Real estate investors, brokers and agents are as guilty as any other industry practitioners at using jargon and abbreviations that seem commonplace to us, but are often confusing to our clients and customers. As a reminder to slow down and explain these important terms and concepts, especially to new clients, here is a list of the most common jargon and simple explanations:

• ARV – After-Repaired Value. The estimated resale or new appraisal value of a property after remodeling or repairs are complete.
• CMA – Comparative Market Analysis.  A report run by a real estate professional to estimate the value of a property for a listing.
• CAP  (Cap Rate) = Capitalization Rate.  A measure of the quality of an income property investment based on income and expenses expressed as a ratio. (NOI/COST=CAP)
• COCR – Cash on Cash Return.  A simple calculation of the return on initial cash invested relative to annual cash flow. (cash flow/initial investment).
• DBA – Doing Business As.   Business name registered as ancillary to the actual entity or person filing taxes or bank account deposits.
• DOT – Deed of Trust.  Document filed by a lender to publicly show proof of loan or lien on real property.
• FHA – Federal Housing Administration. The federal agency in the Department of Housing and Urban Development that insures residential mortgages.
• HOA – Homeowners Association.  A group that governs a subdivision, condominium or planned community or other real estate with a common purpose.
• HUD – Housing and Urban Development.  The United States federal department that administers federal programs dealing with housing.
• I/O- Interest Only (loan). A type of loan amortization in which the principal balance of the loan neither increases nor decreases.
• IRR – Internal Rate of Return.  The average annual compound rate of return received by an investor over the life of their investment.
• L/O – Lease Option.  A written agreement between a property owner and a tenant that allows the tenant to use a property in exchange for rent, but it also gives the tenant the option to buy the property for a certain price within a specified time period.
• LLC – Limited Liability Company.  A legal structure for businesses which is designed to combine attributes of corporate and partnership structures.
• LOI – Letter of Intent.  A document outlining an agreement between two or more parties before the agreement is finalized.
• LTC – Loan to Cost.  The ratio of the price paid for a property to amount of the loan used to finance the purchase.  Often used to calculate a purchase AND repair or build costs.
• LTV – Loan to Value.  The amount of money being loaned (borrowed) against the appraised value.

• MLS – Multiple Listing Service. Local or regional service that compiles available real estate for sale by member brokers including detailed information, generally computerized and online.
• NNN – Triple Net Lease.  A lease in which, in addition to the rent, the tenant is required to pay for property taxes, insurance and maintenance.
• NOI – Net Operating Income.  Annual income after all expenses (property taxes, ins., & maintenance) except debt service (mortgage payment).
• NOO – Non-Owner Occupied.  Homes that are acquired specifically for investment purposes, also a type of loan for investment property.
• OWC – Owner Will Carry (owner financing).  A type of financing in which the seller accepts a promissory note as a portion of the purchase price. Also called owner or seller financing.
• PITI – Principal, Interest, Taxes and Insurance.   The total monthly payment a borrower makes to the lender.  If private mortgage insurance is required, that will be included in the amount as well.
• PMI – Private Mortgage Insurance.  Insurance paid by a borrower to protect the lender in case of default. PMI is typically charged to the borrower when the Loan-To-Value Ratio is greater than 80%.
• POA – Power of Attorney.  A written authorization to an agent to perform specified acts on behalf of his principal, usually to sign closing documents. This may be granted as either a general or a limited power.
• POF – Proof of Funds. A document by which the principal’s bank states that the principal owns the funds required for the transaction.
• REO – Real Estate Owned. REO is a class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.
• ROI – Return On Investment.  A measure used to evaluate the quality of an investment or to compare different investments. Return/Cost expressed as a percentage or a ratio.
• SFR – Single Family Residence.  A standard home with no common areas, or sharing of common walls intended to be occupied by 1 family.

This scenario has happened often enough in our office recently that it has become newsworthy and worth sharing with other real estate agents, buyers and investors:  Our buyer clients are getting a competitive advantage in the 1^st time home buyer and investment property markets because of a mortgage strategy, and by working with a specific type of financing company – FHA approved mortgage banker that underwrites and funds locally on a warehouse line.

