Real estate investing has skyrocketed in the last decade, in large part due to the steady rise in value of real estate across the country. In many ways, the fix and flip industry embodies the American dream. Anyone who has $20,000-$40,000 in their bank account can make an investment, thanks to the availability of fast funding options like hard money loans. For those who can’t, all they need is to find a few partners, pool their collateral, and work together until they have made enough cash to buy a house on their own. That shouldn’t take too long, either: even first-time investors can make tens or hundreds of thousands in profit on a single flip.
Despite the increasing demand for smart real estate agents to help investors find and sell properties fast, not many agents take full advantage of the enormous profits available to all who take part in the fix and flip industry. For the agent who does, getting involved with investors can change the game completely and launch them into the big time.
Benefits of Working With Investors
Working with real estate investors can net many benefits for agents, but here are three significant cash flow drivers that are realized nearly immediately.
1: Steady flow of repeat business
Even new investors can flip multiple properties in a year. With experience, investors flip many houses simultaneously and on average, turnaround a project in just 9-10 months.
This means you can maintain fewer relationships while generating massive amounts of business: if a professional investor flips 20 properties a year, you only need five good contacts to make a commission on 100 properties and as many as 200 transactions!
2: Quicker deals
Investors generally operate without the emotion of traditional home buyers. It’s easier for investors to commit to a fix and flip property that they may only own for six months than it is for a future homeowner to commit to a house that will be theirs for a lifetime. As long as a property has profitability potential, investors will quickly snatch it up.
Many new investors say the hardest part is finding the deals, so if you can use your resources to solve that need, investors will jump at the opportunity and you’ve just made a new best friend. Plus, once a buyer is interested, you won’t have to go through the lengthy process of waiting for a mortgage. Hard money lenders geared towards investors can fund and close deals in a two weeks or less.
So working with investors means that when you find a good investment property, you could close the deal less than two weeks later.
3: Bookend sales
If the investor likes you (and if you follow the guidelines laid out in this article, they will), they will be more than happy to have you list their renovated property once the rehab is done. Not only will you be an expert on the house since you were there from start to finish, but the investor will already know and trust you.
For a smart and hardworking agent, every success will pay twice.
Finding Investor Clients
Once you decide to take advantage of the benefits of taking an active role in the investment niche, it’s time to actually build a stable of investor clients. One of the easiest ways to meet people is to go to different networking events for real estate professionals, or REIAs. If you are just getting involved with the industry, it might be a good idea to target new investors. Expert investors tend to have people they work with consistently and are fiercely loyal to. By getting to know investors who are just starting out, you have the opportunity to develop a strong relationship with them at the foundation. Earn their trust early, and they will stick with you when they are big shot investors flipping dozens of properties a year.
Another option is to research the construction projects going on in your area to find out who the players are. This is a good way to find investors working in your sweet spot: if you are an expert at selling two-bedroom suburban homes, you can investigate the project managers working on those and target your marketing efforts specifically to them.
Relationship building through communication
After you’ve located potential clients, you need to convince them to work with you. The most straightforward step you can take is calling and e-mailing your contacts to discuss what kind of deals they are looking for and start hunting for them.
Another more general option is to consider putting out some content on guest blogs. If you write pieces giving advice to investors who are looking to work with real estate agents (for example, a piece on how to choose a real estate agent for your fix and flip project or on the benefits of working with an agent as a real estate investor), then your desired audience will come naturally. If you list your contact information in the post, you are getting free publicity that will lead investors who are looking for an agent directly to you.
If you have a knack for layout and design, you can also put together a small portfolio of potential investment listings that you have taken on and send it out to your contact list. Or, if you are willing to commit to consistent effort, you can start a newsletter and periodically send out lists of local properties for sale that would make a profitable flip.
Once you convince some real estate investors to take you on, don’t let the relationship end with one deal. Get to know them personally, keep in touch, and ask them about their project throughout the process to see if you can offer your assistance.
Working With Investors
The best way to score repeat investor business is to become their go-to resource.
Have a team behind you
Find a reputable hard money lender, appraiser, contractor, lawyer, etc. to recommend to investors as they get started. One of the hardest things to do as a new investor is find good people to help get the project done. If you use your contacts in real estate to find and vet real estate professionals that you can suggest to investors, they will be grateful and reward you with their loyalty.
Be the expert
Use your expert knowledge of the neighborhood to provide valuable insights not found on paper. Investors can look at numbers and previous sales to figure out which areas are in demand, but you have firsthand experience. Amplify this knowledge by learning the ins and outs of house flipping to understand what properties make good investments.
Get to know your investor
What kind of deals does your investor want? Do they want a single family flip or multi-family rental? Do they work in suburban neighborhoods or urban cities? Would they rather flip a property with minimal rehab or are they interested in total gut renovation?
Target the houses they like and help them find investments that are specific to their skills and experience.
Investigate properties first
Before you present a listing to an investor, make sure that the price is good, the foundation is sound, and the area is up and coming. You have invaluable knowledge because of your past experience in buying and selling, so use that to figure out whether or not the house will sell once it’s fixed up. Let your clients know that you’ll never suggest poor investments in the hope of making a quick commission because building a long-term relationship with the investor is paramount to your success in the industry.
Be loyal and transparent
Good investors – the ones you want to work with – are smart. Don’t mislead investors about a property’s value or send a potential investment out to a dozen of your clients. Work with your investors, don’t use them, and they will return the favor.
Building a System
Once you have established yourself as a real estate agent for investors, it’s time for the big leagues. With investors, you can sell significantly more properties than you could working with primary residences. People don’t move that often, but one investor could flip dozens of houses every year! However, the fact that investors buy and sell so often means that you need to be on the hunt for a consistent stream of inventory that you can feed to your clients. While finding each property yourself may work at first, developing a system will be key to success once your business takes off.
One option is to work with foreclosure and HUD specialists to find distressed properties that you can funnel to your investors. Keep tabs on your clients’ projects and have new properties ready for them as they are finishing up. Get them to rely on you for their next deal; if you are constantly offering them good investment properties that cater to their expertise, they will never want to hire any other agent to help them buy and sell properties.
Another option is to bring in one or more partner agents to help you. Instead of managing both sides of the investment – providing the distressed property and selling the fixed listing – you can have a partner focus on one end while you focus on the other. Depending on the volume of flips done by your clientele, you can bring in as many agents as you need to help you out. That way, you can maintain all of your relationships and give each of your clients the time and energy they deserve.
Investors are smart, they’re educated, and they’re fast. Unlike with homeowners, where a real estate agent is a one-time necessity, for investors a good agent is an invaluable asset and they will ask you for help time and time again. If you are ready to open up new business channels by working with investors, start searching for investors to build long-term relationships with and seeking distressed properties that they won’t be able to resist.