As a Realtor it is essential that you are presenting properties to Real Estate Investors in such a way that they are able to make a decision almost immediately based on the information you provide them.
Here are a few methods:
- Send Comparables When You Send the Listing!!
When you send a property to an investor, make sure to send comparables of that property simultaneously.
The rate at which properties are being bought in this market is outrageous, investors do not want to waste time and lose a perfect opportunity because of a delay in determining whether or not the property will be profitable.
- Formulate a spread sheet!
If the investor plans to renovate a property it is imperative to formulate a spreadsheet which gives scenarios and determines the (ARV) After Repair Value.
If the property is already an income producing property or the investor plans to hold onto it as an income producing property it is essential that you provide them with a formulated spread sheet showing their rate of return.
If the property is occupied by tenants then you can provide an accurate picture for your investor, if the property is vacant then a projection will also give your investor an idea of what they are getting into.
Things to include on the spread sheet:
Purchase Price, Closing Costs, Fix – Up Costs, Mortgage Amount & Costs.
Income: Rent Roll , + CAM (if commercial)
Expenses: (Taxes, HOA fee’s, Vacancy, Repairs, Property Management Fee, Service Warranty etc).
After formulating the spreadsheet you should be able to present your investor with a CAP rate and Net Income. ** Ask your investor what their minimum CAP Rate is **
Does your investor really need a property manager?
Be sure to provide your investor with these 3 scenarios:
Net Income WITH Property Management + Service Warranty (A/C, Plumbing etc)
Net Income WITH Property Management + Repairs (percentage)
Net Income WITH Service Warranty (A/C, Plumbing etc) and WITHOUT Property Management.
Let’s face it, you investor would be more likely to buy more properties through you if they are producing a high return.
Some properties do not need a property manager, and sometimes having just a home warranty will minimize expenses and generate a higher return for your investor, which gives them more capital to purchase properties through you.
- Show Them A Projection!
Your investor wants to know what they will be getting for this property in the future if they hold onto it and rent it out.
Investors are curious to know the threshold of each property, show them a projection formulation with a rent roll ranging from low end to high end.
If they are purchasing a property with a mortgage, they will want to see how their rate of return increases over the years due to mortgage amortization.
Each scenario is different in Real Estate nevertheless formulas can be applied to Residential, Commercial and Business purchases.
Written By: Pawan Gulati – VR Universal Realty 1/05/2016 2:13 AM