As one who was actively engaged as an apartment specialist with Coldwell Banker in both, Claremont and Costa Mesa California, and later with Prudential Real Estate Professionals in Salem, Oregon, I understand.
After all, who in their right mind (especially a real estate agent competing for business) would be foolish enough to share with others (especially to friendly competition) the benefits a real estate agent receives by selling rental income property?
Of course, you probably guessed it, none would.
But my DNA also makes me a teacher at heart, so after over thirty years experience selling multi-family properties, I feel that its time to spill the beans.
In this article, I want to reveal the truth about selling rental property as well of the subsequent benefit real estate agents receive by jumping in and getting involved with rental property and working with real estate investors.
Selling rental property can be one of the most financially rewarding experiences any real estate professional can encounter during his or her career.
Okay, maybe aside from the residential mansions in Beverly Hills where prices are easily in the millions, apartment buildings are commonly sold at prices that exceed residential property prices in most market areas. Thus, apartment buildings are typically going to generate more commission dollars for agents than residential property.
It’s not unlikely, for instance, that in a market where the average sales price of a house is $180,000 that a ten-unit apartment building one block over may sell for two-to-three times that price.
And when you do the math based on a six-percent commission, well, you do the math. It means you get a more substantial payday on every transaction you close with rental income properties and investors.
Another unsung advantage associated with selling rental property comes in the form of what might be called “the real estate investor psyche”.
Once you sell a house it’s probably safe to say (barring something irregular like a job transfer or change in finances) that the buyer is no longer a potential customer for about five years.
On the other hand, since it is “investors in real estate” who purchase income property, you are always faced with the potential that your customer might want to invest in more rental property; or given the right set of circumstances may even want to exchange one investment property for something larger.
In other words, when you sell investment property, you work with investors who are always buyers and sellers (and therefore by association) you are always in the right position to acquire repeat business and maybe reap the benefit of additional commissions.
This was true with the first investment property I ever sold to an investor, and in most transactions I was involved during the years since.
Why, because real estate investors (by their very nature) are always looking for a property (or another property) that will make them money. And this means repeat business for you, and as a result more commissions earned.
The prospect of getting referral business from colleagues in the office or elsewhere is never lost or taken for granted by any real estate agent.
We love referral business. And the truth is that agents who work with income property do get recognized by agents who do not; and the result routinely equates to referrals.
How to Make the Transition
Fair enough, but you can’t enter the income property arena thinking like a residential real estate person. There are a few things you need to understand about real estate investing protocol to be successful at it.
When you sell rental income property, you need to present the numbers. It’s not enough to simply point out the on-suite bathroom and large walk-in closet because real estate investors are only interested in the bottom line: “How much money does it make me?”
You must present the cash flows, rates of return, and profitability numbers for every rental property to your investors otherwise you could merely “pound sand” and lose the opportunity. This is not difficult with good real estate investment software.
It is also a good idea to become familiar with some of the essential returns real estate investors look for to make investment decisions; otherwise you will appear less-than-capable of working with rental property and can lose credibility with the customer.
So it’s not a free ride.
You will have to make enough of a commitment to do some homework and invest in the proper tools. But it is neither really that difficult nor costly. And at the end of the day, you will reap the rewards.