Too many offers, too long to close

Fastest Loan, Lowest Rates

Are you shopping for a house in the Denver real estate market, or an agent representing a buyer, in the $300K and under price point?   Are you experiencing stiff competition for good properties that are priced correctly?  Here’s an explanation:

• Moratoriums on foreclosure properties and REO inventory hold backs
• Inventory is down to historic lows in the lower price ranges
• 1^st Time buyer demand is high for remodeled houses and sweat equity bargains
• Investor demand for flip and rental properties is feverish

The most common challenges we hear from our agents and buyer clients:

• Multiple competing offers for good properties and losing deals
• Challenging lending environment and changing rules
• Very long underwriting timelines for loan approvals
• An over correction on appraisal values that are below market price

How do you compete in this market for the best priced properties?

We have had success lately winning contracts by offering shorter closing times to the seller or listing agent.  All things being equal, shorter escrow periods get attention.   Most sellers are motivated to close quickly, especially investors who have remodeled a house for resale.  Also, with the first-time homebuyer tax credit deadline fast approaching, it is doubly important to have confidence in your lender’s ability to get the loan done quickly.

Use a mortgage company that directly underwrites your loan

There are many articles online about the differences between mortgage brokers, mortgage brokers, and correspondent lenders, so I won’t go into detail in this post.  But the key difference for buyer, seller and agent alike is the time-frame for underwriting and funding.   In order to write offers for fast closes, you will need to work with a finance company that underwrites and approves loans in-house.  The best companies are approved to sell bundled loans directly to FHA.  Ask!

Brian Neufuss is the mortgage lender that we have worked with for the past several years.  And he deserves some accolades for his work recently in building relationships and getting loans approved locally and quickly with far less “red tape” than any other that we’ve worked with.  He has benefitted our clients and real estate investment business, but has also impressed listing agents whom our clients have purchased through.

Please know that this is a freely given endorsement and recommendation of Brian’s expert services with no intent other than to thank him.  He has consistently pushed deals through for us with the lowest possible rates, whether for owner-occupant, first time home buyer, investment property or refinances.  Please feel free to contact him to ask questions about his business and system at the following number or use our Contact Form on our website and I will forward to him (we don’t put email addresses on the website for the spam bots to grab).

Fastest Loan Approvals in the West

Brian Neufuss, Mortgage Banker

Denver, Colorado

303-250-1841 direct line

*Private and Hard Money Loans also available for Investors

In 2009 we have had a lot more requests and questions from clients about using IRA funds to purchase investment real estate for fix and flip projects and rental properties.  So I thought I would post an FAQ with answers.  Here are the Top 5 Questions from 1^st time investors using their IRA funds to buy income property:

#1 How do I get access to my IRA funds to buy a house?

In order to begin the process, you will need to establish a self-directed IRA account.  It is unlikely that you will be able to obtain this type of IRA account with your current brokerage or bank.  A quick Google search will retrieve many custodians who help investors open IRAs for real estate purchases.  After comprehensive due diligence of many of these companies, we have selected Equity Trust Company for our own accounts and recommend that our clients include this company as part of their selection process for a custodian.  Consider account and transaction fees, allowed structures, types of entities, consulting and customer service when selecting a custodian.

#2 Can I get a Loan in my IRA to purchase investment property?

Yes, you can get a loan for up to 65% of the purchase price of a property in your IRA using what is called a “non-recourse” loan.  This type of loan is not personally guaranteed by you, it is only secured by the property within your IRA account.  One of the leading lenders in Colorado serving IRA customers is First Bank.  They have a specific and streamlined program that we highly recommend.  You can read about all the plan and property qualifications at this link called Loans to Purchase Real Estate in your Retirement Account.

#3 What kinds of property can I buy using my IRA funds?

Within your IRA, you will have many options for real estate investments.  The most common is purchasing property directly and getting fee simple title.  The title will be held in the name of your IRA, not your personal or business name (with or without leverage or loans).  Another option is buying into ownership of LLC’s or Limited Partnerships that own and operate income property.  Your IRA may also be a lender that holds a mortgage on a property that pays interest to your IRA that is secured by real property.  This is called investing in notes (promissory notes).  In the first two examples, your IRA is the owner of a property, and the last example your IRA is a lender to an owner of the property.  Any of these can be good investments for your retirements funds, all of them have risks and should be only be undertaken after careful consideration.  After all, these are your life savings!

#4 How can I get the Money out of my IRA?

