{"id":5073,"date":"2023-03-11T13:55:00","date_gmt":"2023-03-11T17:55:00","guid":{"rendered":"https:\/\/propertyonion.com\/education\/?p=5073"},"modified":"2023-03-07T16:34:22","modified_gmt":"2023-03-07T20:34:22","slug":"how-can-an-investor-friendly-realtor-help-a-newbie-investor-develop-an-roi-strategy","status":"publish","type":"post","link":"https:\/\/propertyonion.com\/education\/how-can-an-investor-friendly-realtor-help-a-newbie-investor-develop-an-roi-strategy\/","title":{"rendered":"How Can Investor-Friendly Agents Help a Newbie Investor Develop an ROI Strategy?"},"content":{"rendered":"\n<p>As a real estate agent, your work is commission-based. That means the more property deals you help close, the more money you make. But regular homeowners only buy a new home about&nbsp;<a href=\"https:\/\/www.nytimes.com\/2022\/03\/24\/realestate\/where-do-homeowners-stay-in-their-homes-the-longest.html\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">every 13 years<\/a>. If you want to boost your earnings, it helps to also work with real estate investors.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>As an experienced real estate agent, you can help newbie investors develop an ROI strategy that will lead them toward real estate investing success. <\/p><\/blockquote>\n\n\n\n<p>Why real estate investors? They tend to close more deals per year (buying and selling property is their livelihood) at higher prices (many focus on multi-family properties, which tend to be more expensive) with cash (many have cash reserves or business lines of credit). For realtors &amp; Agents, this means more commissions.<\/p>\n\n\n\n<p>But some real estate investors are more experienced than others. In fact, there\u2019s been a recent rise in \u201c<a href=\"https:\/\/www.nar.realtor\/magazine\/real-estate-news\/sales-marketing\/growth-of-the-rentvestor\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">rentvestors<\/a>,\u201d people who choose to buy an investment property before they buy their own primary residence. Such <a href=\"https:\/\/propertyonion.com\/education\/7-real-estate-investing-tips-for-beginner-investors\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"newbie investors (opens in a new tab)\">newbie investors<\/a> may not know how to create a real estate ROI strategy. They\u2019re new to the game.&nbsp;<\/p>\n\n\n\n<p>That\u2019s where you come in. As an experienced real estate agent, you can help newbie investors develop an <a href=\"https:\/\/propertyonion.com\/education\/what-is-roi-in-real-estate-investing\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"ROI (opens in a new tab)\">ROI<\/a> strategy that will lead them toward real estate investing success. In this article, we\u2019ll go over five tips on how to do just that. Here they are:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>Unlike regular homeowners, real estate investors only care about the numbers. So, once you know what their investment goals are, it should be easy to narrow down an appropriate investment strategy.&nbsp;<\/p><\/blockquote>\n\n\n\n<p><strong>1. Determine the Investor\u2019s Goals and Settle on an Investment Strategy<\/strong><\/p>\n\n\n\n<p>The first step is to sit down with your new investor client and determine what their investment goals are.&nbsp;<\/p>\n\n\n\n<p>For example, some investors may be looking for as much&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/c\/cashflow.asp\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">cash flow<\/a>&nbsp;as possible. Others may only care about a high rate of&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/a\/appreciation.asp\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">appreciation<\/a>. And some are looking for a completely&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/p\/passiveinvesting.asp\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">passive investment<\/a>.&nbsp;<\/p>\n\n\n\n<p>Ask your investor client what they value most in an investment and what their investment timeline is. This will help you know what investment strategy to recommend.<\/p>\n\n\n\n<p>Depending on their answer, you may want to suggest a fix-and-flip strategy for a quick ROI, a buy-and-hold strategy for long-term appreciation, a rental strategy for steady cash flow, or a&nbsp;<a href=\"https:\/\/propertyonion.com\/education\/book-review-the-brrrr-rental-property-investment-strategy-made-simple\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">BRRRR strategy<\/a>&nbsp;for a little bit of all of the above.<\/p>\n\n\n\n<p>Unlike regular homeowners, real estate investors only care about the numbers. So, once you know what their investment goals are, it should be easy to narrow down an appropriate investment strategy.&nbsp;<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>Ultimately, it\u2019s your job to know the market like the back of your hand. That way, your investor client will learn to trust you and rely on you when it comes time to buy (or sell) a property.&nbsp;<\/p><\/blockquote>\n\n\n\n<p><strong>2. Know the Real Estate Market Like the Back of Your Hand<\/strong><\/p>\n\n\n\n<p>Once you\u2019ve settled on an investment strategy, you need to know the real estate market that your investor client is interested in. As an agent, you act as their eyes and ears for all that goes on in the market\u2014especially when they are just starting out and aren\u2019t yet familiar with the market themselves.&nbsp;<\/p>\n\n\n\n<p>So do your homework. To identify good areas to invest in, you need to pay attention to:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Comparables (aka&nbsp;<a href=\"https:\/\/www.investopedia.com\/terms\/c\/comparables.asp\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">comps<\/a>)<\/li><li>Zoning regulations<\/li><li>Public transit options<\/li><li>The job market<\/li><li>Local amenities and attractions<\/li><li>Property tax rates<\/li><li>Neighborhood crime rates<\/li><li>And more \u2026<\/li><\/ul>\n\n\n\n<p>As you narrow down your search, try using propertyonion.com\u2019s free&nbsp;<a href=\"https:\/\/propertyonion.com\/property_search\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">Property Search Map<\/a>. It can help you locate off-market deals on foreclosure and tax deed properties.