing investors in residential and small multifamily properties different from representing homebuyers?
Investors have different goals than do the average homeowner. Typically, investors have specific criteria for which they are investing, which can be highly dependent upon the individual. However, investors are all similar in that they are seeking some type of return on the investment of their capital. This is contrasted with someone looking to purchase a personal residence who will often have many personal and emotional factors wrapped up in their decisions; separate from and in addition to financial concerns. For the agent representing an investor, it is vital that they learn to “Speak the Language” of real estate investing as well as learn the proper questions to ask potential clients such that they can build a mutual understanding.
How can you ask intelligent questions about investors’ goals?
Well, first of all you need to show that you care about their goals in the first place. A realtor looking to work with investors would be smart to take an active interest in real estate investing, themselves. It is only by digging into the terminology, characteristics, and industry benchmarks of local real estate investors that you can build a bridge of understanding to them. A vital component of that bridge, and of positioning yourself to provide value to them, is asking the right questions. Here are a few that any good Realtor should be asking their investor clients:
- What type of properties are you looking to invest in (Single Family, Multi Family, Large Complex, etc.)?
- What geographic and/or price points are you looking to invest in?
- Are you seeking to buy and hold properties for a long period of time?
- If so, is your strategy that of obtaining tax benefits of rental ownership OR do you need properties that cash flow?
- If you need properties that cash flow, what are you anticipated or minimum returns on an annual and monthly basis?
- Are you aware of all the costs that go into maintaining a rental property and have these been factored into your projected returns (Taxes, Insurance, Management, Capital Expenditures, Maintenance, etc.)?
- Perhaps, as opposed to a buy and hold, you are looking to develop and/or improve and turn/flip properties in more of a short-term strategy?
- If So, what are your annualized return expectations for your development?
- Have you ever flipped or developed property before?
How can you build your own investments without causing clients to think you’re competing with them for opportunities?
This is a great question and one that comes up frequently with agents who are unfamiliar with investor relationships. As an investor myself, I would personally never work with an agent who did not, or had not, own(ed) their own investment properties. I do not think there is any substitute for experience. Also, how can a realtor truly add value to the investor experience if they have no hands-on experience with the potential risks vs rewards? I think the key to avoid conflicts of interest, as an agent, is to be up front about your investment goals and attempt to work with clients who have slightly different goals than yours in terms of property type and/or investment strategy. Another alternative, if you and your clients share the same investment space, is to simply team up with them on opportunities!