Real estate agents that ignore the potential of selling multifamily property as a complement to their residential business are losing opportunities to increase their earnings in a big way. Oh, there are some agents that occasionally fall into a listing or sale of a duplex or small apartment complex, but that still doesn’t address the opportunity that could be gotten with a more proactive approach.
The primary benefit of selling rental properties, of course, is the money. In most cities, for example, it’s not uncommon to find apartment complexes selling for $50,000 per unit where even a small ten-unit complex would have a fair market value of $500,000 and a twenty-unit complex one million dollars. And there are, of course, many other cities where that figure could easily double.
I don’t have to do the math for you—the commission you would earn as a real estate agent (even on one side of the transaction) for any apartment building with those fair market values would be substantial. So there are some real revenues that can be earned selling just one multifamily property. But there’s more.
Most real estate agents often overlook another characteristic common to the rental property buyers and sellers themselves; that they generally don’t own just one property, but several. In other words, whereby you might gain the trust of one particular seller and list his or her property, they could in fact own several others that you could subsequently list for sale later. And the same goes for the buyers. It’s not unreasonable to think that they might be in the market for several complexes (if not immediately, then surely down the road).
This is the nature of real estate investing that agents need to understand—investors buy and sell rates of return, and as such, they are always willing to take part in a transaction that would increase that return.
Unlike homeowners, for instance, real estate investors are not beholden to a multifamily property because it’s where they raise their family; it’s a matter of money; real estate investors buy and sell income property because they are in the business of making a profit. And if that means that two complexes are more profitable than one, or thirty units are more profitable than ten units, if financially feasible, investors are always game.
In this economy there’s another emerging truth. There are potentially multitudes of people ready to transfer their funds from a volatile stock market or low interest-bearing bank account into investment real estate. In fact, you could easily discover that even amongst your current customers that there are investors in the wings ready to make the plunge.
Okay, so what can you do to become more proactive with multifamily property and share in the booty?
Foremost, understand the nature of real estate investing; it’s all about the numbers. Unlike the features that might be important about a personal residence, real estate investors aren’t concerned with kitchen size or school districts; they are looking at the bottom line. In other words, how much cash flow, what rate of return, and how much profit are what drive investors.
As such, the way you effectively tap in is to develop the resources to run and present those numbers. The best way is with a real estate agent software solution because it will compute the numbers and create the reports for you. Of course you can also create your own spreadsheet if you have the time, skill, and patience.
The point is that must do something that adequately prepares you to work with multifamily property buyers and sellers. Remember, you aren’t presenting a personal residence to the investor (or potential investor), so it’s not about a property located near work that makes the sale, but your ability to present concise, rock-solid numbers that show and convince the investor that it makes financial sense. And best of all, with the right software, its right at your fingertips.