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Here’s Why You Can’t Afford to Ignore Investors

Investment opportunities in real estate abound. A course through content sponsor Real Estate Buyer’s Agent Council (REBAC) can show you how to court investor clients and how you can jump in yourself.

September 10, 2018

Today’s real estate investor is hardly a one-size-fits-all type. Opportunities to capitalize on high rental prices are fostering a new crop of investors. They’re on the hunt for the next big opportunity, whether that’s in single-family rentals, vacation homes, short-term rentals, or real estate investment trusts. And buyer’s agents are in the prime spot to help them take that leap.

“This can be an untapped source of money for many real estate professionals,” says Peter West, ABR®, an instructor for the Real Estate Buyer’s Agent Council who teaches an elective course as part of the Accredited Buyer’s Representative (ABR®) designation on investing. “If you’re looking to build your business, working with investors is definitely one way to do that. This can open up a new segment to either a seasoned or brand-new real estate professional.” West will be teaching the REBAC course on Nov. 1 during the 2018 REALTORS® Conference & Expo in Boston titled “Real Estate Investing: Build Wealth Representing Investors and Becoming One Yourself.”

Despite a market climate of escalating home prices, investment opportunities are plentiful for those looking for cash flow opportunities to save up for their next home, retirement, or just to boost their income, West says. Trained buyer reps can help identify and present such golden opportunities to their clients.

“When the market is strong, investors come out of the woodwork,” says West, who specializes in investment properties and development with Bishop Real Estate LLC in Venice, Fla. “In the current hot market, investors are undeterred from the rising upfront costs to pay for a home, but they’re looking at the potential in rental income they can collect by owning a rental property. It’s a great time to be in the investment business.” West works with a variety of investors in his own business, from the mom-and-pop type who own one or two modestly priced properties to institutional investors holding $22 billion in REITs.

West offers up some of the following insights for buyer reps who are looking to groom their in grooming your own investor buyer pool:

Don’t Pigeonhole Potential Customers

You may be overlooking some clients who want to break into the investment market.

“Accidental investors” are a growing trend, as reported recently by CNBC. Homeowners are finding ways to leverage their current house in order to move up to a larger residence. As such, they may opt to rent out their current home on a short- or long-term basis to take advantage of rising rental rates as they then use the funds as leverage to trade up to a larger home. Lenders are looking more favorably on carrying two mortgages in such a scenario and are showing more willingness to use rental income as a mitigating factor for carrying two mortgages, Lawrence Yun, the National Association of REALTORS®’ chief economist, told CNBC. On top of earning rental payments from tenants, the homeowners then also gain equity by continuing to own their current home.

West says buyer’s reps shouldn’t be shy about broaching the investment potential topic with their current clients. “Maybe they never thought they could buy something as an investment, but a real estate investment held over the long term is one of the best vehicles out there for growing wealth,” he says. “It’s important to be able to talk about why you should invest.”

Educate Yourself on the Differences in the Transaction

When your clients are ready to become investors, the conversation will change, likely moving from emotional talk to the numbers. “An investor doesn’t really tend to care if the carpet is shagged or green,” West says. The focus shifts to the cash flow potential—like absorption and cap rates—and the financial perks and risks of the investment.

Buyer’s reps need to be ready to change their tone too. In REBAC’s investment course, West prepares real estate professionals to focus their conversations on the financial options, tax considerations, various investment strategies, 1031 deferred tax exchanges, risks, and property management options. West also shows agents how they can leverage tools, like the Realtors Property Resource®, to help guide their investor clients to find the right properties. It’s important for real estate professionals to have a blueprint of the nuances in dealing with investment transactions so they can confidently guide their clients in identifying and evaluating property types, locations, and value considerations that will best serve their client, West says.

Don’t Bypass Investments for Yourself

As you’re courting investor clients, consider real estate for your own portfolio as well. West believes real estate investments should be a critical component to any real estate professional’s retirement plan. He speaks from first-hand experience: Licensed in multiple states, he owns 52 apartments in Massachusetts and 50 properties in Florida. He’s rehabbed and flipped another 50 properties over his 34 years in the real estate business and is currently redeveloping a 150,000-square-foot warehouse in Massachusetts.

“If you don’t plan for the future, your income will stop the day you retire,” West warns real estate professionals. “I always tell agents: You can make a great living listing and selling real estate to others. But you should also make real estate part of your own portfolio for your retirement and estate planning.”

Real estate professionals are already perfectly wired to do so, he adds: “You already know when a good time to buy or sell is. You have access to the MLS. You are out there seeing the market. You know how to analyze a property. You know the values and what it will sell for, and what you could rent it for. You have that intimate knowledge of what’s going on in the marketplace. You’re in a prime spot to invest too. I hope this REBAC course teaches agents how to invest in a future for themselves, too.”

The National Association of REALTORS® does not endorse or evaluate the product, service, or company, nor any of the claims or representations made in this sponsored content article. The sponsor company making claims or representations is expected to have research data that substantiates these claims and the research or citation is to be made available on the company's website or, where proprietary interests exist, be made available upon request.

Melissa Tracey
Content sponsor

Melissa Tracey is a contributing editor for REALTOR® Magazine who also writes advertorial copy for content sponsors. She can be reached at mtracey@realtors.org.