Working with clients who are real estate investors is much different than working with traditional homebuyers — but it can really pay off. The average American buys and sells around just five homes in their lifetime. An investor could buy and sell more homes than that in just one year.
What does this mean? It means more commission without the headache and effort of having to find a new client. Here, I’ll discuss the pros of working with real estate investors and some surefire ways to get them as clients.
1. Recurring business
As of 2018, most U.S. homeowners stay in their home for a median of 13 years before moving on to a new one, according to the National Association of Realtors (NAR). This means it will likely be years before a typical homebuyer uses an agent’s services again. A client will likely work with the same agent a maximum of three times throughout their lifetime — and that’s an optimistic estimate that doesn’t take into account an out-of-state move.
Therefore, as an agent, a large portion of your time is spent generating new business through referrals and marketing. Many agents spend thousands per year buying leads and consistently seeking out new clients to ensure a steady stream of sales. The recurring business of an investor will reduce the money, time and effort you have to spend finding leads.
Agents who work with investors have recurring clients and, therefore, recurring commission. This may translate to around $6,500 on average for each $250,000 transaction. If you have a client who does just three deals a year — a conservative estimate for a full-time investor — this could mean nearly $20,000 in commissions off just one client. You can see how this could quickly expand your business as a real estate agent.
2. Less emotion involved
Generally, people who are buying a home to live in tend to be more emotional about the purchase and take more time to decide. For investors, though, it’s a more pragmatic decision — for them, it’s all about the ROI of their investment.
If you find a good deal, they will likely invest in it, few questions asked. Rather than wasting time with indecisive homebuyers, you can be more efficient by working with investors — as long as you have a good understanding of what they’re looking for and have a great pulse on the market.
Real estate investors are experienced, so they don’t need a lot of hand-holding in the buying or selling process. For example, investors already understand things such as title insurance and the closing costs of selling a home (typically 8-10 percent of the final sale price), so agents don’t have to spend a lot of time educating their clients.
If you have the right deal and the investor decides to make a move, your job is mostly done. On the other hand, you may spend hours educating homebuyers and walking them through the entire process — and keeping in tune with their emotions.
3. Industry connections
Both agents and investors can add value to a relationship, making it a win-win by both accounts. Both you and your investor clients come with your own networks and connections, and can make referrals to one another accordingly.
For example, if you’ve sold a lot of fixer-uppers, you may be able to refer your investor client to a solid, dependable contractor. Or, an investor may recommend your services to their wide network of fellow investors.
The more you work with real estate investors, the more you could grow your client circle — both of investors and service providers alike — and the more value you can add to your clients. The value is reciprocal when you work with investor clients, unlike when working with a typical homebuyer or seller in which the transaction is one-sided.
4. Free investing advice
If you’re one of the many agents who plan on becoming an investor yourself, working with investor clients can teach you about the process.
There’s no better place to learn than from investors themselves. As you help them close more deals, you’ll keep your finger on the pulse of which properties are desirable as an investment, and you’ll be more prepared to pull the trigger when you’re ready to become an investor yourself. Learn from your clients’ successes (and failures)!
How to land investor clients
Now that we’ve won you over on working with investors to increase your business, here are a few tips to land more investors as clients.
Start working with newer investors
It’s unlikely that a seasoned investor will want to work with an agent who has never had an investor client.
Newer investors may be more willing to take a chance on you, especially if you’re willing to provide a bit of enticement through a one-time discounted commission rate to get your foot in the door. Working with new investors will help you gain experience to eventually earn seasoned investors as clients.
Although investors can teach you more about investing, you need to have some knowledge of the process and what it entails. Investors don’t want to work with an agent who doesn’t know what he or she is doing — in fact, they hire you precisely to take some of the work off their full plate.
You can gain knowledge by attending industry events and seminars or shadowing an agent who has experience working with investors. Best case scenario: Learn from an experienced agent who is planning to retire in the next several years, so they can recommend their clients to you.
We also recommend reading some industry favorites such as The Book on Rental Property Investing by Brandon Turner of BiggerPockets, or Ken McElroy’s The ABCs of Real Estate Investing.
Become an even better negotiator
All real estate agents must be good negotiators, but this is especially important when working with investors.
Investors don’t have emotional attachments to a home. All they care about is the ROI and getting a good deal. And negotiation is essential when it comes to getting that good deal.
To brush up on your negotiation skills, check out Tim Castle’s book, The Art of Negotiation, or Getting to Yes by Roger Fisher, William L. Ury, and Bruce Patton.
Ask questions and know the investor’s sweet spot
A lot of investors know exactly what kind of building they’re looking for. This might be a fixer-upper for under $50,000 or any property that cash flows and is under $150,000.
Most investors have a formula they use, and if the numbers work, they will buy the property without much hesitation. You must understand each investor’s needs so you can find them the best deal.
Know to look off-market
In hot markets, investors’ agents must know how to look off-market to find the best properties (and deals) for investors. They may find these through their ever-growing network, industry events, direct mail or other leads.
Become the go-to agent for real estate investors in your local area, and you could have a steady stream of clients ready to buy — or sell!
Ben Mizes is the CEO of Clever Real Estate in St. Louis, Missouri. Connect with him Facebook or LinkedIn.