Most of your traditional buyer clients are probably very similar in what they’re looking for in a property. They want a property that is within their budget (or below their budget), that has as many bells and whistles as possible, and that is in a prime location. Most of your buyers want as much as they can get for a price they can afford.
When you work with buyers like this, who are looking for a residential property, you will likely discuss various finishes, square footage, and building features. Many of these buyers will purchase based on whether or not a property feels like home to them. Little research or thought may be put into figuring out whether their dream home is a good investment, even though their home purchase is often one of the largest investments that they will make.
Many homebuyers are accidental investors. They’re looking for a home that appeals to their “American Dream” ideal, and they end up making one of their biggest investment decisions in the process. Although the real estate investor is looking at the same market as Sue and Joe first-time homebuyers, the investor is looking at the market through a very different lens. By understanding the differing mindset of the investor, you will be able to serve your investor clients more effectively. While Sue and Joe first-time homebuyers want to know about school districts, landscaping, and kitchen layouts, your investor client is less emotional about the transaction and more focused on these particular questions in his/her decision:
- What is the potential value in a property?
- How much will it cost financially and in terms of resources to receive the property’s potential value?
- What are the risks associated with this acquisition?
Typical buyers (accidental investors) may end up making profitable decisions and coming out ahead simply because their goal of finding an appealing property means that they acquired a hot property that will most likely appreciate at a steady pace. This is the mindset of many buyers.
The strategy of real estate investors, however, is very different from this “ideal property” mindset that most of your buyer clients possess. Investors are looking for deals. They are looking for properties that will return more than the initial investment. If investors lose sight of their wealth-building goal and purchase a property on a whim or because of its “bells and whistles,” they may end up making a dangerous, costly investment error that will take them a long way from their wealth-building goal.