Will it provide positive cash flow the first month after purchase or is it the one that is priced well below market value? The truth of the matter is an investment property could produce a positive cash flow, be below market value, need no repairs, or need thousands of dollars in repairs. It all depends on the investor. I just got off the phone with a realtor who told me he specialized in investment properties. He was asking if I could do investment properties and what were my interest rate and fees. After talking for a short time and asking a few questions myself, I found that according to him there is only one thing to be concerned about, does the property generate a positive cash flow.
In a previous life I did investing for hundreds of people. During the interview I would ask an individual several questions. Why are you investing, for retirement, to purchase a business, for security? What were his goals in investing? Point being, every serious investor should have a business plan, a goal, a mark to shoot at, a way to know if he is being successful, on track or not. And an exit strategy.
First, property investing is not difficult. Some are looking for positive cash flow others are looking for a property below market value they can put 10-20 thousand into and sell it in 6 months to a year or less and make a decent profit. Still others will purchase hold it for a few years so the property can appreciate and then sell it. As long as there is a plan and the plan makes sense it's all good. Each investor has his own business plan and
if he doesn't before he starts investing, he needs to develop one. But before you spend hours helping them to develop this plan find out their willingness to invest in themselves. Find out if they are financially able to invest. Get your mortgage professional involved now on the front end of this plan; He/she can be a great asset in helping with the development of this plan. This will allow you to find out whether or not you should invest time running around showing houses they can't afford for whatever reason. A while back I had an individual call and tell me he wanted to become an investor. I was excited. I had arrived! Someone called ME and wanted me to help him become an investor. Naturally I told him all my qualifications and how excited I was to work with him. Then I started asking him questions and pulled credit only to find out he couldn't purchase the next tank of gas for his car unless he could use his credit card.
Second, there should be, as a minimum, 2-3 professionals there. You the realtor, a mortgage professional (I don't mean someone that had his cards printed with "Mortgage Professional" either), someone that has been in the business as well seasoned as a mortgage professional and possibly a tax professional. Not someone that does taxes during tax season but a tax professional to advise the investor and discuss the tax implications as it applies to him. Possibly even a financial planner or CFP. Don't ask the other professionals what their fees are; if you do your job well, there will be enough for all. Disclose all the fees and let the investor know how much you expect to make. If he is a new investor walk him through the process. Don't let there be any surprises.
Third, the client is the investor; he has a business plan now. If it is you and the mortgage professional then sit there with the investor and make the plan of attack. Then execute it. The more confident and professional you are, the more likely you are to succeed.
Keep the client apprised of everything. If the property is a short sale, make sure he understands that doesn't mean quick. If it is bank owned, inform your client of this as it may take some time. What ever the situation keep your investor informed. If something is right or something is wrong, let him know immediately. Call him and then send him an email telling him again what you just told him on the phone. Ask for confirmation that he received the email. The mortgage professional needs to be the same way. Email the client when the appraisal is ordered, then when the appraisal is completed satisfactorily, when documents go into underwriting, when they expect to be out... You got the point. Don't forget to cc all parties involved if you're the realtor or you are the mortgage person. Keep every body informed. Communicate, communicate, and communicate.
Remember if you do your job your client will bring you more business.
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