Real Estate Investing Tactics

The other day a tweet on twitter announced a new blog post on Active Rain by a Realtor. Part of the title had, "why buyers want to low ball". So, naturally, it caught my attention. I read the article and was the second to post a comment. My comment simply talked about how investors often submit what the agent considers to be a low ball offer but in fact it is a very reasonable offer considering the investor's need to make a profit.

I go back and look at the article today and there are over 130 comments. Yet, mine and one discussing mine I read a couple of days ago are gone. Not that big of a deal, they don't want anyone pointing out the obvious.

Then, after reading the comments praising the article I realized why real estate agents have the view of investors they have. It isn't their fault, most of them do not understand how a business operates. They also confuse investors with speculators.

See, during the boom times, Realtors found it easy to deal with speculators, no matter whether they were buying to live in it for a while and then sell or to buy it as an "investment" banking on appreciation. They didn't have to deal with any value equations because there was an over-abundance of buyers willing to pay the asking price and in many cases much more than the asking price. These agents were essentially order takers during the boom times and now that the pool of buyers has shrunk they are finding it very uncomfortable to deal with anyone looking objectively at a property.

See, I don't care what the guy down the street paid for his property. Just because he was willing to jump off a financial bridge by over paying doesn't mean I should do it. As an investor, a real investor, I am interested in how any property will perform. I am interested in the cashflow it will provide. Historically, appreciation will stay a little ahead of inflation but that is about it. Sure, there are exceptions to that and of course you can force appreciation by buying undervalued properties and improving them.

The bottom line is this. Realtors are taught to sell retail and in boom times that model works very well for them. However, in times like this may of them struggle because they don't understand anything other than a straight retail transaction, with a new loan and closing. Those are the agents who are struggling now. Those are the ones risking being shaken out in this market.

I work with some really great real estate agents. They understand investors, how we do business, how we make a profit and they are happy to work with us because we are a repeat customer. They also know what other agents see as a low-ball offer is actually a correctly valued offer given the particular details of the transactions.

Contrary to what the article claims, we are not trying to "stick it" to the seller.

You can read the original article and comments by clicking here.