Well, here’s the bad news and the good news:  You cannot pay yourself or take profits or cash-flow from real estate investments in your IRA and put them in your pocket today.  Sorry.  But, the good news is that you are doing yourself a favor by growing your net worth and savings and that will increase your borrowing capacity and ability to do deals outside your IRA accounts for current income or short-term capital gains.

What do I do First? Or How Do I Get Started?

Sometimes this is the first question, and sometimes it’s the last!  I always recommend that investors (especially novice investors) begin the process by interviewing and hiring two experienced and competent advisors.  First, an accountant and second an agent or real estate investment advisor.  It is critical to choose real estate professionals that understand the benefits and risks of investing in real estate (whether in your IRA or otherwise).  Be aware that there are many accountants and real estate agents that are very knowledgeable about normal transactions, but there are only a limited number that specialize in investment property, and even fewer who understand IRA rules and regulations.  In other words, don’t just hire your brother-in-law!  Seek out people who have been where you want to go.  Find people who have an existing team that you can use; leverage other professionals who have paved the way for you!

NOW is the time to get started, Happy Investing!

If you or someone you know is interested in these types of IRA real estate investments, please us the Contact Form for additional information.

I was having a pretty normal day at the office, comping properties, checking on email etc.  Until a pleasant looking woman arrived unannounced just after lunch and handed me her card:  Special Investigator for the Denver District Attorney. Ouch.  She asked me if I had a few minutes?  What else could I say, but “c’mon in…”

I asked what it was about, and learned that a certain property that we purchased and then resold last year was under a fraud investigation.  A fraud, apparently, that is becoming more and more prevalent in today’s real estate market and investors need to be aware:  people selling property that does not belong to them.   She asked me to pull the file for the property and then asked for copies of several of the documents.   Lots of weird questions ensued:  Please describe the seller’s, height, weight, distinguishing features?  She then showed me some pictures.  What do you remember about the ex-wife?  Excuse me?  What ex-wife?  I remember the son and the mom from closing, that’s it.  And they did not look anything like the people in the pictures!

Interesting thing was that we DID receive a call to the office earlier in the year from a person who complained that someone had sold her house without her permission.  But she sounded kind of crazy and we get calls from weirdos a lot in this business, so none of us really thought much about it.  But remembering that call, all of a sudden I felt like I was starring on the TV show Law and Order, so I had to ask:  “Should I be calling my attorney?” She sweetly replied that is was not necessary at this point (right), and informed me she is “a cop, not an attorney.”  (whew?)

So the story goes, apparently the “seller’s” of this particular house may not have had the right to sell the property.  This was a mild case compared to the blatant fraud that is happening with other deals, according to the investigator.  In this instance the husband “allegedly” removed the ex-wife from the deed with a Quit Claim deed without her permission and then sold the property and kept all the proceeds.  In my head the question kept coming up:  Am I in any way responsible for this?

After a pretty long cop-like conversation, I’m pretty sure I convinced her that our office and business had nothing to do with the Quit Claim deed and alleged fraud.  Although she admitted there were some red flags.  The organized groups that commit this type of fraud use a team of investors and agents, have in-house notary and use small private title companies to close the transactions.  We have that in common with the criminals.  Thankfully, we do keep impeccable records of our transactions and we were able to provide all documents she requested.  And the dates confirmed that our affiliated people or companies were not involved with the forged signature on the deed.  She also made phone calls to the title company and all the employees who were involved in the transaction and all our “stories matched.”

The investigator suggested that we make some procedural changes to our buying system which I would like to pass them along to other investors:  Ask for and get a copy of the driver’s license of the person who is signing the purchase contract at the time of signing. Make sure the driver’s license matches the title work, and be watchful of strange title occurances (like Quit Claim deed, power of attorney, etc).  We have previously left this type of identity checking to the title closer and never paid much attention during escrow if the title work came back clean.  In all my years of investing, this has never happened to me before, and hopefull will never happen again based on the new procedure.  Investors, keep a sharp eye out for this type of fraud!

