Agent Tips & Advice: Working With Real Estate Investors

The relationship between agents and real estate investors is not always as harmonious and mutually beneficial as it has the potential to be. However, if both parties are willing to put in the time and effort, agents and investors can truly create a win-win relationship. Agents are always in search of business and real estate investors are always on the prowl for the next good deal. In order to foster a strong, working relationship that profits both parties, agents and investors must take the time to understand how the other's business works and how they can fit into that picture.

We asked seven agents about their experiences working with real estate investors — and what they'd change about the relationship. Check out what they had to say.

1. How is working with real estate investors different from working with the average home buyer?

Working with a real estate investor involves a different process than working with somebody who wants to buy a home. While both require you to qualify the motivation and capabilities of the buyer, the actual selection process is completely reversed. Home buyers look at homes to find an emotional connection, whereas investors are seeking a rate of return with an anticipated safety margin. This means home buyers look at homes and then select one, whereas investors go to contract and then look at a property. While this is overly simplified, it is far easier to like a property than to find one with the right rate of return. Thus, looking at a property before knowing it can provide your desired rate of return (or that you can even get it under contract at the right price) is a recipe for failure for investors. – Joe Manausa of Joe Manausa Real Estate

Investors have a goal — usually cash flow or a return on investment (ROI). ROI can be cash-on-cash return, appreciation or some combination of both. With an investor you will need to understand their goals, then help them locate properties that will meet the goals. Since the goal is usually a financial return, they are less concerned about the property itself, focusing instead on the amount of rent the property can generate and the property's appreciation potential. You need to understand how their use of leverage (mortgage financing) might affect the return as well. The average home buyer, on the other hand, looks at a property based on how it will serve their needs. Cash flow or the ability to rent isn’t a consideration. – John Mazzara of Minneapolis St. Paul Homes

2. What questions do you typically ask investors before deciding to partner with them?

It varies with the type of investment and the area, but these are some of the essentials: What is your time frame to purchase? Are you familiar with the area? Are you holding or flipping? Are you financing, and if so, who is the lender and what type of loan are you pre-approved for? Have you ever purchased investment properties before? How many properties do you anticipate purchasing? Do you have a builder’s license and solid relationships with contractors? Is school district important to you? What types of issues are deal-killers for you? –  Gwen Daubenmeyer of The Integrity Real Estate Team

I have four basic lines of questions when somebody asks to work with me as a real estate investor:

1. What experience do you have as an investor? As a real estate investor?
2. How much money do you plan to invest (as opposed to your desired purchase price) and how much leverage will you utilize to achieve your desired rate of return? Are you paying with cash? If not, what is your credit situation and source of financing?
3. What are you doing currently, and what are your expectations? What type of return is your money getting now, and what is your desired rate of return? What is your safe rate? (The safe rate is the return they know they can get consistently elsewhere, so a real estate investment should exceed it.)
4. Do you have any opinions that would rule out certain property types? (I ask that to find out if they want something beyond my personal expertise.) – Joe Manausa of Joe Manausa Real Estate

3. How do you determine if a partnership will be mutually beneficial?

I have been selling homes and investment properties for 30 years. My success with all my clients is based upon trust and loyalty. This is a two-way street. If a client will follow my lead, I will take the time — however long it takes — to educate them and direct them into profitable properties. If they won’t give me loyalty and work exclusively with me on their search, I won’t spend the time. – John Mazzara of Minneapolis St. Paul Homes

We work with a lot of smaller investors. We have helped a lot of people go from their first property to owning and successfully running several properties on Maui. I need to understand if their expectations and goals are realistic in today’s market. I also need to know if they have the resources and experience to be successful. If we can get clear on what they are trying to accomplish, they can succeed. – Lee Potts of Aloha Realty Group

I look at the investor's ability to adapt quickly and be very responsive. Because the investor market is very competitive, you need to act quickly and work through challenges fast. There will be plenty of issues that arise when remodeling, like undetected mold, hidden termite damage, or plumbing and electrical issues that were not seen until they started opening up walls. – Lee Tessier Team of Keller Williams American Premier Realty

