Is Your Real Estate Investor a Seasoned Pro or a 'Wannabe'? |
By Denise Lones
The Lones Group
If it hasn't happened to you yet, it will. Somebody will walk up to you and say, "I'm a real estate investor." Whenever you hear this, BEWARE.
When a person tells me they're an investor, I always ask, "What kind of real estate investor?" Often, a quizzical look crosses their face as they think about an answer.
So I help them.
I ask, "Commercial? Residential? Industrial? Business opportunity? Executive? Rental properties? Rehab properties? Fixer properties?"
By defining their specialty, I'm able to determine their level of expertise. This is CRUCIAL to figuring out if I want to work with this person or not. If they don't know what they're doing, they're only going to waste both their own time and mine.
So, step one is to define what kind of real estate investing they are involved in-or WANT to be involved in. There are so many "get rich in real estate" seminars nowadays that every Tom, Dick, and Harry thinks he's a "real estate investor".
Even megalomaniac New York real estate TV stars with bad hair are plastering their faces on billboards all across the country. Promising riches to anyone who attends because according to the blurbs, "real estate investing is easy".
Not so easy, Mr. New York Bigwig, as you well know. It takes time, devotion, energy, knowledge, and credibility. But you and all the other so-called gurus who promise the ability to "tell off your boss and kiss your 9-to-5 job goodbye" don't mention this part.
And, of course, who gets exposed to these new "wannabe" investors first? Yep. It's us-real estate agents.
And they're easy to spot. The more general somebody talks about the type of investing they do, the more I know they don't know what they're doing.
For example, if you're a real investor, you've learned valuable lessons and you can "speak the language". You've gone down what I call the Investor Specialty Path. You know that you want raw land to build on. Or you know that you want condos near universities to rent to students. Or you know that you want pre-foreclosure properties to rehab.
In other words, you have a specific plan.
But if you're just looking for a "good deal", then you're not a real estate investor. Because a "good deal" can mean so many different things.
Herein lies the danger for a real estate agent. You have to ask yourself, "Do I really want to spend time with this person? They're probably going to make a bad investment based on the advice from a get-rich-quick guru. Or they're going to quickly realize they're in over their head and not buy anything from you.
And here's the kicker-if you've ever been to one of these seminars, they all tell the students to find and bond with a local real estate agent who is willing to make ridiculous offers on properties. The idea is that you'll eventually find a seller who's desperate enough to take it.
While this point may work under certain circumstances, it's predatory. The entire method of success for these gurus is not a win/win success model. It's taking advantage of people who are in dire straits. Win/lose investing does not sustain itself long term.
Sure, you can find a "good deal" here and there, but the person who dives into these strategies is definitely a "predatory hunter". Is this the type of investor you want to work with? Probably not.
But don't get me wrong. There are people who have taken courses that are more serious, and truly want to invest with a more mature and long-term outlook. Because they are new, these people can be dangerous to work with too. BUT-if you have the opportunity to find a particularly bright one, you may be able to educate them on how things really work.
How do you know? First, by finding out their area of specialty. Make sure they have one. Then, probe them with questions. Find out what their short-term plans are for the property. Find out what their long-term plans are for the property. Find out how much of their own money they're willing to put in. Find out the names and reputations of their partners. Make sure they understand that proper investing takes TIME.
Then and only then are you able to make a clear decision that you want to work with this person or not. A good real estate investor is a valuable partner for your business. Together with a person who knows what he or she is doing, you can make a lot of money as a team.
For this rare person, make sure that their first investing experience is a spectacular one. By doing so, you convert a first-time investor into a long-term investor. They will come back for more-and they will come back to you.
So, whether you're dealing with a seasoned pro investor or a "newbie", be careful. If you can help a seasoned pro, then you can open up an entirely new and lucrative area of your business. If you can help a "newbie" determine that real estate investing is not for them, then you've done both of you a favor.
Real estate investing is an important part of financial security for many people, and it's not going away. But as an agent, you just have to know who it is you're working with.
Ask Denise
Q: "Is it better to invest or land or in houses?"
A: It depends on the investor's personal preference. I know investors who do one and would never do the other. Although I will say that land investing can be extremely lucrative for people who are willing to learn all the specialized knowledge it requires. If you invest in land, you need to understand the process of subdivision, contracting for services, and zoning regulations. Plus, it's a long-term commitment. New and short-term investors often prefer already existing properties because, while still potentially complicated, they're a lot less complicated than land investing. Investor beware.
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