Estimating repairs, staying on budget and working with contractors is perhaps the most mysterious and difficult aspect of the business of flipping houses.  As any good investor will tell you, you make your money when you buy.  But all too many investors LOSE all the profit in the remodeling or rehabbing process.  Here are the three most common mistakes made by novice fix and flip real estate investors:

• Under-estimating repair costs
• Over-improving properties
• Under-improving properties

General Contractor Guidelines:

• Begin interviewing contractors before you find a project
• Determine cost plus or complete bid procedure
• Pay contractors timely, but don’t let them get ahead of you on payments
• Obtain lien releases with every check you write

Before You Begin Repairs and Remodeling:

• Switch over utilities the day you close!
  • The title company may offer to help, but don’t trust that they will do so timely.
  • Contractors will not be able to start repairs without the utilities.
  • Avoid delays by contacting the utility companies before you close about any special procedures if the house has been vacant for a long time.
• Change locks, change lock box code, secure property by boarding up any broken windows and doors.
• If you are replacing windows, measure and order them right away.  It can take up to two weeks for delivery, the timing will be perfect if you order them first.
• If you are replacing the roof, pull a permit right away and put it in the window prior to beginning demolition work.

Specific Order of Fix and Flip Repairs:  

1. Clean-Out Crew: Many distressed properties will have been occupied by very messy people!  Be sure to budget $250 for each dumpster as well as labor to clean-out the property.  In some cases the full scope of the project will not be known until after the clean-out is complete.
2. Demolition Crew: At this point you will have a full scope of the project planned.  The demo crew should remove EVERYTHING that you plan to remodel.  Cabinets, vanities, tile, carpet, old plumbing, old HVAC, any drywall where new electrical or plumbing needs to be run.  Many investors make the mistake of trying to save and work around certain items in the house.  Ask your contractor:  it is often less expensive to start fresh with than try to save costs by reusing items.  Doors are a prime example.  Strive to have a “clean slate” and work environment after the demo is complete.
3. Roofing Contractor. Always fix the roof first! There is nothing worse than having fresh new drywall ruined during a rainstorm by a leaky roof that you planned to fix later.  Pull a roofing permit and put it in the window on day one (before the demolition).
4. Foundation and Structural, including Framing. Make repairs to foundation, beams, supports, joists, concrete etc.  When the structure is solid you may begin framing new walls and the rest of the project.
5. Windows Installation. The timing of the windows installation is often tricky because they likely need to be ordered and delivery times are a few days to a few weeks.  The interior framing, rough plumbing and mechanical work can be in process, but windows should be installed before the interior drywall work is completed.  You should also plan window installation to not interfere with exterior paint schedule.
6. Gutters / Soffits / Exterior Paint. Correctly perform any brick, framing, or siding repairs or your paint job will not last.  Exterior paint is usually a 3 day process.  Day 1, scrape, day 2 prime, day 3 paint.
7. Rough HVAC. Install furnace, ducting and accessories for A/C if part of scope (condenser can be later).
8. Rough Plumbing. Copper or PEX plastic tubing is becoming popular.  It is less prone to theft and easier and faster to work with.  Check your local building codes.  Have the lines snaked at this time.  Install tubs.
9. Rough Electrical. Many codes have changed recently and inspectors are very keen to improper electrical repairs.  Make sure you install panels, GFI outlets and wiring correctly, to code, with a permit.  Or you will regret it later.
10. Drywall / Texture. Another 2-3 day process for drying times, budget accordingly and keep everyone out of the way of the drywall crews.
11. Cabinets / Trim Carpentry. Install doors and trim.  If there are thresholds or trim that must wait until after tile or vinyl flooring, be sure to schedule a follow-up visit from carpenter for final touches.
12. Interior Paint. Yes, use bland colors even if it hurts your sense of style.  Pick your sheens correctly, semi-gloss for kitchen and bath ceilings, eggshell for walls.  After completion, schedule a touch-up session with the painting contractor to coincide with day before carpet install.  Mark and save extra paint!
13. Counter-tops in kitchen and baths. If you are using Formica you can have it installed by the carpenters.  If you are using tile granite, use the tile team, and if you are using slab granite order immediately after cabinet installation and have it installed by the fabricator.
14. Tile / Flooring (not carpet). Install all bathroom, kitchen and tile flooring.  Make sure to keep tub drains covered to keep mud out.  Finish or install hardwood flooring.
15. Finish Plumbing and Electrical. Install all trim kits, fixtures, faucets, outlets, lighting, switches, ceiling fans, vent covers.  If you did not replace tubs, have them re-glazed at this time.
16. Install appliances, final touch-ups.  Painting / trim, order landscaping, measure and order blinds if applicable.
17. Full Construction Clean. Vacuum ducts if not replaced, clean-out ALL debris, scrub bathrooms, kitchen, broom clean garage.  Wash the windows (yes, wash the windows!)  Make it SPOTLESS!
18. Install carpet. Again, this is the very LAST thing you do inside the house (except staging).  Change the lock box code at this time.
19. Final Exterior. Landscape mulch, rocks, address numbers, mailbox, welcome mat and flowers on front porch. (this can be done earlier in the process if you would like to get the “street appeal” set for the house while it is being remodeled.

