Real Estate Blog - UNDERSTANDING THE REAL ESTATE INVESTOR CONSUMER

Home : Blogs : Lenn Harley, Real Estate Broker, Maryland & Virginia : Lenn Harley, Broker, Homefinders.com in Maryland and Virginia

UNDERSTANDING THE REAL ESTATE INVESTOR CONSUMER - AGENTS BEWARE!

* * * * WARNING! HARD CORE REAL ESTATE TALK * * * *

THE CONSUMER INVESTOR GOAL: To get rich [investing in real estate].

THE CONSUMER INVESTOR: A consumer with no real estate experince.

THE TRAINING: TV Infomercial.

EVERY DAY OF EVERY WEEK OF EVERY MONTH, I receive telephone calls from real estate "investors" seeking information about "deals" that we can show them that are priced "below market", in good condition that they can buy and resell quickly.

THERE ARE MANY EXPERIENCED REAL ESTATE INVESTORS IN THE MARKET - THEY BEAR WATCHING.

Watch the investor class real estate buyers. There are many serious investors in the real estate market and they should be watched closely because the experienced real estate investor buyer is a good barrometer of when the market is bottoming. Investors are smart. They can "do the numbers" and determine if the prices are at a point where the investor can either rent for profit or improve and sell for profit. These investors often have cash to invest, understand investment financing and do not get emotionally involved in the transactions. Investors have been quiet for about 4-5 years. They rarely buy at the peak of price fluctuations. Since they are not planning to live in the properties they purchase, their investments are in properties to rent or to rehab, remodel or tear down and build new or land purchases. Often the investor buyer is a 1031 investor and, for the agent, is just like any other real estate transaction and 1031 investor buyers or sellers can be very good clients.

Serious investors are usually well financed and often belong to consoria of like minded investors through partnerships. Their purchases are often in the name of corporations, LLCs or Partnerships. These folks know what they're doing. They've been out of the market since about 2004-2005 as prices were escalating. Now that prices are coming down in most market areas, professional investors are coming back in the market.

However, there are investors and there are investors. The professional investor class has cash, financing, experience and knows what they want. Real estate agents can do well representing professional real estate investors. However, real estate agents need to be wary of the "consumer investor".

PROFILE OF THE CONSUMER "INVESTOR"

The expert consumer investor: Has watched approximately 25 TV infomercials about real estate investment. May have spent many sleepless nights to catch several. 75% of the consumer investors are watching for secret clues about how, what, when and where to invest and get rich through real estate investing without the need for actually spending any cash. The infomercial doesn't give specifics, but sells the sizzle, the goal of getting rich through real estate investing. The consumer doesn't really grasp the how, when and where, so they order the books and tapes planning to get rich through the program. After all, if it's on TV, it must be true. After reading the book and watching the tapes, they consider themselves expert real estate investors.

The accidential consumer investor: 20% of the consumers watching the infomercials are pre-occupied with the partially exposed ample bosoms of the female narrators and forget what was presented in the program. So, they order the books and tapes advertised to learn more. They often seek to partner with family or friends in real estate investing.

The passive consumer "investor": 5% of the consumers watch the infomercial to view the partially exposed ample bosoms of the female narrators. They don't watch infomercials with male narrators. They don't order the books and tapes.

RESOURCES OF THE CONSUMER REAL ESTATE INVESTOR:

The expert consumer investor: Is focused on finding properties to buy that they can resell at a profit but have not focused on financing the purchases. Subscribes to paid published foreclosure lists, attends real estate auctions, reads the newspaper for FSBO ads, subscribes to bankruptcy filing lists, reads local newspapers for foreclosures auction ads and may attend some county foreclosure auctions, making them "experts" in real estate foreclosure auctions.

Investors Welcome

The accidential investor: Contacts local real estate agents looking for information about "good deals" that the agent know about and can show.

The passive investor: Has decided to focus on getting rich by building an Internet site selling something advertised by narrators with partially exposed ample bosoms.

AGENTS WORKING WITH EXPERIENCED REAL ESTATE INVESTOR BUYERS benefit by having clients that know how to make a decision and are able to buy what they want. Agents working with consumer investors expand their market knowledge, but . . . . . .

