What makes residential real estate investors different from ordinary home buyers?
September 14, 2018
When real estate agents first start to work with residential real estate investors, they soon realize that they are entirely different from the standard home buyer that they’re used to.
Investors think differently. Act differently. They are motivated differently from a typical buyer.
These differences make them some of the best clients you have -- but only if you learn to meet their needs by becoming an investor-friendly agent.
Investor-friendly agents create significant value and develop deep business relationships with investor clients. These relationships are mutually beneficial and can last for years or even decades.
Let's look at the typical residential real estate investor and explore how they differ from a regular home buyer.
How are investors different?
Most successful agents are very familiar with the standard home buyer. They know how to interact with them, what matters most, and how to market to them.
But when it comes to working with real estate investors, agents sometimes find it challenging to figure out what matters most.
There are six points that make investors different than standard home buyers.
Investors are frequent buyers.
The National Association of Realtors® put out a report for 2017 that showed homeowners are staying in their homes for an average of 12 years.
Typical agents depend upon standard buyers as their primary source of income. If a typical buyer only buys every twelve years, agents hoping for repeat business need to have a vast network of clients and prospects which will need to continually be marketed to for many years. A significant amount of time and money will need to be invested to maintain a list of repeat home buyers. This can be challenging in times of economic uncertainty.
Investors, on the other hand, tend to overlook current market conditions and buy several homes annually. A new investor may start out purchasing one to two homes per year. Once they start realizing income from rental properties or flipping, they tend to use their gains to buy even more homes. The process accelerates and frequency increases.
Investors may buy more homes at lower price points
While the standard home buyer only buys a house once every 12 years, the purchase price of this emotional decision may be very high.
Because many investors look for properties that can produce high appreciation or positive cash flow, this can mean smaller commissions for the agent on each property purchased. Investors seek out homes where the rental rate can support the purchase price.
However, since investors purchase several properties annually, the combined cost is usually much higher than a high-priced house purchased by a standard home buyer. And it is often the case that the process runs far more smoothly for each property.
Investors close deals faster.
For most standard home buyers, a home is an emotional attachment. It is where they will live and raise a family for years. Unless there is a motivating factor such as a move or personal urgency, many standard home buyers take a long time to shop around until they locate the perfect home.
As most agents know, the wishy-washy home buyer saps time, money, and energy by having to continually market to them as well as taking the time to show them various properties.
Unlike the standard home buyer, investors know what they want and are ready to move. Agents that work with investors realize a better return on their time and money investment for each property.
Investors are more flexible about location.
The location of a home is critical to standard home buyers. They base their decision on how close the house is to a particular school district, time it takes to commute to work, and proximity to other amenities.
Investors couldn't care less where a house is located, provided that it meets all of their investment criteria. Even if a property is located far away, a property manager can be hired to deal with the day-to-day maintenance and operations.
Investors have different evaluation criteria.
Such things as school and crime ratings, grocery stores, and commute times are all taken into consideration by standard home buyer. These factors can sometimes limit the attractiveness of an offer made by a home buyer.
Investors will take all of the above into consideration, but they're also knowledgeable about market trends, appreciated rates, zoning laws, and even renter migrations. They need to stay cashflow-positive and they know how to do it.
When purchasing a home -- or even beginning their search -- investors crave detailed insights into cashflow and ROI.
Investors are more likely to pay cash for houses.
Standard buyers generally have fixed budgets and cannot go over their lender’s approved loan amount.
But a real estate investor will often come in with all-cash. This makes their offer much more attractive to sellers, streamlining the process and offering a greater chance of success.
Investors are easier to reach with marketing
The average real estate agent’s marketing plan can be described as the “shotgun approach” due to the wide demographic they’re trying to attract. This can add up quickly with regards to time and money invested in marketing.
Real estate agents must continually market themselves via multiple marketing channels such as direct mail and paid ads (online and off), and be continuously building relationships with everyone they meet.
Investors are much easier to market to. They tend to congregate in predictable places such as investment and country clubs, social media groups, and even conferences. It’s much easier for real estate agents to find, locate, and target investors vs. spending time, money, and energy trying to find a standard home buyer who may not have their mind made up just yet.
The RealPeek investment platform helps agents become more investor-friendly
The RealPeek investment platform offers both agents and their investor clients powerful search tools that will enable them to find excellent investment properties quickly and efficiently.
Investors often spend many hours poring over websites and complicated Excel spreadsheets to find hidden gems and perform cash flow analysis before purchasing a property. Is the price right for this neighborhood? Will my purchase generate positive ROI?
RealPeek's technology makes it simple to search and filter properties by the factors investors care about. It empowers agents to give investors the data they need. You'll save your investor clients time, help them avoid costly mistakes, and help them choose among multiple homes that fit their investment criteria.
The RealPeek investment platform helps agents become more investor-friendly.
Become essential to your most valuable clients.