Here’s the challenge. How are real estate agents supposed to make money selling rental income property in this depressed real estate economy?
After all, most rental property owners are requiring a price for their property based upon previous years’ “bubble” inflation, and buyers are choosing to hold on to their cash rather than to fork out the money for income property deemed over priced.
Fair enough. Nonetheless, there are elements that transcend what might be considered likely and in turn nuances at work that are inherent to real estate investing that might surprise you.
Here’s the deal. It has always been true with real estate investment property: There are always owners willing to sell and buyers willing to invest. In other words, there are always deals (and commissions) to be made if you know where to look and are committed to finding them—even when it appears you are seeking the proverbial “needle in a haystack.”
Yes, you heard right. There are opportunities to list and sell rental property out there waiting for you, but it’s not likely they will fall into your lap; you’re going to have to dig for them.
Here are some suggestions.
1) Prepare yourself for income property – At the very least, understand what an APOD and Proforma are, and learn the formulas for cap rate and gross rent multiplier. Research your market area to determine what cap rate income properties have sold for, or are currently listed. Invest in good real estate investment software so you are prepared to make sound cash flow analysis presentations. You wouldn’t expect any business owner to succeed who lacks knowledge about the product or does not possess the right equipment and tools. The same is true if you hope to build a successful rental property business.
2) Call your customers – In this case, you already have rapport with those you’ve serviced in the past, so you have an inside track, and probably won’t get hung up on. Ask them whether they might consider investment real estate, or perhaps own rental property that they might consider selling. Remember, you don’t know until you ask.
3) Listen to your colleagues – Attend office, local board, and other meetings where your colleagues (who are working with investors) are pitching “haves” and “wants.” Pay particular attention to the types of income property they’re looking for and don’t hesitate to go out and try to find it. My first income property listing was the result of driving around pinpointing and contacting owners of properties that suited my colleague’s buyer.
4) Contact rental property owners – To do this, of course you’ll need to know what rental properties exist in your town and who owns them. You can drive around and gather addresses then have a title company supply you with the owner’s name or you can visit the commercial division of the tax assessor’s office and gather them yourself. The more thorough you are the more names you collect and in turn, the more owners you will be able to contact.
5) Contact property management companies – This is sometimes the only way you will be able to contact an owner because rental property owners typically insulate themselves behind a management company. If you’re fortunate enough to build a relationship with a property manager you might get an inside scoop when an owner is considering a sale, but at the very least be sure the management companies know that you exist and are in a position to sell income-producing property.
6) Watch the classifieds for FSBOs – Check your local newspaper and Craigslist for rental property marketed by owners. It is never likely to see a For Sale sign in front of an apartment or office building because owners do not want tenants to know a property is up for sale, but sometimes they do post a classified.
7) Contact residential developers – Some homebuilders are also investment real estate owners, and given this sagging market, might be ready to sell or entertain an offer. Hey, they may even be sitting on empty houses that can be rented and sold as a rental property.
Okay, you get the idea.
If you want to list and sell income property successfully, not unlike any business entrepreneur, you need to understand your product, budget for the correct tools, and then do the legwork. It does work, but only you can decide whether you want it badly enough to make the investment.