While some of the relationships discussed in this article can actually be formal documented business partnerships, many will simply be a simple contract or a relationship with benefits for both parties. Real estate investors can work alone, but those who want to grow their business and holdings will build relationships and partnerships with others.
If you’re wholesaling or doing fix & flip, your customers will be investors in many cases. Building relationships with investors, especially rental property investors, is how you build a list of active buyers ready to buy your deals. Wholesaling often results in a sale to a fix & flip or rental investor depending on the condition of the home. Even if you’re doing fix-to-rent investing, you may change your mind about a property after you own it, and having active rental investors can provide a buyer for you.
More formal investor partnerships are popular when a pooling of assets opens up more funding for property purchases and rehab projects. Often an investor with the money is also someone who doesn’t want to take a very active role, but they want the benefits of lower risk real estate investment. The active wholesaler or fix & flip investor can partner with a more passive but well-funded person to do deals.
Also called “bird dogs,” these are people who don’t invest themselves; instead they locate possible deals for investors. They may drive around looking for owners selling their homes, or they find homes that seem to be abandoned or in the early stages of a foreclosure.
They normally don’t do much or any research or due diligence, as the job is to deliver the address and photos. They often get a small set referral fee. If they perform some of the due diligence, such as seeking out owner information, they are paid more, often at the closing if the investor buys the property.
Real Estate Agents
No matter what type of real estate investing you plan on doing, you will come into contact with real estate agents, and building relationships with them can be quite valuable. Here are values based on strategies:
• Listing agents can at times find that they are unable to list a property for the owner. It can be for equity reasons, or timing when the owner needs to sell quickly, or for other reasons. Building relationships with these agents to get alerted to frustrated sellers is valuable.
• Lenders and banks pay real estate professionals to perform a BPO, Broker Price Opinion, when there appears to be problems with the borrower’s ability to keep up with payments. The home isn’t yet in pre-foreclosure, but the lender wants a real estate agent or broker to drive by or at times gain access to a home to give them a value opinion before they take other action. Getting advance notice of these situations from agents can help investors to do their own due diligence for a possible purchase.
• Real estate agents want their listings to sell. When a listing has been on the market a while and the seller is getting a bit desperate, a price reduction is likely the next action. If an investor works with real estate agents and is an active cash buyer, these agents may give them advance notice of a price reduction.
Just getting to know agents and giving them your business card to let them know you’re in the market for cash home purchases could deliver business for you.
When someone dies, there is a probate process to pay the deceased’s debts and distribute the remaining assets to heirs. When real estate is involved, sometimes it’s sold instead of passing to heirs. The person in charge of this process is called either the executor or the personal representative.
The goal is to get as much for the real estate as possible, but there is also a time factor and sometimes pressure from heirs to get property sold so that the probate process can be over and they can receive their inheritance. Getting to know anyone at the courthouse or in other jobs who can alert you to probate when real estate is involved can be faster than reading obituaries or researching at the courthouse. You can approach the executor/personal representative if the property is of interest and let them know that you’re a cash buyer.
Anyone who deals with home buyers is a potential source of leads and valuable information for investors. Mortgage brokers get approached by homeowners who are trying to refinance, sometimes because they’re having a tough time making their mortgage payments. When they can’t refi and improve their situation, you could get a referral from the broker as someone who may be able to help.
If you get into fix & flip in the retail market, you should have relationships with mortgage brokers and lenders you can refer to your potential home buyers. Getting good financing can make the difference and get your sale at the price you want.
Partnerships and win-win relationships contribute to your investing success. You never know when and where that next profitable deal will originate.