Finish Schedule Tips

• Know your market. For example, you may not need to use slab granite in the neighborhood where tile granite sells just fine.
• Budget more than you think you need to for street appeal.  I see so many novice investors spend too much money inside the house, but not enough on landscaping and exterior appeal.  Buyers may not even get out of the car if you don’t have street appeal!
• Colors are critical, but not in the way you may think.  The old Realtor creed is correct, buyers should not notice the colors, they should notice the house.
• Light staging is better than heavy staging.  Use rugs to define spaces rather than large pieces of furniture.  A few pictures and well placed mirrors on walls, a Chinese screen, lots of plants and accessories in the kitchen make the biggest difference for the lease cost.

Architectural Types and House Product Tips:

• Buy houses with good floor plans.  A house with some sort of functional obsolescence will be difficult to sell even with great finishes.
• Purchase homes that are 50-70% of your city’s median value for the largest buyer audience and least risk.
• Do NOT purchase homes that have significantly different architecture than the neighborhood homes (odd-balls)
• Ranch style houses with 3 or more bedrooms and 2 or more bathrooms have the widest audience for sales.
• Victorian houses and early 20th century houses (old houses!) are the most difficult to remodel and have the most cost over-runs

Yes, the Remodeling and Rehabbing Videos are Coming! Be sure you leave your Contact Information to be informed of the our complete video shoot of each stage of a fix and flip project in Denver.

The best preparation for meeting with a lender – especially a private or hard money lender – is to have your “docs in a row.” When I work with a new client that does not have a current personal financial statement, our first step is to get their complete financial picture onto an organized spreadsheet.  Some are pleasantly surprised to learn their true Net Worth, some are disappointed (but motivated!).  Everyone thanks for me for this exercise when we are finished.  Creating a PFS is also beneficial for owner occupant buyers.  It is just as fun to impress traditional mortgage bankers by uploading your loan application to his computer from your thumb drive.  You get instant respect.

Don’t Believe “Pre-Qualification Letters”

Many real estate brokers will leave the process of organizing financials to a mortgage broker or banker.  But consider the value to your client, and yourself, of working on this together as a first step.  By assisting your client from initial financing to post closing follow-up, you earn higher respect as a real estate professional.   Also, I prefer to know a clients credentials *before* I spend my valuable time with them shopping for properties.   I have found over time that prospects who are unwilling to share financial information with me are far less likely to actually buy, so this one criteria is an excellent method of “separating the wheat from from the chafe.” This is especially true among people who call themselves real estate investors; there are lots of people who purchase real estate investment courses and attend the “guru seminars,” but never actually purchase any real estate.

Whether you are working with a traditional mortgage broker, local banker, or private equity lender, having financial documents organized and presentable at a moments notice is always impressive.  So impressive, in fact, that with private lenders it even makes up for a certain amount of weaknesses that may be present in the statement itself.

“Do or Do Not.  There is no Try” – Yoda

What’s the moral of the story?  As an investor you should always have your financial statements ready to show mortgage professionals,  bankers, private lenders, and potential partners.  As an buyer agent or broker, you should review (and help prepare if necessary) financial information from your clients.  You are asking for problems if you believe a “pre-qualification letter” means your buyer will close.  I go so far as to carry mine on a thumb drive that is attached to my key chain.   The password protected folder has following documents in .pdf format:

• Color photo scan of driver’s license and SSN card
• Excel worksheet of Personal Financial Statement
• Excel spreadsheet of Real Estate Owned
  (includes insurance policy numbers, loan numbers, rate, payment, etc)
• Current personal and business bank statements
• Current investment and IRA statements
• 3 Years of personal and business tax returns
• Copies of Operating Agreements for all Partnerships
• Completed 1003 Application

Everyone Starts ‘Somewhere’

Even if you do not have an “impressive” financial statement right now, you should create a PFS. It is important to know where you are in order to determine how to grow your assets and reduce your liabilities. There are investing programs for people of any current financial status.  You can indeed get into the real estate business with “no money down and bad credit,” but you must be realistic about the process and the path.  And you should not take advantage of the work of others by presenting yourself otherwise, like many novice investors do with agents and owners of property.  On the other hand, if you have substantial assets, you will want to learn about programs that leverage and protect your assets to their fullest potential.  This usually means finding and working with quality agents, operators and sponsors.

