Why Sell Real Estate Investment Property?

james kobzeffReal estate agents commonly come to a crossroads during their business activity that concerns real estate investment property. It goes something like this:

“Should I start servicing other real estate besides the residential properties I’m already comfortable with and venture into servicing real estate investors and rental income property, or not?”

In other words, the realtor is really contemplating whether it would be worth the effort to expand his or her business activities to include selling real estate investment property along with single-family homes, or just to dismiss the notion altogether.

Fair enough. When I first became a realtor I also came to that same crossroad. But in my case, I guess I didn’t over think it and simply accepted the idea that any closed transaction (regardless) meant more commission and a bigger paycheck.

As it turned, I was right. It did mean higher commissions to sell real estate investment property; in fact, I liked the result so much that I devoted the following thirty or so years of my real estate career listing and selling investment property exclusively and never sold residential property again.

Okay, but I’m getting ahead of myself. I’m not suggesting that brokers and agents should give up their residential property business. Hey, there are home buyers that rely upon your expertise and service.

I’m simply suggesting to you (real estate broker and agent) that you are probably missing out on a great opportunity to increase your income by neglecting to list and sell real estate investment property. Think about this.

  1. You don’t have to be an expert. Whereas commercial real estate requires expertise, residential income property does not. With only some minimal preparation almost any realtor can sell apartment buildings.
  2. The listing and sale function is similar. Other than some nuances that we’ll discuss in a moment, it really boils down to just locating a property that meets the buyer’s criteria.
  3. You probably already know some investors. Chances are good that many of the customers you’ve sold a house to are ready to also make an investment in rental income property. So you may hit the ground running.

So how do you prepare?

  1. Foremost, understand that real estate investors buy cash flow, and are not necessarily interested in the amenities the way a home buyer is. A sale will depend on whether the rental income property is profitable, not whether it’s a nice place to raise the family. So think in terms of presenting numbers to your customer.
  2. Acquaint yourself with a few returns and reports associated with real estate investment property. Two of the more popular are Cap Rate and APOD. So make it your first assignment to learn about these.
  3. Research your local market. Look for what’s currently available from duplexes to larger apartment complexes. Pay particular attention to what financial data is presented to get an idea of what’s expected.
  4. Find a friendly colleague already engaged in real estate investing. Perhaps over a cup of coffee he or she will be generous enough to share some insights about real estate investment property with you.