5 Things a RE Investor Wants Their Agent to Know (from the Perspective of a RE Investor)
The more value you as a real estate agent bring to your clients, the more they will look to you as a trusted advisor. That translates to a lifelong customer and referral machine for your business. Additionally, RE investors may buy multiple houses every year, meaning they could provide you with more business than any other client.
1. Market Rents
· Know the 1% Rule: It’s important to know what the 1% rule is and how it may not be realistic in today’s housing market. The 1% Rule states that the monthly rent for a property should be 1% or more of the sale price of the property. This is a quick and easy criteria to filter properties between which ones are worth exploring further, and which ones can be ignored. The problem is, the way house prices have increased at a much faster rate than rental rates recently, coupled with increased interest & insurance rates, meeting this rule in the current market is like finding a diamond in the rough. In most cases, the 1% rule can only be met in C & D-class neighborhoods while assuming tenants will pay on time and in full. This could be an issue for you as the agent if the investor demands you find them a property in an A-class neighborhood that meets the 1% rule, but none exist. In this case, it’s important to keep their expectations realistic, or spend more time with realistic clients that are serious about closing on a home.
· Know the average rental range in the area for similar properties. Accurately estimating what a property will rent for (before and after repairs) is vital to the profitability of a deal. The real estate investor won’t expect you to know exactly what a property will rent for, but you should be able to give an estimated range. You can use similar processes to find comparable for a CMA when looking at rentals. Or you can use a simple tool to estimate what a property will rent for: Zillow Rent Estimate.
· The easiest way for a real estate investor to add value to a property is by increasing the number of units or the number of bedrooms, bathrooms, and square footage.
· Does your city allow single-family to multifamily conversions? How strict is your city on permitting? If you don’t know the answer to these questions, it’ll be worth digging into your local zoning laws.
· Read the books and listen to the podcasts your clients listen to and you will be able to speak their language and add even more value to them (stay tuned for our blog on the best RE investor books & podcasts).
· PRO TIP: Know egress window requirements in your state. Knowing your state’s requirements will impress your clients, but more importantly it will be a $5k-7k swing on if one needs to be installed or if the existing window is sufficient. For example, here are the requirements for Wisconsin: Wisconsin Egress Requirements
3. Typical Tenants
· Who would be the typical tenant in the area the investor is looking in? This will determine which properties make sense for your client’s goals and which can be ruled out immediately.
· Example: The more expensive, small, updated house with quartz countertops will not cashflow as well as the large house next door if both properties are next to the local university with the typical tenant being college students.
4. Seller Motivations
· Real estate investors love a good deal in the same way non real estate investors do. If you can figure out the seller’s motivation, you can provide valuable insight for your client that could save them lots of money and make you their go-to agent.
· Does the seller have any more properties they are looking to unload now or in the next few years? Dig deeper into those conversations and find anything that can be useful to your client.
5. Know Superstar Contractors in the Area
· If the investor you are working with is new or an out-of-town investor, they will lean on you for contractor referrals. It’s important you have a few in mind. Stay in compliance with RESPA when recommending service providers. You’ll need to recommend multiple contractors for any service.
· Reach out to previous clients and ask if they know any superstar contractors AND if they would be willing to let you refer them to your other clients.
· If you are a Milwaukee area agent, I’ll get you started (no affiliation to the below):
o Home Inspector: Precision Plus Home Inspections (worked with twice)
§ I love houses and learning about houses, but after 4 hours at a home inspection with Jason, my brain can’t take any more information. He will tell you everything about a house and include it in very detailed reports that help greatly when asking the sellers for repairs.
o Plumbers: Milwaukee Plumbing & Piping (worked with twice)
· This company does great plumbing work for great prices. They are also responsive and have great attitudes. What more do you need?
o Egress Window: Addonis Waterproofing Co (worked with once)
· I received ~8 quotes on an egress window installation and Addonis’s quote was the best. They let me dig the hole to save money, then they showed up and did a great job.