Episode Transcript
[00:00:00] Tell me this, what agent wouldn't want a client that consistently buys multiple homes every year? I mean, if you're not working with investors and it's not part of your business plan, you're literally leaving thousands of dollars on the table for some other agent to come and pick up.
This is the agent mind podcast. Hey, once again, the agent mind podcast. Thanks everybody for tuning in today. We've got a great topic. I'm TJ McGraw. We got our co host James Dickey. Here with us today. Um, uh, today is going to be about working with investors. There's just such an opportunity there. They're investors are always buying.
If there's a deal, investors are always buying. So it doesn't matter what the market looks like. It doesn't matter if the market's up, market down, sellers, market buyers, market doesn't matter. Investors are always buying. The caveat is though, if there's a deal, so some of y'all might be thinking out there like, I don't want to work with investors.
They're, they're pain in the butts. They, you know, [00:01:00] they, they, they want to ridiculously, you know, low ball offers all the time. And I just, they're just a pain in the butt to work with. Well, I can tell you this right now that a lot of investors are thinking the same exact thing about you that you're a pain in the butt.
Um, and really what it boils down to is a. It is miscommunication and misunderstanding on both sides of the roles and what value you bring. You bring as an agent, you have to bring different value to the investor than the value that you would bring to a regular old home buyer. So we're going to talk about that today.
Um, that's it. I'm going to stop talking with the intro here. Let's just dig right in. James Dickey. What's up, man? How's it going? It is going great, man. How are you doing today? Awesome. It's a, it's always a pleasure to have you on co host in the agent mind podcast. Yeah. Excited about excited about today.
We're going to talk about, um, investors working with investors, converting investor leads into clients and, um, kind of building that [00:02:00] relationship. Um, cause it's, it's a little bit different. Um, I think it's worth talking about because although, uh, basics of what we do is relatively the same, but there's a little bit of a different mindset when it comes to investors.
What is the difference between a typical, uh, client that we work in, in residential as opposed to investors? The biggest difference between working with a family when you're looking for a home that they're going to be living in, maybe raising their family in, and working with an investor is that the investor oftentimes has no emotion attached to it.
It's just a business transaction for them. With the family, there's a lot more emotions involved. An investor, it's a business transaction. So oftentimes if it doesn't work, it doesn't work. If the numbers don't work. That's it. Walk away, walk away. They can walk away a lot easier because they haven't like fallen in love with a property.
If they can make the numbers work, if they can get it for what they, what they want to make their, that fits into their like buy box, so to speak, then they're going to go ahead forward with it. If they can't, they're going to walk away and go on to the [00:03:00] next one. So I'd say that's, that's the biggest, the biggest difference.
Yeah. But I think it's, uh, it's, it's the, what you said from the very beginning, it's the, what kind of investment do they have in the property? They're looking at as a financial investment as, as opposed to somebody who wants to live in there. So that's, that's really, uh, one of the big differences, like you said, um, where do you find investors, um, that to work with?
Oh, well, I'll tell you what you, um, there's, there's, there's a bunch of different ways. Now, if you're, if you're fielding leads and you're prospecting, you're doing what you're supposed to do, you're going to come across people that are, that are interested in investing at least, or you may come across an investor through your, your normal operation of being an agent.
I'm guessing that anybody that's been doing this for even a few months. And calling buyer leads has come across somebody that was like, at least thinking of investing, whether they can or they're in a position to do or not. Um, so you probably come across them. So that's, that's one way, just keep an eye out for them and then don't be [00:04:00] afraid of them.
But I think today, hopefully we can kind of give you a little advice on how to, how to speak to them because you guys speak to them a little bit differently. Um, don't be intimidated by it. It's just like, they're, they're looking for different information. You know, they're looking, they're not necessarily looking to see if, um, if, uh, there's, you know, uh, the, if the backyard is going to be good for kids to play in, they're going to be thinking, you know, how, how much can I rent this for, how much do I have to put into it?
So, um, a little bit different there. That's kind of the first way we, we kind of come across investors. I'm working with an investor now, repeat client. Um, they came through off of an online lead. And it was the first text message I had with them. Cause I sent a text messages because I was in the middle of something in the middle of appointment, I think with somebody else.
