Traits of an Investor-Friendly Agent
November 9, 2018
Agents are a valuable resource for investors. They can provide investors with market information, identify profitable deals and help investors make quick decisions.
Shifting to appeal to the mindset of investors means agents should consider:
- How rents are trending in relation to the home prices, which helps investors track cash flow, cap rate, cash on cash returns, and rent-to-value ratio statistics.
- Interest rates and their effect on cash flow.
- Volatility of home prices, which helps decide when is good to buy, sell or continue holding properties.
- Neighborhoods where most fixer uppers are selling, which helps fix-n-flip investors identify opportune locations.
- Areas where houses are being torn down and replaced with new homes, which indicates increase or decrease in future values of other homes in that neighborhood.
- Where most new home construction is happening, which indicates strength of the housing market.
- Where the new apartment buildings are being built, indicating demand for renters.
- Home appreciation trends.
- Tenant-landlord law changes by cities and counties.
These are some of the trends that investors track as part of their due diligence process. Investor-friendly agents stay informed about such trends and use it to help their clients make well-educated decisions.
An investor's main focus is the profitability of a property. Because of this, the information and approach they need and expect from agents is very different from that of standard home buyers. Here are the most important traits of an investor-friendly agent:
Understanding an investor's mindset is the most important trait that an investor-friendly agent possesses. Investors buy properties to make money and build wealth. Unlike standard home buyers, investors are not emotional decision makers. They need to be given data to justify the decisions they make. This means they way that investor-friendly agents serve investors is drastically different than how they serve standard home buyers. Investor-friendly agents don’t focus on the features of the property. Instead they focus of the profitably and the wealth-building goals of their investor clients.
While there are several courses and workshops available for real estate investors, there are hardly any real estate investment courses specifically designed for agents. Investor-friendly agents make efforts to find investor-focused education. They read real estate investing blogs written by experienced investors, they become members of real estate investment clubs and groups, participate in meetups and conferences/ They find investors and speak with them to learn from their experiences to understand their pain points.
All properties that agents find for standard home buyers come from the MLS. But for investors, an investor-friendly agent goes beyond the MLS. For buy and hold investors, the MLS is a good source; but for fix-n-flip investors, agents are more likely to find properties that are off-market. Investor-friendly agents use their networks to help their investor clients find deals. For rental properties, they create systems to monitor the MLS and have a good eye for spotting deals.
Investor-friendly agents perform property analysis and due diligence on properties using spreadsheets, online calculators and applications. They know how to spot diamonds in the rough. This analysis contains key metrics such as cash flow, cash on cash returns, and possibly appreciation rates and cash out predictions.
Investors need more information on a property than property price, average sale price and days on the market. To make profitable decisions, investors also need to know the likelihood a property will rent immediately, vacancy rates, cash flow per month, appreciation expected down the road etc. Investor-friendly agents are well versed in this information.
Investors don’t have any boundaries on where they buy properties. Agents usually have expertise within their local region, so how can they serve investors globally? Investor-friendly agents are well connected with other investor-friendly agents and investors in different regions, so that use that network to help their investor clients. They also use tools to search and analyze properties nationwide.
When selling a property, an investor-friendly listing agent gathers information such as current and market rents, the property’s income and expenses, maintenance costs, capitalized improvements, taxes etc. and prepares a comprehensive report that helps potential buyers do cash flow analysis and make an informed decision. This applies mostly to multi-family homes, but can also apply to a single family residence or a townhouse when the buyer is an investor.
Investor-friendly agents network with investors at real estate investment networking events and meetups, become members of real estate investment clubs such as REIA and REAPS, and attend real estate investment focused conferences and trade shows. That is where they market themselves and find leads. They also promote themselves as specializing in investment properties in their advertisements and websites.
Investor-friendly agents build strong relationships with property managers and refer them to their investor clients. They may be property managers themselves which they provide as a value-added service. They offer incentives (for example, lower property management fees, low flat rates when placing new tenants) to maintain long-term strategic relationship with their clients.
Investor-friendly agents qualify lenders who understand how to work with investors, Investors may have unique situations such as complex tax returns, LLCs, and multiple property ownership. The underwriting process could, therefore, take longer compared to a loan for a standard buyer. The agent also verifies if the lender can close fast and deal with situations such as delayed financing, cash out financing, seller financing, and multi-family properties.
Investors may be looking at multiple properties at once and may ask that the agent submit offers for them all. Agents who are used to working with standard home buyers may be intimidated by this request. Agents can help investors submit multiple offers as long as they understand the rules and laws. For example, the investor must prove they have sufficient funds available for all the offers they are submitting. Investor-friendly agents have the knowledge of creative financing such as private mortgages, portfolio loans, hard money loans, and dealing with short sale sellers and with the banks for Bank-owned REO properties. They use this knowledge to compete with standard home buyers who use conventional loans.
As you can see, investor-friendly agents conduct business differently and use a different set of skills when working with investors. It is important for an investor to work with someone who understands their needs and can help them achieve their long-term goals. Investors are looking for agents who are experts at handling investment properties. Agents who can prove their expertise will win investor business time and again.
Get our Secrets of Working with Residential Real Estate Investors eBook.