By Margaret Kelly
Responsible investors have a major role to play in the real estate recovery—and it could be even greater. Unfortunately, lenders and policymakers seem more focused on the recklessness of fix-and-flippers during the boom times than on the positive aspects of encouraging sound investment right now.
Despite restrictive lending and challenging rules, investors are the prime force moving distressed properties off the market. The clearing of this inventory is a vital step—it could take another two or three years—and rules that make it easier are surely worth considering.
Many of today’s investors are normal people buying a home or two as rental properties. In many ways, their actions benefit everyone, bringing us all closer to a healthy industry. By providing professional assistance to these investors, we can take part in this process as well.
What They’re Up To
Investors currently make up about 24 percent of U.S. residential buyers. That’s up from a steady pre-2011 level of under 20 percent. What’s more, because nearly 77 percent of investor transactions are cash, today’s historically low interest rates aren’t driving the upward surge in activity. That tells you something about the confidence investors have at this point.
And it’s not just the old pros. First-time investors are catching on, too; some of them are so sure of the market that they’re buying properties with their IRAs; when they sell later, the profits will stay tax free in the IRAs.
In many cases, investors are buying structures no one else wants, particularly damaged REOs. According to a practitioner survey by Campbell Communications, investors are involved in 60 percent of sales of damaged REOs. Why? Because they have the capital to restore these blighted properties and turn them into rentals.
In contrast, investors are involved in less than 30 percent of sales of move-in-ready REOs, a favorite of first-time homebuyers (more than 40 percent). In other words, investors aren’t generally snapping up properties that are better suited as owner-occupant.
Within the distressed property space, investors are already accomplishing a lot—with very little support; imagine what they could do with more.
Where You Come In
I can’t say it enough: Training is essential to success in real estate. And that’s especially true when working with investors. You need to understand the process and be able to demonstrate the value you bring.
To learn more, consider the reputable training and resources offered by groups such as the Charfen Institute, whose Certified Investor Agent Specialist designation has empowered thousands of agents to work in this sector. Another solid option: the OwnAmerica program, which offers an amazing number of strategies and innovative ideas.
These types of courses teach you the language of real estate investment. They also get you thinking about how to market to investors, which is vital.
The teaming of investors and real estate agents isn’t a new concept, but because many investors built their portfolios without the help of an agent, there’s a bit of resistance in play. That said, more and more investors are looking for skilled, trustworthy advocates to be their eyes and ears in the hunt for good properties.
So the smart move is to get the training, learn the mindset and let investors know they can count on you. And as you help them turn distressed properties back into homes, you’ll be doing more good than you realize.
Margaret Kelly (CRB) is chief executive officer of RE/MAX, LLC. RE/MAX earned “Highest Overall Satisfaction For Home Sellers and Home Buyers Among National Full Service Real Estate Firms” in the J.D. Power and Associates 2011 Home Buyer/Seller StudySM.
For more information, visit www.remax.com.