The residential real estate market is multifaceted. Some may argue that it's difficult to become an expert because there’s such a diversity among the types of transactions.
Do realtors need a niche? Is there an advantage to specializing?
Is there an opportunity for agents to specialize in residential real estate investment properties? Based on current market trends this may be an avenue to explore. If a realtor does decide to focus on one specific buyer or seller type, what do they need to make themselves the go-to agent for that niche?
Here are three types of customers involved in property investment. Plus, some ideas on what it might take to become an authority and their go-to real estate agent.
The First Timer
With the growing popularity of companies like VRBO and Airbnb, property investment has become more lucrative. And everybody wants in. Which means the number of first-time investors is on the rise.
The first-time property investor shares similar characteristics with the first-time home buyer. These investors are new to the real estate investing process, so they may not be educated on what it entails. Which means any agent looking to focus on this niche must possess the patience of Job and the answers to a million and one questions.
An agent must also be prepared to switch hats quickly. From counselor and legal advocate to voice-of-reason and financial advisor. Understanding a client’s financial goals, why they decided to venture into property investing, is a priority.
Arranging financing for property investment comes with an entirely new set of obstacles. Of course, it’s not the agent or broker’s responsibility to make skilled investment decisions for their client. However, the prepared agent who can answer first-time investor’s questions about investment property financing becomes an invaluable resource. Explaining (in layman’s terms) the pros and cons of cap rate versus cash on cash (CoC) return to a freshman investor sets a realtor up to be the go-to when the buyer graduates to senior investor status.
After the first house-flipping reality show aired on cable TV this type of investing quickly moved into the mainstream of real estate. The buyer persona in this niche is the short-term, active investor. These investors think of their investments in terms of months. They want to purchase, rehab, and sell in the shortest time possible.
A quick turnaround requires “quick money.” Realtors who serve this niche must be knowledgeable about non-traditional methods of financing. It’s likely these buyers already have a mortgage on their personal home. An agent who presents the rehabber with a list of non-conventional financing choices from small local banks and credit unions, hard money lenders, and even crowdfunding options is priceless.
The real estate agent who wants to become an authority in the rehabbing niche has an extensive database of resources. Resources that help investors meet their short-term goals. Your flipper will appreciate a list of reputable contractors, plumbers, electricians, flooring installers, painters, and landscapers. And if the customer plans to rehab and rent, an agent who can easily explain the difference between mortgage insurance and landlord insurance proves their worth.
The Long-Term Investor
An enterprising agent who caters to the seasoned investor can truly capitalize on this niche. The investor wants to build a successful team and grow their portfolio. The foundation of that team is a savvy realtor.
Sometimes investors need a fresh eye, an outside view, in order to avoid over-analyzing every investment. Having a solid understanding of the local area, knowing the most active neighborhoods in your state, allows the realtor to advise the investor on a specific neighborhood’s investment potential. Hands-on knowledge about which types of properties -- apartment, condo, single-family home -- are most profitable is also extremely important. Once an investor realizes they can discover more than basic information by partnering with you, the relationship becomes more likely.
It’s not uncommon for successful investors to search outside of their area. In this case, their interest is in accurate and up-to-date information like:
- Renter population and demographics
- Renter turnover statistics
- Reputations of local property management companies
- Number of distressed properties
- Potential for resell
You've heard the phrase “jack of all trades but master of none.” Do you believe it holds true for the real estate industry?
Outside of residential properties, there are many unique areas of real estate specialization. There are commercial realtors and land consultants. Some agents focus on property development. A horse property specialist can answer any equestrian-zoning question. These agents are experts in their chosen fields.
Is there an advantage if realtors develop a niche and focus solely on one area of the residential investment scene?
I'm interested in your thoughts. Looking forward to reading your comments.