As real estate agents, we understand that the number one goal for our investor clients is to generate a return on their investment. The main factor that sets them apart from one another is their tolerance for risk when it comes to real estate investing.
At Tru Realty, we work with our investor clients differently than most brokerages. We understand that it’s important to educate our agents on the different types of real estate investments available. We also make certain that they have a clear understanding of the different risks associated with each type of investment. For example, a fix and flip investor versus a buy and hold investor.
Two common examples of real estate investments are fix/flip and buy/hold. Let’s look at both of them separately.
A buy and hold real estate investment is a conservative buying approach with a greater focus on the long game.
With any type of real estate investing, the first step is always to meet with the client to learn more about their investment goals. Finding out the type of product (single-family, condo, multifamily, etc.) that they are interested in and how it correlates to the type of return they are looking for is something that should be discussed upfront. Even though the client is ready to invest, that doesn’t mean that finding the right investment property will come easy. An important step in this process is to set clear expectations for your investor clients upfront. I recommend that you keep consistent communication with your client that includes updated market trends.
Often times investment properties are not listed on the MLS or LoopNet, so agents will have to rely on their market connections to lead them to the best deal.
This is the time to gather financials, rent roll, tax information, and expenses to confirm that the numbers pencil out. At the same time, you should be having the property inspections and appraisal ordered as well as any surveys that may be needed. If a property manager is being utilized, you will want to make sure that the rent amounts are comparable to market rents in the area.
A fix and flip real estate investment is fast-moving and involves efficient property rehabilitation to get a property back on the market as quickly as possible.
For a fix and flip investment deal, the agent and the investor should evaluate remodel sales comps. You should also do a thorough review of the contractor’s remodel budget to plan for any possible cost overruns or other issues that may arise.
Lastly, most real estate investors say they are not emotionally attached to their deals. I beg to differ.
They may not be emotionally tied to the physical property, but they are emotionally tied to the return on the investment. Sometimes a return means a college education for your client’s child or grandchild, or perhaps even retirement funds are at stake.
In my opinion, real estate investment deals are no different than traditional transactions. As a real estate agent, the best opportunity for success comes when you connect with a client on a genuine level. When you accomplish this very important goal, your chances of success are greatly improved.
Asher Cohen is a licensed Realtor and Director of Sales at Tru Realty. He specializes in residential real estate in the greater Phoenix area. Asher and his team are committed to professional, reliable, and knowledgeable service to all of their clients—from first time home buyers to seasoned investors. He’s experienced in all facets of the market and takes great pride in listening to his clients’ needs to provide the best possible service.