In our next segment on Financing and Capital we will be reviewing ratios of a financial statements, please stay tuned by getting our updates via RSS and/or email.

I have a few key methods of qualifying real estate investors to determine whether or not I want to work with them.  This has little to do with the amount of experience they have, and less to do with the amount of money they have then you may think.  These are both important factors in determining how I will work with an investor.  But the critical factor in whether to work with them is based in their commitment and integrity.

During my first interview or call with a new referral, I ask the standard questions about their experience, available capital and credit score.  More importantly, however, are the questions about their goals and intentions.  The way certain questions are answered, including was is NOT said, usually gives me a good indication about whether I can establish a mutually beneficial relationship.  With practice, you can learn these evaluation skills to qualify investors, and only work with those who will be good clients.

The first step in this learning process is to understand the Types of Residential Real Estate Investors.  This will allow you to differentiate between clients, customers and vendors as you grow your business through networking and marketing.  All investors will fall into one or more of the following categories.  Less experienced investors generally require more time, but more experienced investors will require more skill and knowledge to earn their business.  As always, the relationship must be a “win-win.” 

Types of Residential Investors

Scouts

Scouts, also known as Finder’s, are usually novice investors looking to get started in the business.  Many first time investors do this type of work because it does not require  money or credit to start. A scout’s objective is to source property leads for more experienced and capitalized investors.  Scouts gather information about potentially profitable properties and sell this information to another investor.  A good scout will include the following information in his or her report to the investor:

• Location of the property
• Owner’s name and contact information
• Condition of home, including pictures (recently taken)
• Estimated as-is value and remodeled value of the property
• Asking price on the property and current loan balance
• Estimated cost of repairs to the property
• Liens on the property or other applicable circumstances

The fee that a Scout charges for this information and/or lead is determined based on the value of the property as well as the estimated profit that the investor is likely to make.  This can run from a few hundred dollars up to a few thousand dollars on each property.

Many people want to start out in the business being dealers (wholesalers), but should learn by being a scout for more experienced investors.  The best scouts will succeed in the business, and eventually become Dealers.

Dealers

Dealers, also known as Wholesalers, are much like a scouts but with one significant difference.  They sign a purchase and sale contract and/or purchase the property to resell for a wholesale profit margin.  This level of control requires more capitalization and additional risk, so dealers stand to make a larger profit from the investment than scouts.  Typical dealer mark-ups are between $5-$25,000 per property depending on how “deep” it was purchased and if any additional costs or work are involved in selling the property.

You will often find people in the investment real estate business who are acting as dealers, but are really scouts.  Investors who contract a property but are not capitalized to close the property are not dealers.  They are often misleading the seller of the property (i.e., making a “cash offer” without any cash).  This is a tactic often taught in the “no money down” seminars and investment courses.   The difference between a dealer and scout is the dealer will close on the property purchase (or at least have the ability to close) before reselling to a rehab or landlord investor.  Scouts who act as dealers but are unable to close transactions often leave the unknowing seller with no buyer at the closing table.  This creates ill-will about the business of real estate investing and should not be done.

Most dealers will sell their properties “as is” to another type of investor, performing little, if any, work to the property.  In some circumstances a dealer may not close the property at all, or may do what is called a “double closing” or simultaneous closing.  An “assignment” means the dealer is selling the contract to another investor who closes the transaction.  In a “double closing” scenario, the dealer will only own the property for a few minutes between two closings.

More experienced dealers may perform major repairs to a property before selling it to another investor.  In this instance, the dealer will purchase a property, perhaps at a steep discount because of a structural problem, and do the “heavy lifting” of fixing a foundation problem or replacing roof and mechanicals.  This strategy involves the dealer making the property appealing to novice rehab investors who are looking for “cosmetic” type remodel projects.

Experienced dealers make excellent partners for your real estate investment business or investment oriented agency.  They often have deal flow and an inventory of properties that are not available through the MLS.  Good dealers understand the value of your role as a buyer or an agent working with investor buyers.  If you a rehabber or an agent working with fix and flip investors, finding and establishing a relationship with a dealer like the one described above is an excellent source of properties.

