Interest in investment properties is on the rise according to a recent survey by National Association of Realtors (NAR). 76% of home buyers who purchased a home as an investment stated that “now is a good time to buy a home.”
That opinion isn't simply wishful thinking. There are statistics to back it up. The same NAR report states that the average sales price for an investment property rose 8% from 2015 to 2016.
And if you believe any of the headlines out there, we have the share economy to thank. Companies like VRBO, Airbnb, HomeAway and FlipKey (just to name a few) make owning an investment property -- or five -- a much more lucrative endeavor.
What can realtors do to capitalize on this growing trend? What does it take to become an established authority in the investment property arena?
To become an effective advisor to property investors an agent or broker needs to be aware of the pitfalls investors face and the mistakes they need to avoid.
#1 (Bad) Location, Location, Location
Knowing the neighborhoods to focus on plays a huge role in the quality of renter a home attracts. It may also affect tenant turnover rates. This is common sense for a real estate agent, but to an investor - especially a first-time buyer - this can easily be overlooked.
The risk of purchasing a less-than-remarkable location is especially true for out-of-town investors. Local realtors are an invaluable asset in this case.
#2 Mortgage Madness
Financing an investment property comes with its own set of difficulties. Many times an investor has an existing mortgage (their own home and other properties). Obtaining funding through traditional avenues gets tricky.
The go-to agent realizes this and has an extensive list of lenders offering alternative financing options.
#3 The Rehab Blues
There are several clichés that exemplify this phenomenon: “Biting off more than they could chew;” “His eyes were bigger than his belly;” “Too much on her plate.” There's a food-related theme here, but it's appropriate. Underestimating rehabbing costs can eat into profits. Quickly.
A first-time investor might be tempted to cut back in certain areas. A realtor with an expert eye for the types of must-do fixes that are not obvious on the surface becomes a valuable team member. Encouraging a client not to skimp when it comes to a thorough property inspection could save them a lot of money. And guarantee more business in the future.
#4 The Unsuspecting Landlord
The share economy (thanks to Airbnb and Uber) has opened the door for a lot of first-time investors. Many don't realize the long list of responsibilities that comes with being a landlord. From 2 a.m. disaster calls to baseballs through the window, the job description reads like a second career.
Savvy realtors understand these pitfalls. They will advise their clients on the benefits of a property management company. From screening tenants and collecting rent to handling maintenance and repairs, property management is especially helpful to the passive investor. Agents prepared with several recommendations (ones they have personal experience with) prove themselves invaluable.
Whether an agent is new to real estate or is thinking of specializing in a specific niche, focusing on property investors as clients have potential to be profitable. Of course, there are plenty of other pitfalls that investors may face. What other ways are there to become an agent who is investor-friendly?
