by Barry Cunningham

Real Estate Broadcaster and Investor

Author website

It’s no secret to most Realtors that the housing market is in the toilet right now, but there is still a group of aggressive buyers who are still quite active. The Real Estate Investor.

While the mere thought of working with investors causes some Realtors to cringe, it’s time for the vinegar and oil relationship to end.

Investors are willing to work with anyone that can bring them a deal. They use birddogs, postal workers, bankruptcy attorneys, court clerks and yes, they will use the services of a Realtor.

However, the breakdown in communication usually comes when the parameters of a real estate investor are not met. A real estate investor, if they are experienced, will have a very defined set of criteria that must be met if they are going to pull the trigger on a deal.

While condition and neighborhood often are irrelevant, the numbers have to absolutely make sense. Most investors that we work with will not look at any deal unless it either cash flows if it is held or provides for significant return if it is to be re-sold.

Cashflow means the property must provide for at minimum a zero balance after income and expenses are taken into account. That is to say that after the projected rental amount on the property, less expenses can not be a negative number.

Here is a calculator that you can use to determine cash flow BEFORE presenting a deal to an investor. You can obtain market rents very easily without the need of the MLS by simply going to Zilpy. The features on Zilpy are pretty accurate and we have used them to work the numbers on properties we own and properties we have purchased and it has proven to be quite accurate.

On a re-sale deal, the property has to be purchased at a price that is at minimum 60% or belowwhat is perceived to be current market value. Some more aggressive investors will take a deal at 70% below perceived current market value but the pool gets really thin at LTV levels above this number.

Where do you find properties like this to sell to investors? Everywhere! I wrote a post a couple of days ago referencing the productivity level of Realtors in this market. It became pretty clear that there are a lot of Realtors whose productivity level is below 5 or so sides for all of this year. I personally know some investors who are averaging 5-10 transactions…per month!

Many Realtors are reluctant to do what it takes to find the deals that investors are looking for. It is understandable if one chooses not to work with investors because as a group we can be very demanding. You’re not going to sell or convince an investor. You’re also not going to hide anything from them either.

Investors, experienced ones anyways, are trained to exploit any imperfection that they can in a property because that exploitation usually equates to higher profits. So when dealing with an investor, be prepared to disclose everything you know about a property and expect the investor to find even more issues and for the investor to put a dollar amount on those issues found.

In this market, you can find properties for investors by speaking to listing agents who are managing REO properties for lenders. Often times these properties need work and are not suitable for most “retail” end user buyers. These properties, if the numbers make sense, are the types of deals that most investors are looking for.

Here’s another caveat…don’t expect an investor to run all over town looking at deals. When we buy property we often do so sight unseen. Like I stated earlier, it’s all about the numbers. An experienced investor can perform all of his due diligence from the comfort of his office. He can run comparables, check out the neighborhood, obtain market rent analysis, find out about any liens or code violations, check out the status of the current owners and even have repairs estimated for him right from his office.

As any offer submitted will be based upon a right of inspection, it’s not necessary to waste time running around looking at individual properties. Don’t worry a thorough inspection will most assuredly be completed but it will be done so after acceptance of the contract and the contract is subject to inspection anyway so what’s the reason to go running all over town.

A lot of Realtors used to selling to end users are often surprised by this. Often times we get asked by agents, “Don’t you even want to see the property before putting this offer in?” No, we don’t need to. We know the area, we have probably already seen the house at one time or another and we have people in the field and other associates who will or have gione by the house already and taken a look on our behalf.

That’s another great point to remember. An experienced professional investor can probably tell you about any neighborhood in his working area. He has been working that area for some time and already has information relative to the demographics and may have already bought and sold properties or may be holding properties in that very vicinity.

What a good agent is needed for is to professionally negotiate the offer with the REO agent. An agent who understands the needs of an investor and works diligently on behalf of an investor will have more business than they can handle.

How many Realtors reading this even know how to find investors? Word spreads quick when an agent is found to be investor friendly. Investors are often cash buyers and when they find the deal they want they move quickly. Some can close in as little as 24 hours from clear title. Just think, after you read this you could look up some properties on the MLS, run the numbers, and speak to some investors and have a closing by Friday! It can and does work like that.

So where do you find investors. You just have to look. There are investment clubs that meet regularly in most metropolitan areas. These clubs can be as few as 50 or so investors all the way up to some of the largest which may have as many as 5,000 active members. Additionally there are a number of large websites that specifically cater to investors. Here is a list of investment clubs from across the Country.

Working with investors is not for everyone. Investors can often be tough and brazen. Reason being is most don’t have the time to deal with the usual Realtor pitch or the unprepared Realtor.

Many Realtors think that some of the techniques that investors utilize are either unethical or illegal. While there are sure to be some con artists in the bunch, for the most part investors who have been around are very knowledgeable and are willing to listen if a deal makes sense.

When you approach an investor with a deal have your ducks in a row. Prepare thoroughly, expect to be challenged on your numbers, understand that you are dealing with a savvy and shred professional buyer who will do whatever it takes to maximize his or her profit.

Just because you may not understand a strategy or technique does not mean it’s illegal. An investor will buy a property today, if not from you, from somebody. If you want to approach the investor market as a way of increasing your income, understand that this market is viable but you need to have your ducks in a row.

In the next week or so I’ll be explaining some of the techniques an investor uses to maximize his profit and how a Realtor can also ethically and legally become an investor and earn more money investing than waiting for a commission.

Lastly, no…I am not advocating flipping or speculating haphazardly. There is a proper and conservative way that investors are making money right now. It is in these times that millionaires are made.

This is the best real estate market for experienced real estate investors. Those Realtors who are not actively and aggressively pursuing real estate investors are leaving a lot of money on the table.