As with any business, there are talented and forthright dealers, and there are those who give the business a “bad rap.”  When working with dealers, be sure to get references and check local reputation centers like the Better Business Bureau.

Rehabbers

The rehabber is the most common (and famous) type of real estate investor, and so requires little explanation.  In the investment community they are called “retailers.” On TV and the internet they are called “fix and flippers.” Rehabbers generally purchase properties through agents, or from a dealer or scout.  The objective is to remodel and then sell properties to owner occupants at the highest possible “retail” price.  The rehabber puts the most money into properties and has the most risk.  Rehabbers also stand to make the largest profit if they are skilled at the trade.

Rental Landlords

Rental landlords are seeking properties that enable them to earn a profit on a monthly and yearly basis from rents over and above all expenses including debt service.  Rental landlords are generally the most sophisticated of residential investors because they are working on long-term wealth building rather than short term income.  A large percentage of landlord investors are not in the business of real estate; most have other income sources.  Investing in real estate is usually retirement planning and wealth building for landlord investors.  As such, they require the most knowledge and experience to work for as an agent.  For the experienced investor or investment oriented agent, landlords are very good long term relationship clients because they are usually well capitalized and buy multiple properties per year.

Balance Sheet Investors versus Income Investors

As you meet and qualify investors to work with in your business, you will gain a deeper understanding of experience and capitalization levels within the spectrum of investor types.  On a macro scale, I qualify investors as either Balance Sheet or Income investors.   In very simple terms a balance sheet investor has an amount of capital that he or she wants to grow on a risk adjusted basis for net worth gains;  an income investor is seeking current income from operating and selling real estate.  The difference to the adviser or agent is the level of legal and tax planning that is involved with the projects or investments.

As the nation continues to take its proverbial medicine for the spoils of Wall Street’s residential real estate backed securities fiasco, Realtors are suffering massive drops in transactions and income. If you are working the traditional residential market, you’re likely facing pretty grim volume now, and for the near future.  How about this for a change?

Stop Sucking Wind

• STOP wasting your time working evenings and weekends with “liar buyers” who drag you to see hundreds of houses and never make a decision.
• STOP listing over-priced properties that never sell or taking on Short Sales that require hundreds of hours of negotiations.
• STOP begging your friends and family for their real estate transactions and ruining relationships over business.
• STOP expensive and time consuming prospecting and holding lonely Open Houses.
• STOP working with clients that are barely qualified for loans and hoping the deals close to get paid.

Yes, you really can STOP all this nonsense by learning a few new skills and making a simple change in the type of client you work with.  In a down market, residential real estate investors are very active buyers (and sellers too).

Investors are desperately seeking good real estate agents who specialize in investments.

I know, you don’t work with investors because they make low ball offers, use your knowledge, experience and tools and then burned you for the commission.  Right?  Has this really happened to you or have you just heard about them happening to other agents?  Agents who suffer these set backs have not learned to find “real” real estate investors.  It is not hard to find them!  Investors are everywhere, and this $300 billion market segment is extremely under served.   Since your colleagues don’t want to work with them, you will get multiple, consistent referrals right from within your own office!

How would you like to have your best volume year ever this year while your colleagues fight over the few good listings available and cut their commissions to get them?

• Learn how to dramatically increase your commissions and income in a segment that is booming during the current housing slump and credit crisis.
• Learn how to find serious and qualified buyer clients who each purchase multiple homes per year, during normal business hours, treat you with professional respect, and make decisions quickly without emotion.
• Learn technological skills that will streamline your business and protect your most precious asset – TIME!
• Learn about the business that has created more millionaires than any other business ever! Real Estate Investing!

Learning to separate the short-sighted amateurs and “seminar graduates” from professional investors or well qualified high-income “retail investors” is paramount to earning and enjoying business success for agents.  The objective in attracting the latter two is building long-term mutually profitable relationships.

What can you do now?  Start by bookmarking this site.  This entire blog is dedicated to teaching agents and investors about investment property.  It is written by people with significant real world experience in the business of investments, agency, construction and finance.  You are also invited to download our Investment Property Training manual and subscribe to the Private Market Newsletter in order to be informed as the content and information grows.  Our team offers specialized training for both investors and agents.  We look forward to communicating with you further.