But the first text message I reached out to them, they responded back. Like, I want to make an offer this amount of money for this house. I'm like, Oh, this has got to be a joke or something like that. So I called him, got him on the phone and like, yeah, so we, I made an offer within [00:05:00] about, I would say 45 minutes of getting that lead in, I made an offer and because I kind of jumped and did that and just didn't really ask any questions and I've already worked with investors before.
So it was just like, okay, we're, this is a business business decision. Let's get this offer in. I knew that the offer wasn't going to, wasn't going to stick, um, or I had a hunch it wouldn't. Um, and it didn't, but then we went on and we bought other properties and sold properties and I'm getting ready to list one of the properties right now.
But so that's, so that's definitely a one way to do. Another way is, um, look for real estate investor meetups in your area. That's a great way to meet investors a hundred percent. Um, and, and just your, your sphere as well. Like it, it's having, having conversations with your sphere about real estate. It's most people, I would say eight out of the 10 people in your sphere have thought about investing in real estate at one point or another.
So just talking about it with them, not being [00:06:00] pushy, obviously, but just having the conversations about what it looks like. Um, and as soon as they allude to, you know, they want to own a rental property one day. Then you can kind of go down the road. What does that look like? You can get into these conversations with your sphere.
And a lot of times it, it can make sense. They just need a little bit of, of education from you as far as what the market's doing and how easy it might be to get to acquire a property. For sure. So I'd say those are the three biggest ways, biggest ways to do it. The most intimidating might be going to the, the, uh, meetups, the meetups and the networking.
Yeah. That might be the most intimidating because we don't, investors kind of, they contend to look at agents either with a love, hate relationship or. Uh, like they don't need agents at all relationship. Well, again, that kind of leads me to my next question really is, uh, you know, why do real estate, uh, real estate agents get a bad rap and then that with investors?
[00:07:00] Well, yeah. Um, well, I'll tell you what, well, there's many reasons, all right, we can say many reasons, but oftentimes an investor has, is more savvy about the market. They understand the market better than the average, um, person or every family that buys a house maybe once, twice, three times in their entire life.
So, um, because they're buying and selling houses all the time, probably a couple of year if they're, if they're, you know, moving with their investors, investors. If not, they've, they're definitely buying houses and buying real estate more often than the average person who's not an investor. So that, that knowledge, uh, you know, gives investors empowerment to make offers on their own where they don't, they don't really feel like they need.
A real estate agent and some don't. There really are, there really are investors out there that don't need an agent for most things. Um, I think that if you, lemme put it this way, there are investors out there that understand [00:08:00] the value that agents bring to the table, and they're willing to, to pay for that, that value.
They understand, look what, what an agent does as far as marketing the sale. Um, finding houses, helping, we're gonna talk about that in a minute. But, um, you know, bringing deals to them like they understand that the. The value in a lot of them do, um, but they're not, they don't necessarily want to be tied to one agent.
Um, they don't want to be, um, you know, they don't, they, they just, if they can do it on their own, they're going to do it on their own. Like if they, if they get a deal from a wholesaler, then you're not going to get that deal, which is totally fine. You should be totally fine with that. You can build your relationship with investors in a different way.
Even if it's someone that is against realtors and they think that all realtors are out there like used car salesman, just trying to, just trying to skim off their deal. Which unfortunately, because we don't know as an industry, most of us don't know, [00:09:00] I'm not knocking anybody. It's just, this is why we're having this, this, this episode.
Most agents don't really know what, how to help, how to serve investors. So we come across as like, Oh, let me work for you. Let me get it. Let me get in on your deal. Let me do this. Let me do that. I was like, I don't need you. Cause I can find my own deals. I don't need you. Cause I can sell my own houses. I I don't really need you, but so, so trying to help you have to bring different kind of value to an investor than you do a family that's looking for, you know, a family home.
How do you handle the conversation about commission? Well, how do you get your worth? How do you, how do you define that question to an investor? That's a, that's a great question. And I, most investors are going to, this is what they're going to say. If you start working with an investor, Hey, you're going to make some, a ton of money off of me.
I mean, what, what can you do? What kind of deal can you give me? And some of that's true. Um, like currently I'm working with an investor [00:10:00] right now. I'm taking, uh, I'm cutting my commission, which, which, if you hear me talk in any other situation, like don't cut your commission, you're not, you have to explain your value.