4. What are your top concerns when working with real estate investors? How can investors help resolve them?

It depends on whether you’re on the buying or selling side for them. If you’re working with an investor to find properties, I’d be concerned about my performance AND theirs. If you don’t put up your numbers (assuming their expectations are realistic) they will move on to someone else. You also want to make sure the investor can perform, but if you’ve done your due diligence upfront, this can alleviate much of this concern. An investor can help resolve the performance concern by making sure the agent they’re working with is the best fit and by understanding the marketplace themselves as well — that way, they can be decisive when the agent sends leads. On the selling side, I want to make sure I’m a rockstar listing agent who is negotiating hard and giving their investments the attention they deserve. As long as the investor is realistic and understands the marketplace/comps, there wouldn’t be much concern. – Tracy Royce of Royce of Real Estate

​Will they really pull the trigger when a suitable property is located? With inventory being so tight in the best investor price ranges, it's not realistic to expect to steal a house. It's also no longer the case that a cash buyer gets a significant discount — they might get something, but it's not 10-20% margin. A smart investor has financing or cash lined up with proof in writing, knows their desired outcome (If cash flow, what is the number? If equity, what is the number?) and time frame.​ –  Leigh Thomas Brown of RE/MAX Executive Realty​

5. What unique benefits arise from working investors?

A serious investor can be a great addition to your book of business and can be a long-term relationship. An average homeowner buys and stays put for seven to ten years, whereas a serious investor may do multiple transactions per year. If you are considering working with investors, I would highly recommend you complete the Certified Investor Agent Specialist (CIAS) designation course. Not all investors are the same and there are specific things you need to know so you can represent their best interest. There is a lot of money to be made in real estate, but there is a lot of risk too. Be smart about it and get an education before you jump into the investor arena. – Nate Martinez of RE/MAX Professionals

Repeat business. As a agent, the investors will use you over and over if you help find them houses, give them accurate ARVs and sell their properties in a timely manner. The houses still need to be marketed properly and you still need to follow up. I have made some great friendships with clients who started out working with me as an investor. They are also happy because you are helping them make money and you will make money in the process. – Lee Tessier Team of Keller Williams American Premier Realty

6. What advice do you have for agents new to working with real estate investors?

Take the time to understand what an actual “good” investment is for the client. If you’re not sure, ask more questions. I think investors get frustrated because agents might think a “great investment opportunity” is a property under market value, not accounting for the cost of repairs, holding, etc. There are so many other costs involved for investors. On the selling side, invest the $100 for professional photography and/or video. Given how much reach listings get through syndication and the power of good pictures, there’s no excuse for not using high-res professional photography.

Investors sometimes spend tens of thousands of dollars rehabbing, and as a listing agent/investor myself, I expect the property to be featured well. They’re relying on you to get a good return on their investment, so be the consummate professional, and your investor clients will send you many more deals! If you’re a new agent, it’s a fantastic way to learn the art of negotiating, get good at pulling comps, become efficient with the paperwork and get closings under your belt. – Tracy Royce of Royce of Real Estate

Set a minimum commission that makes sense given the time involved and the number of transactions the investor gives you. You don't ever want to be put in the position of recommending one house over another because of a better commission. Minimum commission removes that from the table. Take classes. Get designations. Education solves a lot of problems. Ask experienced agents if you can shadow them on their investor showings. Becoming an investor yourself is the best education. If you don't have the funds right now, pretend you do. Go through every detail on paper. Sit down with a few lenders and learn what loan programs are available should the home need work and fail to qualify for traditional financing. Create relationships with the best of those lenders and ask for their referrals. They will appreciate that you are intent on becoming an educated investor specialist. – Gwen Daubenmeyer of The Integrity Real Estate Team

You need to know the details. We are often reminded that we are not accountants or financial advisors and that’s absolutely true. But you still have to know the numbers, the inventory, the rules and the regulations, and you need to be prepared to go deep to assist with analysis. – Lee Potts of Aloha Realty Group