Courtesy, Lenn Harley, Broker, Homefinders.com.

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 06/24/2008 08:28 AM

Comments (33)

real estate investing

Post is included in group: Realtors®
Post is included in group: Dedicated Bloggers
Post is included in group: The Ninety-ninth Percentile
Post is included in group: Mortgage, Foreclosure & Elder Abuse Housing Fraud
Post is included in group: Club Chaos

33 Comments on UNDERSTANDING THE REAL ESTATE INVESTOR CONSUMER - AGENTS BEWARE!

JUN

2008

Hi Len. Lots of time spent with "investors". I guess if you find the right ones, it may be worthwhile. Mostly time poorly spent.

Ken

ROFL...I almost choked on my coffee reading this one...LOL...classic! Yeah, there are plenty of these folks around and I avoid them like the plague. Not only are they a waste of time, they are annoying!

Ken. I learned during the 1980s that consumer investors were going to be a big waste of time. I do get a lot of calls from them though. They are all looking for a great "deal". Like everyone else isn't?

We get so many "investors" in our area. I actually joined (read paid CASH) to become one of them. Why? Because I wanted to know what all the buzz was about. As it turned out, I only confirmed what I already suspected.

The leader of the group, an attorney turned investor, makes a boat load of money selling his tapes. He has tapes and seminars for every situation in real estate. Of course they aren't cheap.

What I did learn is how good a marketer he is. Before every meeting, seminar or get to gether I get a personal telephone call and email notice reminding me.

He never lets up on the marketing, selling the benefits.

Now I know what the buzz is about. It's about selling dreams of success.

Susan. Thanks. Indeed. I don't represent them. Some of my agents have over the years. Actually, we've done very well with 1030s.

I love the line, "because its on tv it must be true..." - too funny. You know, you forgot that so many consumers become accidental investors when they fail to sell their old home after they buy a new one and then are forced to rent it out. That also makes them experts... :-)

This blog has great humor in it as well as fact. I get so many calls from people wanting "cheap" properties. One ad that I wrote and actually blogged about has just about worn me out with all the calls. Even though I put in the ad that it is not habitable, I guess they think I'm stupid because they still want to know details. I hope it sells this week to a California investor who has never seen it. If it does I'm going to blog about it.

Kristal. Indeed. They sell sizzle and tapes and books. They are motivators. Or, should I say snake oil salesmen.

Cameron. You're right. And they rarely use the services of professonal property managers.

great post..I will have to remember all of this...thanks

LOL, Lenn. The lure of investing success traps many who outgh to spend their time, and money elsewhere. The folks who know what they are doing are successful, but those who wish to be so often haven't a clue about how to go about it. Some classic lines in this one!

Jeff

I can almost always tell when someone has just taken one of those TV investor courses. It's actually kind of enlightening to ask them whose course they are following.

Lenn,

We both must be getting the same calls...they go from state to state. I think they are watching too much TV. What does the term deal mean if you are all over the place. I get the send me the whole state of FL of all the listings that are deals....makes no sense...throwing darts and hpoing to hit a target blindly is not in the the clients best interest. Target an area and a price range and what you are looking to do.

Barbara. I can't wait to read that one. I have sold a lot of properties sight unseen, but I'd hesitate with a rehab.

Michael. Thanks for dropping by.

Jeff. Thanks. Some of the lines I hear are classic. "Can you help me find a deal".

Joe. Indeed it is. I don't criticize them. I just get off the phone. If they sound like serious investment buyers with money, I have some very good investment agent partners.

Neal. Experienced investment buyers know what they are doing. IMO, they make a real contribution to the market.

Hi Lenn, So in other words, steer clear of the consumer investor!! They'll have you chasing something that doesn't exist!

Thanks for sharing this!

Yvette. Indeed. If my first broker had warned me, I'd have saved a lot of time and gasoline. I learned the hard way.

Of course, that was before ActiveRain.

That was before the Internet.

That was before . . . . .