However, when I'm working with investors and I have two or three of them right now that are actively, um, buying and selling, and I will cut my commission for them because I know that they're going to use me again, or they have used me several times in the past. So I'll cut, I'll cut it a little bit. Now it's the same, it's the same conversation that you're going to have with.
Uh, a homeowner that's, you're at a listing appointment when you're there, you're asked to cut your commission. It's really the same conversation of, well, here, this is what, this is what I bring to the table. These are, this is all the marketing I do. This is how I operate. This is what I do. I negotiate, um, these kinds of deals when we're buying a house.
Um, I managed the whole transaction. Like you don't have to worry about anything. I'm going to give you all the information. With [00:11:00] investors, if you, I highly suggest you at least learn how to crunch the numbers that they're crunching. And every investor has their own like way of calculating whether a deal is good or not.
But here's a couple of things and we're not going to go too deep into it right now. But if you're out there listening, Google, what is the 70 percent rule when it comes to flipping houses? That's a, that's a key one to know. Um, the 1 percent rule when it comes to buy and holds. Um, those are probably the two biggest to know there's others out there and, um, know that there's, uh, you have to factor in capital expenditures, meaning, um, you know, a house could be cash flowing.
Say a house is cash flowing at a hundred or you think a house is cash flowing at a hundred dollars a month because the, the rent is 1100 bucks and the mortgage is a thousand bucks. Well, in reality, that house is not cash flowing at all. You're probably in the negative because things are going to have to be replaced.
[00:12:00] Um, carpets will have to be replaced. Place will probably need to be painted in between tenants. Uh, the, the heating and air conditioning could go out. The roof needs replacing. So all this stuff needs replacing. So you kind of have to factor that in as well when you're thinking about the numbers. Um, so just, just learning, learning a little bit about that.
There's some great resources out there. The BiggerPockets podcast is a fantastic resource. Um, there's plenty, there's plenty, plenty, plenty of, uh, YouTube videos out there to, to just give you the basics. You don't need to know all the terminology when you're, when you're first getting into working with investors, but you should definitely know those two calculations, 70 percent rule and the 1 percent rule when it comes to buy and holds.
So in essence, when you're talking about commission with an investor, um, I mean, it, it depends. I, I would normally, if I'm working with a new investor, we were developing a relationship. I'm not going to cut the commission all that much, but what I do say is, listen, I'm going to, I'm going to show you how it [00:13:00] works, how I work.
I'll, I'll cut commission by whatever percentage you're comfortable with. Um, and you know, we've got to be careful when we're talking about commissions just because everything that's going on with, with lawsuits and are and all that said, it is negotiable. Put it that way. Your commission is negotiable. Um, so negotiate your commission.
You should be negotiating for as much commission as you can possibly get, like that's the, that's part of it. And the investor is going to be negotiating for, to pay you as little as possible. That's okay. That's how it works. It's not any personal, but, um, so I'll cut it a little bit. I might cut like half the normal that I, when I'm starting to work with somebody, um, I can't, I don't want to talk about specific percentage amounts.
You have to determine that as an agent out there, what you're comfortable with, what you can actually sustain as a business model. Um, so I'll cut a little bit on the next deal. I'll cut even more and then I'll kind of keep it. Keep it at a, at a little bit lower rate. I don't cut it by that much. So let's put it that way.
Yeah. I want to give them a deal [00:14:00] because we're getting, we're doing repeat business and I want to establish a relationship for me. It's easier if I'm working with the same person over and over again. It's easier for me to work for with that person. So I'm like, I just have systems in place. I have, I know I have their special stipulations that I know that they're going to use.
I have them in a document. So whenever I'm making offers, it's boom, boom. It's an easy process. Send it off for e signing and boom, it gets out and offered. Um, so it's a little more streamlined when you work with somebody over and over again, because you know what they, you know what they're going to ask for, you know what they want, you know, the special stipulations to put in there.
And you know, like what, that you've already had the conversations about the earnest money. So you get, you got all those like conversations out of the way. So it's really simple. streamline. I mean, you can have like, um, forms, purchase and sale agreements, like kind of set up for them already. And then you just go in and plug in the address and all that stuff and send it off.
So, and you don't have to, a [00:15:00] lot of times you don't have to be running around showing them houses either. You, you just make offers, you know, without, without going to see places. Um, so it's really not, you're not working as much if you're doing it right. And you're managing yourself and your clients, you're not working as hard or as much as you would.
