Have you ever been tempted to work with real estate investors who claim to have unlimited cash to purchase homes in any conditions?
Before you dedicate your time to an investor, please read this article to better understand how they operate and which ones to avoid.
How do I know?
I’ve been a real estate investor for 15 years. I attended boot-camps and investor meetings. I flipped houses and still own rental properties.
So, let me give you an insight into the minds and types of RE investors: the wholesaler, the house flipper, and the landlord.
Mindset: Get rich quickly without money
Opportunity for Agents: None for finding deals, possibly you can help them sell a property to a rehabber or landlord.
This type of investor is trying to find good deals and immediately “re-sell” them to another investor. Essentially, they put the property in contract and assign the contract to a buyer.
Most investors start as wholesalers, because they don’t need any money and dream of quick cash with little work.
There are many wannabe’s in this category, people who watched a late-night infomercial or attended a free seminar of how to get rich in real estate.
Don’t waste your time helping them find deals. Many wholesalers simply practice real estate without a license and could easily get into trouble with the Division.
There are a few good ones, though. Get on their mailing list as they may find great deals that work for your rehabber clients.
Note: They are FSBO’s, so make sure they pay your commission.
The House Flipper
Mindset: Earn a big profit doing what you love (rehabbing homes)
Opportunity for Agents: repeat business – you earn commissions when they buy, when they list the flip, multiple times a year.
This investor loves to work on houses. They watch HGTV and other home remodeling shows. They are looking for properties that need updating and are ready to put in the work.
House flippers need your help finding “good” deals – distressed properties they can buy cheap and sell for a profit after rehab.
Representing serious rehabbers can be very lucrative for agents. You will not only earn a (small) commission when they buy, but also when you list their flip.
Before you start working with a rehabber, make sure they have access to cash. Connect them with rehab lenders who finance both purchase and renovation.
House flippers want to get top dollar when they sell. Give them solid advice on home sales data, what buyers are looking for, and exact valuations.
Some Realtors even supervise the rehab or operate as the eyes and ears of out-of-town investors. If you find a serious house flipper you create a very profitable, consistent stream of income for yourself.
Mindset: Create passive income to retire in the future
Opportunity for Agents: repeat business helping the landlord accumulate a rental portfolio, and possibly sell it in the future to transition to commercial property.
The goal of the buy-and-hold investor is to generate cash flow from rental income and build long term wealth. They probably read “Rich Dad Poor Dad” and want to create passive income to get out of the rat race.
This type of investor usually has financial resources. Some even pay cash to park their money in real estate.
New landlords look for advice on how much rent to charge, how to pre-qualify tenants, and how to manage their properties.
An experienced investor understands the value you add as a real estate agent. Watch out for newbie investors who just attended a “get rich in real estate boot camp”. They believe they know everything and that you are not worth your commission.
Tip: Don’t waste time with self-proclaimed wholesalers who don’t have cash, don’t know how to find deals, and just dream of making a quick buck.