Lenn,

I always enjoyed my old brokers response..."If there's a good deal out there, I'm gonna grab it"...end of phone call usually!!! Thanks, Fran

This was spot on, Lenn. To my way of thinking, watch what the pros are doing to guage the direction of the market and watch what the consumer investor is doing to determine where not to put your money. The froth that my market experienced in 2005 was due in large part to the highly explosive combination of amateur investors and easy financing. When the abundance of each dried up, the house of cards began to fall in upon itself. Not coincidentally, the professional investors stopped buying into local Real Estate well ahead of that surge, knowing that it was not sustainable. Now that everyone else is kicking tires on the sidelines, however, the pro has returned to our market in a big way. Should be an interesting rest of the year.

Thank goodness my own market is not one that investors would like. It is too hard to make a profit here, without actually living in the home as one's principal residence. However, the Valley, just down the hill is full of these "get rich quick" delusions. While there are many opportunities for the pros with cash, the inexperienced need to watch out and research financing before even attempting to jump in that niche.

Elaine. Foreclosures are not a large percentage of our listings or sales, but they are a large number of our calls. When the news reports foreclosure, investors come out.

Paul. There were a number of investor buyers who did very well bying into the boom, 2003-2004. By 2005, they were finished. That's when a lot of consumers stepped in. Mmmmmm.

Fran. I've actually told a few callers that very same thing.

Great post Lenn! When I was a newer agent, in the 90s, I spent some time with those consumer investors. Usually, no money, poor credit, but very insistant that if I wouldn't jump through hoops for them, someone else would be dying to work with them.

The snake oil salesmen are out in force right now, and I'm getting the calls again too. Out of curiousity, and to see who was there, I attended one of the "VIP - FREE to you, but $249 for everyone else" seminars last month. I snuck out at the break, but could tell that it was leading to the "Secrets to get Rich" books and tapes, worth "$ millions" but "special offer to YOU, for the next 2 hours it's only $1595!

Vicki

Vicki. Funny. I get those invitations all the time.

There is a TV ad running new for real estate auctions held in a hotel offering absolute auctions. I'll bet they were packed.

Ahhh..this was funny and too true. I had a poor woman (in her late 60's) attend an "Armchair Investing" seminar. She purchase 5 duplexes using thier model and went into foreclosure on all 5. Bankruptcy followed and she lost her antique store in the process.

So many people are so gulliable. I know a "real investor" when I see them because they are ALL about the numbers.

Melina. You are so right. Most real estate investors have a very good handle on future value and ROI. They're pros.

Lenn, During the boom my market was raped by "consumer investors. Now mostl of these "flips that flopped" are sitting vacant and in some stage of foreclosure. There are hundreds of them.

I had an "investor" call me a couple of weeks ago looking for deals. I asked him if he had ever bought an investment property before. And his answer was "No, but you can teach me". Well OK then. So my next question was do you have any money. Of course his answer again was "No, but you can show me how to buy with no money." I referred him over to C21 :)

JUN

2008

My dear, sweet Lenn, how deliciously factually hilarious! :-)

C Tann-Starr. Thanks. I've been getting the same calls from "investor" folks for 20 years. Their expectations haven't changed a bit. It's the "get rich in real estate syndrome".

Bryant. I would have done the same thing. Funny thing. Many of the foreclosures on the market for sale today were purchased by real estate agents, brokers and loan officers in 2005, 2006. Many closed on new home buys after the market started to slide. Why, why, why???

Great info Its good to see it laid out so simply

I wonder what they think I am going to do if I find a deal for 60 cents on the dollar after repairs?

My favorite infomercial of all time is the one with the guy on the boat who barks out, "Come to my seminar, we have women on yacht!". HA! Sign me up, loser!

P.S. Are the gold star Gods on hiatus? This is at least the 4th post I've seen this week that REALLY should be featured and isn't. What gives?

Amanda. I can't complain (although I do often enough) because I get my share of features. I believe that I got a feature within a day or so of this one with the First Time Home Buyers Steps to Buying a Home or something.

JUN

2008

Excellent points that every investor should know. We have so many foreclosures inour area. .and everybody want to be an investor.

JUL

2008

Lenn,

It's sometimes quite amusing when we in the mortgage business get calls from these consumer investors who are stuffed with TV infomercials. They really believe that real estate investing is a cinch.

This blog does not allow anonymous comments