You may not have noticed, but as an active real estate agent you are given at least one opportunity a year to sell real estate investment property.

Whether by a walk-in, up-call, previous customer, relative, friend, neighbor, or some aggressive cold calling chances are good that every real estate professional over a twelve month period is given the opportunity to work with one real estate investor.

The question for you is, How did you do in that encounter? Did you win over the investor? Were you able to convert to a listing or sale?

Not surprisingly, most real estate agents miss the chance. Not for a lack of intention–most real estate agents simply misunderstand how to prepare themselves to engage real estate investors. Let’s begin at the top.

Making the Right First Impression

All salespeople understand the value of the first impression–that winning or losing a sale often rests solely on the perception a customer develops within seconds during the first encounter.

Of course real estate agents understand the value of the first impression.

Real estate agents service customers who make buying decisions based on curb appeal (the first impression) of properties all the time. Agents also wash their socks, hair, and cars to impress their customers–before the meeting, not afterward.

Ironically, however, given that agents know the importance of the first encounter, it is often their inability to make a good impression on investors where most agents lose an excellent opportunity to gain a rental property sale. Why?

Most agents fail to recognize what generates a good first impression on investors.

What Do Real Estate Investors Look for in an Agent?

Winning over an investor is more than style and panache.

Real estate investors are less impressed with the agent’s Armani and Mercedes then they are with the priority the agent places on real estate investment property.

The reputation of a residential agent with the grandest record for selling houses means little to an investor without some evidence that the agent also cares something about investment property.

Above all else, investors want to feel confident that the agent cares about how they invest their money and will assist them in making a sound buying decision.

Rate Your Last Encounter With an Investor

Okay, now remember back and consider your last encounter with a real estate investor.

How did you respond when asked about the value, profitability, and rates of return? What reaction did you give when the investor requested an APOD or proforma? Were you clueless?

If you stood there like a deer staring into the headlights of a car at the mere mention of capitalization rate, experience dictates one of several outcomes.

1. You got lucky and made a sale, regardless
2. You referred the business away and lost 75% on potential commissions
3. You scrambled around trying to learn about cap rates and APODs and finally referred it away, only to discover that the investor went to your competitor

In other words, given a perfect opportunity to convert a real estate investor into a commission, you either had to rely on pure luck, settle for 25%, or in the end didn’t make a penny. Why?

You failed to recognize that you were being interviewed for a job by the investor and didn’t prepare yourself beforehand.

Keep in mind that unless you are a relative, the investor does not know you from Adam and has no special incentive to work with you. You are undoubtedly just one of many the investor plans to call, and short of a miracle will probably not be called back unless you make an impression.

How to Prepare Yourself to Impress an Investor

Foremost, dismiss the idea that you need to become a real estate investment expert. Hundreds of deals are closed every year by residential agents that know little about rental income property. How did they do it?

They understood beforehand the importance of numbers to a real estate investor and made the conscious effort to be able to discuss and, if need be, create those numbers in reports for the investor. At the very least, they understood the difference between capitalization rate and gross rent multiplier and were able to create an APOD.

The good news for you is that you can do it, too–very easily!

1. Search online for real estate investing resources where you can become acquainted with and learn the formulas for key terms and returns
2. Use your Excel program to design an APOD and other reports that integrate the calculations for those returns
3. If you prefer not to design your own, purchase real estate investment software already developed with the formulas and reports

Is it worth your effort, time, and expense? If it results in just one sale, absolutely!

The untold secret about real estate investment property, however, is that agents generally wind up mushrooming one sale into repetitive sales. Unlike home buyers, real estate investors often purchase more than one property.

Conclusion

Putting your best foot forward in preparation for a customer is simply a truism of successful selling.

Real estate agents who truly understand that and prepare themselves to meet with real estate investors beforehand–on the investor’s terms–are cashing in on it.

Other agents who decide not to do anything until an income property listing or buyer presents itself are more likely to squander the opportunity.

