Real estate agents and investors are intersecting groups that sometimes appear to be appealing to two separate markets. On the surface, agents appeal to the single or multi family home buyer; investors seek clients that want to make strategic long term investments. On the back end of things, the two groups could heavily benefit one another from the real estate buying process.
Now, how is that exactly the case? Let’s take a deeper look into how a relationship between these two individuals could equally benefit both sides.
BENEFITS OF WORKING WITH A REAL ESTATE INVESTOR
As a strong real estate agent, you want to find leads to match your clients needs. As a real estate investor, you want to have a knowledgeable contact that connects you with housing deals. A relationship between both an agent and an investor can grant them both with results they desire. Here are a few examples of what those benefits look like:
HIGHER NUMBER OF DEALS
A clear and obvious pro of this relationship is the amount of deals occurring. Investors work on a larger scale than a typical client, with investors looking to purchase more homes at valuable prices. On the agent’s side of things, this only increases their profit, enlarging their commission and number of homes sold.
BUYING AND SELLING OFTEN
Unlike a typical homebuyer, who aims to buy a home to reside in for years to come, investors have a different goal in mind; rehab projects, flipping to put back on the market, etc. With this constant need for new purchases and sells, an investor is looking to connect with an agent who can help make this happen. Facilitating this quantity of deals for an agent can lead to a much higher reach of business, and an investor can have easier means of securing housing for their consistent needs.
UNDERSTANDING THE PROCESS
Investors have a similar scope of knowledge and background as an agent when it comes to the home buying process—both immediately understand the financial downsides or benefits of a sale, the draw of a neighborhood location, the cost of making necessary structural changes, etc. It is easier to work with an investor who it looking to buy an investment property than it could be with a family who holds sentimental attachment to a specific home, or is more unlikely to budge on little details. Investors paint a more realistic picture when picking homes to buy, which makes the work of an agent a bit easier when deciding which leads to send through.
STRUCTURE A REGULAR SYSTEM
Investors and agents are extremely similar in the one regard, where both are engaging in these practices for a career. The investors will always be in need of new homes, and the agents are always looking to help facilitate a sell or buy. It is easy to systemize the offering process with an agent, as they know how each steps works and are able to work within a quicker timeline. No need to explain yourself over formalities; you can easily pass forwards the forms and required details, and the investors will work for you. This system is often easily repeated, and the relationship between investor and agent becomes more concrete.
REFERRALS
Since both parties work within the real estate industry, their contacts often overlap. Investors often a hefty network of people for agents to do business with, and as we know this industry, connections make all the difference. Working with an investor not often offers qucker and more effective deals, but it broadens your overall network at the same time, expanding your business and your chance at higher amounts of deals.
INVESTING KNOWLEDGE (FOR FREE!)
As you continue to work alongside investors, you’ll get a chance to understand the process yourself at a more intimate level. Investing is something anyone can learn, but to really know the ins and outs of how to properly manage your finances in order to build generational wealth, now that comes with a bit of time of experience—both can be offered to you when working heavily with experienced real estate investors.
HOW TO HELP AN INVESTOR WITH FINANCING
As a real estate agent, your typical client is probably taking out a FHA Loan or a conventional mortgage. Beyond those two types of lending, an agent probably hasn’t concerned themselves with the tens of ways to finance a property. By becoming aware of the other strategic ways of financing, an agent can heavily benefit an investor in their home buying process.
CONVENTIONAL RESIDENTIAL MORTGAGES
A conventional mortgage is a best case scenario for an investor, due to the lowest interest rates and longest terms; however, that typically isn’t always the option given. Investors are limited in the amount of conventional mortgages they can take out, varying from around four to ten, depending on the bank and borrower. Due to this fact, investors must seek out other ways in which to fund their real estate projects.
FHA LOANS
If an investor is newer to the investing scheme and looking to reside in a property they are investing in, a FHA loan is a great way to jump in. A property such as a four or triplex can be purchased for only 3.5% down. An investor can only have one FHA loan at a time, although, so this strategy isn’t meant for various investments. It definitely is a great option in order to start wealth appreciation and cash flow.
PORTFOLIO LOANS
These loans are offered by more smaller, community banks; and are typically more flexible in their rules. They can customize a loan program specifically for the individual (or investor, in this case), and do not have to abide by the exact laws of Fannie Mae or Freddie Mac. Reaching out to these lenders can be just as simple, and they range in their loan amounts in the similar manner as any other loan from the bigger bank.
COMMERICIAL LOANS
These type of loans are designed for properties with more than four units, either commercial or residential—they are mortized for 25 years maximum, including a balloon payment the follows in the next 5 to 6 years. A commercial lender shows similar flexibility when it comes to the structuring and terms of the loan offered. Credit unions and bank can extend commercial loans, as well as smaller banks, so the options are wide for commercial lending.
EQUITY PARTNERSHIPS
Attracting a partnership for an investor can be a very plausible way to obtain funds for an investment, and can look different in a few ways. Funding can be split and paid in cash; one individual supplies the finances, while the other manages the investment; one individual puts down the down payment, while the other handles the mortgage; and both partners supply the down payment, but only one individual handles the mortgage.
CREATING OFFERS FOR AN INVESTOR
Offers in real estate can be competitive, and dealing with a number of offers put in by one investor can be difficult; an agent does not want to waste their time, not to mention injure their credibility. A key element in navigating how to put in offers from investors is to have clear conversation about what they’re looking for, and what you’re willing to provide.
Investors can generate more revenue for an agent, simply by they amount of effort and finances they’re willing to put into multiple properties. Spending slightly more time with helping an investor can be worthwhile, but only if your relationship gives way to a higher number of deals that close.
Due to investors strategy in real estate, they typically have a streamlined process when it comes to putting in an offer. They understand the timeline for when to put in an offer, when the house is expected to close, all inspection deals, etc. They also can put in offers online, as technology has made this process easier than ever. As an agent, doing business with an experienced investor who both has a systematic process and is filing online, can make an agent’s work more systematic itself, all the while increasing their income through a higher number of offers and subsequent deals made.
SELLING ON BEHALF OF AN INVESTOR
Because of the seasoned knowledge an investor brings to the table, selling for one can appear easier than selling for an average homeowner. There are a few tips to remember when dealing with this process:
BE STRAIGHTFORWARD
Be upfront with the value of a property, including it’s before and after-repair value. Inform your investor of what a property will realistically go for in the current market; by exaggerating prices in order to gain an investor for a client, you could lose business or trust with them and their network.
BE CONSCIOUS OF YOUR TIMELINE
Investors typically prioritize the efficiency of the process when acquiring new property. Holding costs can quickly eat away at profits, and a house sitting on the market is not desirable for either a seller or a buyer. Working quickly will be your best strategy in engaging in business practices with a seasoned investor.
UNDERSTAND A PROPERTY'S WORTH
While a property’s worth can be subjective, it is critical for an agent and investor to get on the same page. Sharing your knowledge on the market, or area of a property, or other outlying characteritistics that can shape property value, will ultimate help gain a stronger relationship between you and your investor. Providing factual data on the property will also greatly help in getting an investor to understand your position on said value of a home.
