Working with investors is probably the single greatest improvement I made in my real estate business. It not only made earning commissions easier for me, it opened up doors for creating massive wealth and income that produced profits far exceeding what I was previously making.
Real estate agents are inherently driven to succeed and are sincere in their desire to help. The challenge is that they often don’t know how. For the most part, they’re trained by brokerage companies with material focused on the owner-occupant, not the investor.
So, real estate agents who don’t invest themselves don’t really understand the rules of engagement for investors. But agents who don’t work with investors are leaving a substantial amount of money on the table. Although the vast majority of them compete for a few really good listings, investor-agents are cashing commission checks on a regular basis by working with investors with little to no competition. As a result they also get their investors’ owner-occupant business as well, again, with minimal competition.
I can’t imagine a better time than now to learn how to do this. We know wealth is going to change hands as it does in any economic downturn. Much of it will be in real estate, and most of that will go into the hands of investors. So, here are the seven basic benefits that I gained by working with investors.
1. Build a funnel of clients who wait in line to work with you
Typically, real estate agents are at a loss as to how they should work with investors and if they even should do so at all. The rules of engagement for real estate investing are completely different than those for working with owner-occupants.
Since most agents don’t understand the rules of engagement for working with investors, they, by default, use the only rules of engagement they know, which are those for working with owner-occupants. As a result, the relationship between investors and agents is strained and unfruitful. So, here are a few rules of engagement for working with investors.
- Determine where the end-user owners (avatar), who will buy the newly remodeled house from the flipper, are buying now.
- Always get agreement on you receiving the listing when the flipper is ready to sell the remodeled property.
- Aggressively market your investors’ newly remodeled listings so you can get the end-user (avatar) buy side, too. In fact, the avatar may need to sell their existing home before buying this one, and that way, you get another listing. This could result in up to four commissions.
- Make sure you focus on areas that are generally between one-third and two-thirds rentership. Exceptions are areas near hospitals, universities, shopping, transportation, military bases, etc. These areas are likely as high as 80-plus rentership, as they should be. These are great areas in which to own rentals.
- Always earn referral fees from property management companies when you refer your client to them to manage your client’s rentals. Better yet, manage them with your own team or company! This is a huge source of additional contact information as well as income.
For both types of investors:
- Start with data from public data sources like census and planning commissions to determine the housing statistics for the area. You don’t want to try to flip a home in a rental area and vice versa.
- Use targeted direct response marketing to attract the right investors and repel the rest.
- Always screen prospective investors before going any further. Interview prospects to determine readiness, willingness, ability, timing and motivation.
- Always get prospects under an agency agreement before doing any work.
Once investors learn that you know these rules of engagement, the word will spread. Your reputation will precede you, and you will spend virtually nothing on marketing to attract new clients. They will find you.
2. Foster relationships one time that pay you multiple times
This is one of the greatest benefits of working with investors. With owner-occupants, you work very hard to just to get a client, and then you earn only one commission. When they sign the settlement sheet at the closing table, they want to get the keys to the house, unload the truck and jump in the pool. You are now a distant memory.
However, when you work with investors, and they sign the settlement sheet at the closing table, the very next thing they want to do is have you set up a search to find their next investment property.
Unlike working with owner-occupants, you don’t need 200-300 investors to make a living. You can do just fine with six active investors. I had an average of 30 at one time and a total of more than 170.
The bottom line is that investors typically buy anywhere from one to several dozen properties a year. The average for my investors is about six. During the height of the recession, I was doing over 100 deals a year with no assistants and no admin help. And that was part time.
3. Control your own schedule, and set your own terms
By following the correct rules of engagement for working with investors, you control your own schedule, and your investors work with you on your terms. You give them a choice of days and times that you decide. As a result, you’re in control, and they still have a choice.
Unlike working with owner-occupants, the investors do much of the legwork. You are more of a guide. You don’t get involved until they’ve already proven that a particular property is worth everyone’s time, including yours.
This process is the difference between the shotgun approach to investing and the high-percentage shot. It works like a charm. Your clients are more successful, and so are you.
4. Operate your business without having to compete with other agents
Every agent wants the million-dollar listings. Most of them work their entire lives and maybe get one if they’re lucky. They spend an extraordinary amount of time, energy and money competing with every other agent in town for the few good listings that are out there. You, on the other hand, wisely choose to work with investors with little or no competition.
Furthermore, investors also need to buy and sell their own homes, and so do some of their tenants. They, of course, call you when that time comes. Therefore, you don’t have to spend time and energy getting those owner-occupant deals. Instead, they came to you.