With a family that wants to, that needs to go out and see every house and needs to go, um, visit the neighborhood and, and, you know, all that stuff. So that's kind of, that's a, that's a long way of saying like, yeah, if some, if you've got a repeat client, that's going to do multiple deals with you and within a year, I think it's, that's really one of the only situations that I would, you know, offer up a little bit of cut and commission.
Okay. Well, you know, that's, that's a great answer, but, um, I got one thing that leads into that as well, because you have a couple of investors you work with. What do you do, um, as an agent? When they work with somebody else as well, not just solely you, but they use a different agent or they refuse to sign a buyer's [00:16:00] broker agreement, you know, what do you do then?
Yeah, so yeah, that's a that's a great question. It could because They just want a deal and it's not gonna bother me if another agent comes to comes with a deal or somebody else comes comes to the to my investor that I'm working with with a deal if it makes sense for them And it works for them. I'm happy for them.
But what I can tell you is that I'm out there and I'm looking for deals for my investor clients. I know where they bought before. I know what, what kind of house they're looking for. Like I have their, the term buy box, which is often, often when you're talking about like an eye buyer or investors, it's like they have a box, you know, that they're, that their criteria fits in.
And if it's outside that box, then they're not going to look at it. They're not going to be interested in it. If, if the house fits all the criteria that's inside their box, then, then, yeah, I'm going to, I'm going to reach out and talk to them. [00:17:00] And this is for stuff like outside, not on the market yet. Um, maybe, you know, if I haven't talked to an investor in a while, I might reach out and be like, Hey, there's some expireds over here.
Like, you know, you want me to reach out and see if they're still interested in selling that kind of thing is like, you, you still want to. You just want to work harder than any other agent for them. But if you think about it, you're just doing your normal everyday stuff, just keeping in contact with your past clients.
So if you could look at it that way, it's pretty simple. One thing I do that works really well is I've, I've helped my investors purchase. And then I will keep an eye on the neighborhoods that they purchased in or the area that they purchased in. And if something. Um, like, but I think a couple of weeks ago, I saw a house that was probably about three doors down from a house that I helped an investor by maybe two years ago, two or two and a half years ago.
A house just came up on the market that was just down the road from them. It was [00:18:00] in his price point is in his price range. I know he buys in the area cause we bought a house just on the same street. Um, and I know that that home is doing well for him. Because I, I check in and make sure that, you know, did, did what were you, what are you getting for rent?
You know, what, all this stuff just to, just to keep in contact with them, just to, Hey, I'm certainly interested in that because it helps me with other clients, other investors. And B I'm, I'm genuinely interested to make sure that he got a good investment or he got the investment that we were expecting him to get he or she.
But, so I called him, I said, Hey, this house down the road, uh, one, I don't know, it was like one 30 steel branch drive. Um, that it just listed, they're asking, I forget what they're asking for. It was, it was like, it was pretty low for, for Metro Atlanta area. It's like one 55 or something like that. Smaller house, you know, great for a single family rental home, but, um, he was so happy and he went into a big explanation about when he's going to be ready to buy again.[00:19:00]
He told me about all his properties that he has going on. Some he bought from a wholesaler. Some didn't do very well. He unloaded some to other investors, you know? So a long story short is like, if some, if an investor is doing a deal with somebody else, I'm not going to get upset, but I'm not going to waste time in my brain, like thinking, Oh man, that should have been my, because it shouldn't have been your deal.
If it should have been your deal, then you would have found the deal and brought it to him. You know what I mean? So, um, that doesn't mean that they're not going to work with you again. And oftentimes if you're working hard for, for somebody and you're doing the things like reaching out and informing them about the neighborhood, calling them with properties.
Um, you know, just keeping them informed. They're going to use you most of the time. They're going to stay loyal to you. They will. Unless they're like horrible people. As long as you're, if you're loyal to them and you're working hard for them, they're going to be loyal to you. But that doesn't mean that they're not going to buy a, get a deal from somebody else.
They might go directly to, um, you know, an agent that has a listing [00:20:00] and just say, Hey, you know, I'll, I'll whatever with, with commission, I won't use an agent and you, you get, you know, if you get the commission or whatever, just to get a deal on the house. So it is what it is. Don't investors are a different breed.
