Legal Disclaimer: As you know, I am a real estate agent and investor. I am not an accountant, an attorney, or a financial planner or advisor. That means you must trust but verify. That also means I am not giving specific investing advice, nor telling you to do that with your clients. What I am telling you is you can share these ideas with clients, sphere, etc and guide them to seek out the proper guidance from their accountants, etc.
Now that the disclaimer is out of the way…
As we prepare for the market to shift, we have to be cognizant of finding new sources of business to help un not just survive but thrive. One of the best ways to do this is with repeat clients. Logically, it makes sense. The average client is going to buy a home from you every 5-9 years depending on their personal situation, the market, etc. So one way to make sure your clients aren’t “average” is by working with investors. Solid investors can buy one house a year from you. Those that really see the value in building wealth through real estate can potentially buy multiple homes a year from you.
So where do you find these investors?
Well, start with your own database! You probably have a solid list of your sphere/centers of influence (COI), and past clients already in your system. Many of these people have at one point or another thought about investing in real estate, if they aren’t already. Most of what has stopped them from taking action can be boiled down to 2 factors:
- Knowledge
- Money
Let’s take these one at a time so you can create a game plan to help the people in your world build wealth while increasing your real estate business at the same time.
KNOWLEDGE:
Knowledge, or more appropriately, the lack of knowledge, is the first factor that will stop a new investor in their tracks. They may watch all the “reality” shows on tv and say to themselves: “I don’t know the first thing about making repairs to a home.” Or, they may hear a horror story about a friend of a friend, who had a cousin, who dated someone who was a landlord. Right away, they may say “I don’t want to be getting calls at 2 am about a clogged toilet.” I get it. In fact, I am right there with them! However, it is your job as the real estate professional to walk them through all the different scenarios, and to connect them with the proper vendors who they can leverage. This would include, but not limited to, contractors, property management companies, project managers, etc. You need to start with an investor consultation, just like you would do a buyer consultation, but tailored accordingly. You will need to showcase why your market expertise, can allow them to buy right, because, as we all know, you make your money when you buy, not when you sell.
But all the knowledge in the world won’t help if you don’t have the money to invest, so let’s tackle that next.
MONEY:
Having informed clients is great, however, it’s all just theory unless they actually have the money to invest. Most of your past clients, sphere, etc, will think they need a truckload of cash to be able to begin investing in real estate. They may not have the liquid savings to be able to go out and buy an investment property. However, a good amount of your database will have either a 401k, an IRA, or a 529 plan. Many of the people you will be targeting that fall into this category may not know they have the ability to buy investment real estate within these tax preferred accounts, or (in the case of the 529 plan), by creating an investment vehicle such as an insurance policy where those funds can be borrowed against. In order to do so, these accounts need to be self-directed. Many of these accounts will not already be self-directed, so you will need to have the ability to refer your clients to a custodian who handles self-directed accounts. My suggestion for this is to reach out to your tax advisor or accountant, and ask for some recommendations. You can then put your clients in touch with the specialist, to see if their tax preferred accounts would qualify. If they do, your clients can buy and flip, buy and hold, or lend money to others for real estate investments through their account. Now, there are restrictions, which is why you need to inform your clients, they should not move forward without consulting their own tax or accounting professional first.
Of course this can be a very complex subject, and a great recommendation would be to partner up with a trusted, local, custodian, as well as a reputable tax advisor,and invite your database to a first time investor seminar that you hold in conjunction with these vendors. Together, you can each give the pros and cons, and help your attendees feel more comfortable about the process.
So what are your thoughts? Do you feel this is a valuable strategy to share with your database?
P.S. It has been a while since my last post, mainly because I have been spending a lot of time building out our investment company and buying houses to flip. As the market shifts, I will be spending the majority of my time in real estate focused on both investment properties and investors. As we progress and begin to build out the investment side of our business, I will be including more posts on investing in general, and how to become an investor agent and work with investors as well.