Given the reward, and little required, why procrastinate? You can certainly learn the terms easily, and can procure real estate investment software very inexpensively. Why would you dare to wait?

“Jim, thanks to your software I just sold my first apartment building…I’m just glad you don’t charge a referral fee.” –Greg Gysin, Gysin Realty

The idea that you can shake a tenant’s hand and mutually agree that “My word is my bond” has a romantic flare to it. But what works well in fiction can become a disaster in real life real estate investing, and there are a few things you should know about oral agreements before entering one.

Oral agreements are legal for month-to-month tenancies and, in most states, for leases up to a year.

For example, you just posted a For Rent sign in front of your six-unit rental property and to your surprise attracted a call from your brother stating that his daughter would like to rent the unit. Rather than mutually agreeing to the terms and conditions in a written rental agreement with your niece, however, you simply agree to a month-to-month tenancy for $600 per month over a cup of coffee.

Guess what? You just legally bound yourself to an agreement that allows your niece to move in and occupy one of your apartment units on a month-to-month basis for $600 per month.

The problem is that by creating an oral rental contract you also created an agreement that can sometimes lead to disputes. Regardless of our best intentions, memories have been known to fade as time passes. Haven’t we all forgotten the details of a shopping list just hours after it was recited to us. Of course!

Tenants have been known to forget the terms of a lease even when the terms are written down. How can you expect them to remember an oral agreement?

Moreover, if you wind up in court over monies owed such as rent or security deposits, there will be nothing to refer back to except an exchange of words and the proverbial “he said, she said” defensive argument. This is not a good way to manage your real estate investment.

If you are prone to oral agreements, however, there are certain things you should know:

1. When you give a tenant an oral lease exceeding one year, it will become an oral month-to-month agreement at the end of the first year.
2. With oral agreements, the amount of notice you give tenants regarding rental increases or terminations typically depends on the period of time between rent payments. For example, if you get paid monthly, you must give 30 days’ notice in most states.

It is best to check your state and local statutes regarding oral agreements. Not all states and local governments have laws about oral agreements, but it’s better to know before an agreement is made than after the fact.

On the other hand, written rental agreements and lease contracts are available at local stationery stores for purchase, or you can draw one up for yourself. Written agreements are not difficult to obtain, nor are they expensive. So why would you not use them?

It is far better for you to always put rental agreements in writing. Remain a prudent real estate investor and leave oral agreements to the novelists romanticizing characters in a book.

Whether you are a novice or seasoned real estate investor, smart real estate investors interested in rental property investing should always devise a plan or set goals regarding what they hope to accomplish by investing in real estate.

The goal, obviously, is to make money. The next question, however, is how do you plan to make your money with the real estate investment.

Let’s look at a few potential ways you might decide on to do so:

1. The money is intended to come from the rents that are charged. You are looking at investment property to supplement your base income and support for your family.
2. The money is to come from the profit realized when the property is resold. You are looking down the road and speculating that over time the property will appreciate enough to make you an impressive profit on the return of sale.
3. A tax shelter is all you hope to accomplish by owning the property.

Typically, real estate will appreciate in value over time and rent income can prove to be quite impressive. A properly managed rental investment property truly can make you money while you sleep.

Still, unlike the liquid nature of stocks, a real estate investment may be difficult to keep rented and subsequently unload unless your property’s location is in high demand.

The point is not to make impulse decisions regarding your investment. Create a real estate investing plan that will help you to make educated decisions. How long do you intend to hold the property? Is the investment based purely on speculation? Are you merely concerned about tax shelter? Is real estate investment going to remain a secondary career to you or do you plan on making it your career?

Yes, owning rental property can be a profitable and interesting investment opportunity. Housing is still one of humankind’s essential needs for survival and is therefore an excellent investment.

Just be prudent enough to carefully implement a real estate investing plan that will manage your investment steps according to what you are hoping to achieve by real estate investing.