You’ve got your market niche, right? You know how to work with home buyers and sellers. You have certain types of properties that are your specialty.
But how about real estate investors? Frankly, that’s a whole new ball game, and if you want to play, it’s going to require a different mindset altogether, a totally new point of view. We could write a book on this topic, but we won’t, at least not right now! For starters, here are seven invaluable tips for finding and working with serious investors.
- Learn to think and talk like an investor. If you’re used to talking to buyers about the nice neighborhood, the great school system, or the local doggy park, it’s time to shift gears. The investor is in business to make money. “This house is going to generate at least $250 a month in positive cash flow.” Give them reasons why the house is a bargain. “This is an estate sale and it’s been on the market for nearly a year.” Or, “There’s some water damage in the basement, but it’s an easy fix.”
- Understand why investors are important to you. Serious real estate investors buy A LOT of properties. Having just two or three savvy investors in your portfolio can make your financial future. They also sell a lot of properties, so if you build a loyal following, you will benefit from both ends of the deal. As a bonus, they generally are not emotionally involved with their properties, unlike the average homeowner. They are strictly in it for the deal.
- Most investors specialize. They have a certain kind of property they are looking for. It could be anything from single-family fixer uppers to apartment buildings. Maybe they want to fix it and flip it, in which case you’ll benefit from the quick turnover. Or they may have a long term wealth building strategy, meaning they will buy and hold their properties for a longer period of time. Learn each investor’s specialty so you can alert them whenever a property with potential comes on the market.
- Understand dollars and cents. Here’s your point of view: You add up the mortgage payments, taxes, and insurance. Subtract that monthly amount from the potential rental income, and you’re seeing great cash flow for your investor. But wait–there’s more! Here’s your investor’s point of view: he will probably pay for property management fees, yard maintenance fees, repairs on the property. And what if it sits vacant for any length of time? All of a sudden, great cash flow is about enough to pay for your daily latte. Not such a good deal, after all.
- Ask the right questions. Before you start working with a new investor, find out his goals and motivation. Get rich quick? Passive income? Long term wealth for retirement? What does he know about financing? How much cash does he have available? Does he need your advice on financing as well as on the properties themselves? What has been his track record as an investor thus far? If he thinks you’re being too nosy or intrusive, it’s time to raise the red flag warning.
- Ask the most important question. “What do you expect from me?” It could be anything from simply alerting her when an attractive property comes on the market to daily contact throughout the deal, to financing assistance and much more. Start with the end in mind, so you won’t be surprised by what you are asked to do.
- Beware of the newbies. A brand new investor may offer a great opportunity. Or not. The truth is, they can take up a lot of your time and they might never pull the trigger on a deal. That’s why the probing questions we outlined above are so important. Once those questions have been asked and answered, it’s up to you to decide if that particular investor is worth your time.
Investors have a whole different mindset from the average home buyer. If you want to work with investors and do it profitably, it’s important that you learn the investor’s mindset, language, and motivation. Do that, and your success is just the next phone call away.