&nbsp;<\/p>\n\n\n\n<p>Ultimately, it\u2019s your job to know the market like the back of your hand. That way, your investor client will learn to trust you and rely on you when it comes time to buy (or sell) a property.&nbsp;<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>Whatever you do, focus on key metrics only when helping your client analyze an investment deal. Otherwise, your investor client may succumb to \u201canalysis paralysis\u201d and never follow through on any deals.<\/p><\/blockquote>\n\n\n\n<p><strong>3. Teach the Investor How to Calculate Return on Investment (ROI)<\/strong><\/p>\n\n\n\n<p>Comparing individual property deals requires math. Your new investor client may not have much experience estimating rehab costs or calculating ROI, so it&#8217;s important for you to show them how.<\/p>\n\n\n\n<p>There are a few different ways to gauge ROI in real estate. Here are two of the most common methods:<\/p>\n\n\n\n<p>The capitalization rate (aka&nbsp;<a href=\"https:\/\/propertyonion.com\/education\/what-is-a-cap-rate-in-real-estate\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">cap rate<\/a>) is the most popular way to assess property deals that are paid for in cash and not financed. It measures the return of a property deal over one year. The formula goes like this:&nbsp;<\/p>\n\n\n\n<p class=\"has-text-align-center\"><em>Cap rate = net operating income \/ current market value<\/em><\/p>\n\n\n\n<p>Another formula you can teach your investor client to use is&nbsp;<a href=\"https:\/\/propertyonion.com\/education\/the-rationale-behind-cash-on-cash-return-in-real-estate\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">cash-on-cash (CoC) return<\/a>. CoC return is best used for property deals that are financed because it compares a property\u2019s annual pretax <a href=\"https:\/\/propertyonion.com\/education\/what-is-cash-flow-in-real-estate-investing\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"cash flow (opens in a new tab)\">cash flow<\/a> to the total amount of cash invested (e.g. down payment and mortgage payments). The formula goes like this:<\/p>\n\n\n\n<p class=\"has-text-align-center\"><em>CoC Return = annual pretax cash flow \/ total cash invested<\/em><\/p>\n\n\n\n<p>Of course, you can also use online calculators to help make these investment calculations. But it\u2019s important to know how they work.&nbsp;<\/p>\n\n\n\n<p>Whatever you do, focus on key metrics only when helping your client analyze an investment deal. Otherwise, your investor client may succumb to \u201c<a href=\"https:\/\/www.investopedia.com\/terms\/a\/analysisparalysis.asp\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">analysis paralysis<\/a>\u201d and never follow through on any deals.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>Having a strong network of real estate professionals on your side adds a lot of value that you can offer to your investor client.<\/p><\/blockquote>\n\n\n\n<p><strong>4. Refer the Investor to Your Network of Real Estate Professionals<\/strong><\/p>\n\n\n\n<p>In real estate investing, it\u2019s not just about&nbsp;<em>what<\/em>&nbsp;you know. It\u2019s also about&nbsp;<em>who<\/em>&nbsp;you know. As a real estate agent, your network can be a valuable resource to your investor client.<\/p>\n\n\n\n<p>For example, you may have connections to commercial and hard money lenders to whom you can refer your investor. You may also know property managers and contractors who can help manage your client\u2019s real estate investment. The same goes for your partnerships with other listing agents. Having good relationships with them can help you get your investor client better deals.<\/p>\n\n\n\n<p>Having a strong network of real estate professionals on your side adds a lot of value that you can offer to your investor client.<\/p>\n\n\n\n<p><strong>Becoming the go-to agent for newbie investors<\/strong><\/p>\n\n\n\n<p>At the end of the day, helping a newbie investor develop a real estate ROI strategy is all about positioning yourself as an expert. You don\u2019t need to know everything about real estate investing, but knowing the basic principles of various investing strategies, keeping a pulse on the real estate market, knowing how to calculate ROI, and leveraging your network can all go a long way.&nbsp;<\/p>\n\n\n\n<p>Interested in learning more about real estate investing? Check out our archives of educational&nbsp;<a href=\"https:\/\/propertyonion.com\/education\/tag\/investing\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">articles<\/a>&nbsp;on real estate investing to get started! The more you learn, the more you\u2019ll be able to help newbie investor clients succeed.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>As a real estate agent, your work is commission-based. That means the more property deals you help close, the more money you make. But regular homeowners only buy a new home about&nbsp;every 13 years. If&hellip;<\/p>\n","protected":false},"author":41,"featured_media":5081,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[426,452,499,3,404,195,467,67,436,441],"class_list":["post-5073","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-articles","tag-cap-rate","tag-cash-flow","tag-cash-on-cash-return","tag-investing","tag-investing-strategy","tag-networking","tag-passive-income","tag-real-estate","tag-rental-market","tag-roi"],"_links":{"self":[{"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/posts\/5073","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/users\/41"}],"replies":[{"embeddable":true,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/comments?post=5073"}],"version-history":[{"count":3,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/posts\/5073\/revisions"}],"predecessor-version":[{"id":5082,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/posts\/5073\/revisions\/5082"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/media\/5081"}],"wp:attachment":[{"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/media?parent=5073"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/categories?post=5073"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/propertyonion.com\/education\/wp-json\/wp\/v2\/tags?post=5073"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}