How Real Estate Agents and Investors Can Create a Win-Win Relationship
By Satinder Haer
Real estate agents and real estate investors seem like natural partners. Agents can help investors identify potential investment properties on the market and investors can provide agents with a steady stream of business. However, the relationship between agents and investors is rarely that harmonious. Often times both parties are only invested in furthering their own profit and miss the opportunity to create an enduring, mutually-beneficial relationship. By learning how to work together successfully, agents and investors can reap the rewards of the other’s business.
Here are 4 tips to help agents and investors facilitate a lasting and financially successful partnership.
- Find the Right Counterpart
In order to create a truly long-lasting relationship, it’s important to find a business partner with whom you are personally and professionally compatible. Not every agent or investor is going to be a match for both your business and personality. Look up agents or investors in your local area and introduce yourself via email or over the phone. If the other party seems interested, arrange a coffee meeting to get a sense of how they run their business and your compatibility. It may take a few meetings to find the right partner, but ultimately it can help you avoid the costly mistakes that often accompany an ill-suited partnership.
- Understand Each Other’s Business
Once you’ve found an agent or investor that you’d like to work with, dig into their business model. The better that you understand how the other individual operates, the more you will be able to offer them and vice versa.
Here are a few key pieces of information that agents working with investors should gather:
- What type of investor are you working with? Fix and flip or buy and hold?
- What criteria should you look for in potential investment properties?
- What is your investor’s formula for calculating ROI on a deal? By learning this formula, you can prescreen the properties for their potential profit margin.
- What types of financing do they or will they use?
Similarly, here are a things that investors working with agents should find out:
- Have they worked with an investor before? Are they familiar with investor financing techniques?
- Which markets do they primarily work in? Are they willing to scout out properties in other markets?
- Are they comfortable with drafting a high volume of offers and paperwork? How quickly can they submit offers once you’re interested in a property? The best investment properties are typically snatched up quickly.
- Create an Information Flow
One of the challenges that agents and investors who work together experience is the lack of timely communication. To combat this, create a system or an information flow. Decide who will convey which information, through which communication channels and how much urgency should be exercised.
Setting up automated MLS email alerts can help ensure that both parties have access to listings as soon as they appear, avoiding a delay in information that can result in a missed deal. Additionally, agents should consider paperless options for managing transactions to save time, labor costs and make it easier to pass documents back and forth. Given the high volume of deals that some investors make, going paperless may help streamline the process by allowing for e-signing and virtual document sharing.
- Keep the Relationship Financially Balanced
Money is a likely culprit in many failed relationships between agents and investors. Agents often express frustration over the low commission that investment properties yield and how many deals fall through. However, underpriced properties and low offers are what allow investors to maximize their profit margin. Given this inherent conflict, it’s especially important that both parties feel like they are getting what they need out of the partnership. Discuss and negotiate a commission structure that works for both parties.
It’s understandable that agents and investors have concerns about working with each other because the relationship can easily go south. However, many of the points of contention between agents and investors can be avoided by choosing a compatible partner and keeping the channels of communication open. Agents and investors can create a win-win relationship but both parties must come to the table and be willing.
