How to Sell Real Estate Investment Property
It's fair to say, after thirty years specializing in real estate investment property, that one of the most frequently asked questions I got from fellow realtors concerned the steps I took to switch my real estate business from residential to income-producing property.
I wish I could say that it was complicated, and that maintaining an investment property real estate business required special skills and long hours of study, but I can't. In truth because it doesn't. In truth any real estate agent can sell real estate investrment property almost effortlessly, with only minimal preparation and a small investment of time.
Okay, let's consider the facts.
1. The buyers for residential income properties are the same people who buy residential property. In fact, they could be your previous "house" customers, or relatives, or friends and neighbors, or perhaps even someone who surfaces unexpectedly during a cold call. The point is that investors are likely to be people that surround any real estate agent.
2. Reject the notion that investment property is reserved for investing experts. Some instances might require a more specialized commercial expert (of course), but normal real estate agents can and commonly do handle many rental property transactions quite successfully. How do I know? Because many "non" real estate investing experts have already proven that real estate brokers can successfully service rental income properties as effectively as residential properties (myself included).
3. Real estate investment properties can generate multi-million dollar transactions. In other words, in some cases you can close a rental income property deal (say a small 10-unit apartment complex) equal to three or four house transactions. So you have a golden opportunity to bolster your annual earnings.
Fair enough, so here's how to do it.
1. Understand the essential nuance of real estate investing. Investors buy the cash flow. That is, investors are foremost interested in how much money the property generates as a result of rental income. Therefore, you must always keep the numbers in mind. So unlike residential property where amenities such as kitchen size and school district commonly influence a buyer's decision, real estate investors consider only what affect amenities have upon the property's ability to generate cash flow. Real estate investing is all about the numbers.
2. Know how to run the numbers. Having the ability to correctly run cash flows and rates of return for real estate investors will not only convey the impression that you're not a realtor just concerned about a commission, but a realtor who genuinely cares about the investor's money and is prepared to adequately assist the investor in making a prudent investment decision. There are numerous articles on this site that will help you with the various formulations.
3. Know how to present the numbers. Once you run the numbers your next step will be to present that data to the investor with clear and concise reports such as an APOD and Proforma Income Statement. Again, you will find various resources on this site that will explain the various reports to consider.
4. Start preparing. Begin by examining the rental properties in your market area have sold and/or are currently listed for sale to get an idea of market prices. Categorize them in the following way:
- Residential - 4 units and less
- Residential - 5 units and more
- Commercial (e.g., office complexes)
You'll want to temper your analysis as you would any real estate property: according to its location, age, and condition. Moreover, since these are investment properties, pay close attention to the rental income, vacancy rate, and the bottom-line cash flow.
Naturally, there are no certainties in life, and making a committment to service investment real estate is not a guarantee that you will enjoy the same success other realtors. But if you do your homework, maybe solicit the help of some qualified professionals (perhaps a colleague?), and remain patient enough to wait for the right opportunity, you should do fine.
So here's to your real estate investing success.
So You Know
ProAPOD Real Estate Investment Software was developed so novice and expert analysts alike can quickly and easily create the numbers and reports suggested in this article.