You also don’t have to compete with other agents for this business. Statistically, the same percentage of investors live in million-dollar homes as the population at large.
5. Develop an additional 6-figure system that provides income in any economy
The possibilities are almost limitless here. It all starts with you using your license to serve your fellow investors. For example, use your license to work with flippers. You earn a commission when they buy the property. You earn a commission when they sell the property. And you may even earn a commission if you find the buyer for their property.
This essentially could give you three commissions from one client and one property. Let’s say they bought the house for $100,000. Then after they remodeled, they sold it for $200,000. Assuming 3 percent commission per side (listing side and selling side), you would earn $3,000 ($100,000 x 3 percent) on the first transaction as the selling agent, $6,000 on the second transaction as the listing agent ($200,000 x 3 percent) and possibly $6,000 again on the second transaction if you are also the selling agent who brought the buyer. That’s a possible $15,000 in your pocket from one investor and one property. This is a very average deal.
Use your license to work with rental investors. Rental investors, like me, typically grow from buying small rentals to buying larger buildings costing more money and therefore earning you larger commissions.
Moreover, when you work with rental investors, at some point, they will require property management. And you’re just the person to provide it! Assume they had 10 units with an average rent of $1,000, and you charged 10 percent. You could earn $1,000 residual income per month for coordinating rent collection and maintenance calls — maybe five to 10 hours per month.
You could also earn a leasing fee equal to one month’s rent every time you fill a vacancy. Assume that’s one per month (turnover rates are actually higher). Now you’re up to $2,000 per month. That’s only 10 units. Imagine if you had 100 units. Get the picture?
You get far more referrals from investors to other investors and owner-occupants than you ever will from owner-occupants alone. When an owner-occupant signs the settlement sheet, they only want to get the key to their new house. Now, imagine your investor after closing.
Later that day, that investor will be hanging around with his neighbors, co-workers or family members and proudly showcasing his latest exploit. They invariably will ask him how he’s doing all of this, and he will invariably say, “Oh, I have this awesome investor-agent who knows how to help me get the best deals.” Can you see now why I always got so many referrals from my investors — without me even asking?
As a result of working with investors, you will, by default, get their owner-occupant business and that of their tenants who are looking to buy their own homes. If you don’t want to be a traditional agent (and I didn’t either), you can refer these deals to traditional agents and earn a 25 percent referral fee for doing so.
Before long, you will find yourself needing to build a team around yourself in order to keep growing and profiting.
6. Build your own brokerage business for a bigger income stream
Assuming you have made the wise decision to implement what is described above, you may now be ready to go from linear growth to exponential growth. It may now be time to create your own brokerage business.
The details of this endeavor are well beyond the scope of this article. However, just imagine if you had five, 10 or 50 agents doing what I described above, and you as the owner of this new brokerage company got a piece of every pie that came through your agents’ respective doors.
I grew my brokerage company, Win Realty Advisors, from eight agents at launch to 50 agents in less than three years. This all occurred during the Great Recession when all other brokerage companies were shrinking. I focused on investors while all others who were focusing on owner-occupants were going out of business. I actually grew a pretty profitable owner-occupant business as a result.
7. Grow and create a property management business
Starting your own property management business is probably the next logical step. Your investors will want it, and you can provide it. Start small, and develop the skills and systems necessary to create and grow this rock-solid profit producer.
I started with my own units. When I had systems and people in place, I added about 40 of my clients’ units. When I mastered the business of managing other people’s properties at that level, I started to take referrals. In less than three years, I grew to almost 700 units.
I spent almost no money on advertising. It was virtually all done by word-of-mouth. This is a very stable business because your income comes off the top of your clients’ income. You can earn income from charging the vendors you hire to serve your clients a fee. You get to keep late fees. You get to keep application fees. I haven’t even described what happens when you start marketing. Suffice to say, you can grow quite rapidly when you grow properly.
In conclusion, it’s not an “or” world — it’s an “and” world. Investors should get their real estate license and serve other investors, thereby opening up a very relevant and easy-to-implement line of business that complements and leverages their already existing investing activities.
I was able to leverage my license as an income-producing asset just like a rental property and run it like a business, because I saw opportunity, and I seized it. I walked the talk. I produced results because I’m an investor, and I leverage not just my investing activities but my knowledge and experience to serve other investors. I’ve been amply rewarded for this, and so can you.
Gary Wilson is the founder and president of Real Estate With Gary Wilson, and he has helped agents learn to work better with investors. Connect with him on LinkedIn.
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