They're not, they're not, they're not thinking that they're doing you any wrong because they're really not. I mean, they got to look out for their business. So, you know, I mean, I think that, you know, like you're talking about, it's really all you can control is your own mindset. Exactly. But I mean, get out there, go to work.
I know that's for some agents, that's, that's a dirty word. Go to work and, and, um, it's called bird dogging. So bird dogging means you're, you're bringing deals to invest. You're finding houses to buy off market for investors to purchase. I will do that. I'll find a house, bring it to an investor. And then knowing that I'm not going to make a lot on that, that purchase.
Like if you buy a house for 80, 90 grand, I mean, you're not making a big, huge, [00:21:00] not a lot, but I know that I'm going to get paid on the sale of the house. So, you know, I get, I get the full, you know, whatever percentage I'm not cutting a deal really on the purchase side. But on the, on the sale side, that's what I get, I get paid again.
So, and then, you know, then if that works out well, and I do a good job with that, then of course we're going to, we're going to find another house and we're going to do all this. So, um, one other thing to get to get, learn about 1031 exchange, right. And learn about that, Google it, talk to your closing attorney about it.
There's just like a document that you need, usually, I'm not sure every state's a little bit different with what the documentation is, but there's just something on the, on the, uh, you know, with the paperwork that you, that you need. Um, and that's really, you don't have to do much else than that as an agent, other than just know that there's time limits and all that stuff.
So, um, that's just a side note. So that, so basically they just get bird dog, meaning be the bird, like [00:22:00] what a bird dog does. They go, they'll get the birds and bring them back to the hunter after, you know, they shot. So when they're, when you have. A home that, you know, is good for investment. I mean, don't walk away from it, like build, build relationships with investors.
And even if they don't use you, you can still there, uh, build a whole list of buyers that when you come across a home, uh, you get a listing lead and there's somebody that really wants cash quick. The house is in disrepair. It might be a hoarder situation. They just need to pay off some bills, call these investors and be like, Hey, I have a deal.
You know, are, and come, do you want, are you interested? Is this given the criteria you'll find somebody that way. And the more you do that, the more of a reputation you're going to have as someone who works with investors and the more, um, investors are going to, you know, seek you out or, or use you. What do you think about real estate agents becoming investors?
Do it. If you can do it, do it. Yeah. [00:23:00] Uh, I think that to really, A, it's going to give you awesome credibility when you're working with investors because they know you're an investor. You're one of, you're kind of one of them at that point. Um, and also you just, you know what they're going through as far as like making business decisions.
And you know, you'll know what you'll know, you'll just have a better insight on what they're looking for. And I mean, there's no greater way to build wealth, I think, than, than real estate. So if you, if you have the means and you can do it, I say go and invest in real estate. We're so connected to the industry and so connected to the market that we should be investing in properties and, um, building wealth that way.
So for sure, I think it's one of the best ways to build wealth is to own real estate. Next week, um, I got an agent coming on. That does investing and is, um, very involved with. Being an agent and investing. He's flipped a bunch of houses. Um, [00:24:00] and, uh, so we'll talk more about the strategies with him. Um, but if you, if you have the will and the, and the way invest in real estate, it's, it's fun and you learn a lot and you can build wealth at the same time.
Um, but you know, don't, don't, if it's not something you're into, then don't, don't force yourself into it. It's the, there's other ways to make money. You know what I mean? So you gotta, you gotta have a passion for it. I assume that most agents have a passion for real estate because. That's what we do. That's what we know.
So why else be it? Well, I would question, if you weren't interested in investing as an agent, I would question why you're in real estate to begin with. I mean, you know, you never know. So I guess, I mean, I guess that's about it. I know we're going to, we're going to talk more and there's, there's more questions.
I'm sure that every level of listeners have about investing. We're definitely going to talk more next week. Um, this is part one. So we'll just go from there. In the meantime, if you have questions, you want me to ask this agent investor that's coming on the show next week, send me an email, [00:25:00] TJ McGraw at the agent mind.
com. Send me an email and shoot me some questions. You want to know from the, from the agent that we're bringing on. I'll go to the Facebook page, the age of mind, Facebook group. And, uh, if you're not a member, join and ask the question in there, shoot me a direct message, whatever the case may be. If you have questions, reach out and, uh, we'll get them asked on the, on the episode next week.
With that, we'll, uh, we'll wrap it up. We'll see y'all. Next time we'll see y'all on the flip side
