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How to tap into residential real estate investment market of 30 million investors

August 2, 2018

There are over 30 million residential real estate investors in the U.S.

One in every five homes sold are for investment purposes*. The real estate agents are missing out on a big opportunity to work with investors to grow their business in this untapped market. Real estate investors are more sophisticated home buyers who make decisions based on numbers, not emotions. They are frequent home buyers who value (and depend on) working with other real estate professionals to achieve success in building their rental properties portfolio.

Successful investors build a team of professionals that they can rely on, such as construction workers, attorneys, real estate agents, and lenders. The real estate agent is a key player of the team who helps the investor find, buy and sell homes for them. A typical relationship that exists today between an investor and an agent is that of the agent merely being the sales person, and not a strategic partner. What does it mean to be a “strategic partner”? The agent provides information to the investors on current housing market conditions, prices, and trends – the same information that they provide to all non-investor home buyers and sellers. And a typical agent does not provide investment specific information such as rents, cash flow analysis, return on investment etc.

There are several reasons for this:

  • The agents are not educated or trained on working with investors
  • They do not have the experience as an investor, so they cannot speak the language and relate to the investor
  • There are state laws and rules that need to be followed when working with investors. Because of unawareness of the rules, agents are wary of dealing with investors and play it safe. For example, one rule is that agents may not provide financial advice related to investments. But this does not prohibit the agent from providing objective investment related data to the investors such as housing prices, rental prices, cash flow metrics etc. Agents should always consult with their attorneys
  • Investors tend to be more knowledgeable of the housing market than the agent, which may intimidate the agents
  • The agents do not have any technology based tools and services they can offer to the investors
  • Researching homes for investments is very time consuming, since investors are open to greater geography than a standard home buyer

    In other words, the agents are not “investor-friendly”, and in order for them to be, they need resources, tools and education specific to real estate investments. The investors want to get visibility into the housing market in real time and be able to analyze the properties in large volumes efficiently so that they can make fast decisions.  The agent can become a valuable resource to the investor if they can enable their investor clients to address these needs. Namely, they need the right tools, marketing strategies, and education

Tools

  • Mechanisms to monitor properties on a regular basis (daily or hourly) that may be profitable
  • Perform real-time analysis to calculate the performance of the profitable properties
  • Search and analysis need to be performed on a large number (thousands) of properties at once
  • Produce customized reports to investors showing detailed cash flow analysis
  • put together attractive deals to increase chances of getting offers accepted in tight inventory markets
  • Understand the lending requirements of investors as they are different that standard buyer. For example, lenders require higher down payment for investment properties – 25% versus 20% (standard buyers can put down under 20% with mortgage insurance). Do agents know the city laws regarding ADUs (Accessory dwelling units) for renting, renting restrictions such as condominium HOA rules, rental caps etc.? Having such information helps the agent structure attractive offers and increase success of investors. Agents should qualify and work with lenders who are also investor-friendly



*Source: National Association of Realtors®

Marketing Strategies

There are a plethora of tools and services available for agents such as lead generation, CRM, social media marketing, marketing automation and email drip campaign software. What’s common among them is that they are all targeted towards general population. In addition, agents use techniques like cold calling, door knocking, direct mail, and community events. For agents to cater to the real estate investors, the marketing strategies must be changed. Unlike the general population where agents can meet their potential clients at home or at a coffee shop, investors can be found in known predictable places, such as real estate conferences, investment clubs and meetups, and online forums. Finding investors takes a lot of specialized networking and relationship building. Investors are very savvy about the real estate market already, so marketing messages must be personalized to include not only general market statistics but also advanced information on rental price trends, new land developments, city laws on zoning, income trends etc.

 

Education

Real Estate investors invest a lot of their time educating themselves on strategies and techniques of investing, how to find deals, how to build effective teams, how to analyze properties and how to make decisions on exit strategies. Again, there is plethora of information, courses and training available for them. However, for an agent, it is rare to find specialized courses that teach them how to work with investors and perform investment property search and analysis. Therefore, the onus is on the agents to self-educate if they want to work with investors. Here is how an agent can get involved with and acquire such an education and knowledge:

  • Attend meetings and events where investors hang out, such as investment clubs, meetups, and conferences
  • There are clock hour courses available, although very few. Agents should check with their real estate school if they offer any
  • Subscribe on online networking forums, blogs and newsletter. They are designed for investors, but agents can get involved, answer questions and offer advice

 

Summary

The real estate investors have special requirements that the agents have to be aware of in order to work with them. In order to be successful and make their clients successful, the real estate agents must offer them efficient tools and technology to enable investors to search and analyze properties in real time and make fast decisions. They must change their marketing strategies and messaging specific to what attracts the investors and self-educate by networking with investors online and in person.

 

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