The Real Estate Financial Planner™ Blog

Before we dive deep into why you should work with real estate investors, it is important for you to realize that not all real estate investors are the same. There are different types of real estate investors. Some are much better clients for us as real estate agents than others.

According to the National Association of REALTORS®, investment properties make up between 17% and 28% of all sales depending on which year of data you’re looking at. That means that about a fifth to as much as a quarter of all sales are to investors. If you’re not working with investors, you’re not working with a large part of the real estate market.

Most real estate investors are looking for a real estate agent that specializes in working with real estate investors. In book 2 and 3 of this trilogy on how to start and run real estate investor groups, we will go over how to create and provide on-going valuable resources to demonstrate your commitment to and specialization in working with real estate investors. This will help you capture a disproportionately large percent of real estate investor transactions.

Furthermore, as I will demonstrate when we discuss working with a special real estate investor type we call Nomads, I will show you that these real estate investors actually buy properties as owner occupants with the intention that later, after they’ve satisfied the owner occupancy requirement of the lender, they will convert the property they’re living in to a rental property. This means that a percentage of your business won’t even be investment properties, but owner occupant properties that will eventually become investment rental property.

In my personal brokerage business, which I will share details about later, approximately 80% of the 42 transactions we did last year were real estate investors from our real estate investing club. Since our real estate investor transactions sometimes include a few multi-family property transactions, it is probably closer to 90% when you calculate the percentage of our income that came from real estate investors from our real estate investing group.

For now, let’s go through the different types of real estate investors together and why you may want to work with each type.

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There is a strong argument to be made that when discussing the types of real estate investors you’ll find at a real estate investor group meeting, that I should start with bird dogs and wholesalers, and move on to flippers and buy and hold investors. I’m not going to do that though. I am going to tell you about what I consider to be the absolute very best clients to work with: Nomads.

We made up the term Nomad™ to describe serial investors that buy houses regularly over time.

When we originally taught it, we would explain it as:

1. Buy a home as an owner occupant
2. Live there for a year
3. Then buy a new home
4. Convert the previous to a rental
5. Repeat the process until you reach your financial goals

Early on, we emphasized the moving into properties component as a key attribute to being a Nomad. We have since expanded the definition and added variations of the Nomad model to include ones where you don’t need to move in (which was probably the most common objection to the model), but you’re still buying a series of rental properties.

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Real estate bird dogs are usually brand new real estate investors that are looking for a way to generate some extra income without investing any of their own money. While I wouldn’t seek out these types of clients to work with, it is important to understand what they are wanting to do, how you could work with them, and how they might ultimately become clients for you.

As I describe in more detail in the other books in this trilogy, when you start and run a real estate investor group, you should teach classes that attract your personally preferred types of clients. But, no matter how narrowly you create your class content, you’re going to attract a few of the other types of investors that are not necessarily your ideal client. That’s OK. Having a few of these other types of investor clients will help round out and optimize your brokerage business. The easiest example for me to make to explain this is: while I don’t necessarily recommend that you focus on finding tired properties that need fixing up and working with all fixer upper real estate investors, having one or two as a client will allow you to sell the fixer upper properties you happen to stumble upon while you’re working with other clients. You don’t want 50 fixer upper investors, but 3, in addition to a bunch of Nomads, will add a few extra transactions per year to your bottom line. The same logic applies to the other types of investors as well; you’ll probably want a lot of your primary client type, and a few of each of the others.

Now, back to bird dogs.

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Creative real estate investors are looking for creative financing deals. These deals involve buying properties using less common financing options like:

• Owner Financing
• Wrap Financing
• Loan Assumption
• Rent To Own, Lease To Own, Lease Option, and Lease Purchase
• Agreement For Deed, Bond For Deed, Contract For Deed, Installment Land Contract
• Subject To

Most creative real estate investors will be seeking these types of deals outside the MLS. While markets shift and change making some of these creative strategies appear inside the MLS from time-to-time, our current real estate market makes these types of transactions rare to non-existent inside the MLS. So, except for the same reasons I discussed with bird dogs and wholesalers, many real estate agents will opt not to focus on working with creative real estate investors.

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