Want to work with more real estate investors? The first step toward taking on more real estate investors as clients is learning how to help them get what they really want from the properties they purchase – profit.
While nice properties with homey features are great to live in, they often aren’t profitable as rentals.
That’s why showing real estate investors the same types of homes you’d share with the typical home buyer is a mistake. Below, we’ll cover what real estate investors want from rental properties so you’re able to provide value when showing them homes.
Real Estate Property Classes – Finding the Sweet Spot
In a recent Real Estate Rockstars podcast with investor Lane Kawaoka, there was a discussion on the different types of property classes: Class A, B, C, and D.
As you might expect, Class A properties are high-end properties – nice homes in nice locations. Class D properties, on the other hand, are the homes you wouldn’t want to visit without a bullet-proof vest and a helmet.
The problem with trying to rent out either of these two property classes is low-to-no profitability. Class A properties are simply too expensive relative to the amount of monthly rent they typically generate. Potential problems, like vacancy and theft, eat away at the profitability of Class D rental properties.
The sweet spot for rental profitability lies somewhere between Class A and Class D. Both Class B and Class C properties can be profitable as rentals, so focus on those when sending your investor clients properties to consider.
Rental Property Features That Appeal to Real Estate Investors
Obviously, property class is just one of the many factors that can affect a rental’s profitability. If you really want to impress real estate investors, take a deeper look at potential rentals before sending them along for consideration.
Investigating property features is a good place to start. The reason for this is that certain features are conducive to rental profitability; others, even some that are typically sought after by homeowners, can hinder it.
Here are two things you should look for in a potential rental:
Replacing flooring is expensive, which is why smart landlords avoid flooring materials that are prone to damage. Carpet, for instance, should absolutely be avoided if possible as it will likely need to be replaced whenever a tenant moves out.
Luxury vinyl tile (LVT) is a great option for rentals as it’s attractive and extremely durable. Inexpensive ceramic tile is another good option, but the installation and removal costs are higher than they are for LVT.
Fewer Breakable Items
Help your investor clients avoid additional maintenance by sending them properties that are unlikely to require lots of work. Three- and four-bathroom homes are actually less appealing to the average rental investor than homes with one or two bathrooms because the potential for plumbing problems is greater.
Homes equipped with expensive appliances are also less suitable as rental investments because the return potential just isn’t there. Not only do high-end appliances increase costs at the onset, they open investors up to higher maintenance costs down the line.
Think Profitability When Working with Real Estate Investors
When working with real estate investors, always think profitability. Investors aren’t like most home buyers, and they certainly aren’t after what the average home buyer wants.
If you truly want to provide real estate investors with value, approach the process of searching for potential properties from their perspective.
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