It is Never Cheaper to Rent than To Buy a Home

It seems like every week there is a new article about whether it is cheaper to rent than to buy a home. They cite studies that sound impressive. They explain how they compare the cost of rent to the mortgage payment, taxes and insurance payments. They obfuscate the truth by talking in terms of percentage of your income that you use when renting versus buying. All of it is utter hogwash! Don’t believe a word of it; it is always cheaper to buy than to rent, regardless of your market, regardless of what percentage of income you’re paying for rent … Read more

How to Work with Buyers that Buy 5 Times As Many Homes

According to the National Association of Realtors Profile of Buyers and Sellers 2015 the typical (median) seller stays in their home for 9 years, but what if I told you there’s a special type of client that buys 9 homes in that same time period? My name is James Orr, Realtor with James Orr Real Estate Services in Fort Collins, CO and I accidentally discovered this special type of client that buys much more frequently than once every 9 years. With more traditional clients, you’re lucky if they sell a home with you and buy a replacement home every 9 … Read more

Working with Real Estate Investors as a Real Estate Agent

Before we dive deep into why you should work with real estate investors, it is important for you to realize that not all real estate investors are the same. There are different types of real estate investors. Some are much better clients for us as real estate agents than others.

According to the National Association of REALTORS®, investment properties make up between 17% and 28% of all sales depending on which year of data you’re looking at. That means that about a fifth to as much as a quarter of all sales are to investors. If you’re not working with investors, you’re not working with a large part of the real estate market.

Chart of Homes Sales by Intended Use

Most real estate investors are looking for a real estate agent that specializes in working with real estate investors. In book 2 and 3 of this trilogy on how to start and run real estate investor groups, we will go over how to create and provide on-going valuable resources to demonstrate your commitment to and specialization in working with real estate investors. This will help you capture a disproportionately large percent of real estate investor transactions.

Furthermore, as I will demonstrate when we discuss working with a special real estate investor type we call Nomads, I will show you that these real estate investors actually buy properties as owner occupants with the intention that later, after they’ve satisfied the owner occupancy requirement of the lender, they will convert the property they’re living in to a rental property. This means that a percentage of your business won’t even be investment properties, but owner occupant properties that will eventually become investment rental property.

In my personal brokerage business, which I will share details about later, approximately 80% of the 42 transactions we did last year were real estate investors from our real estate investing club. Since our real estate investor transactions sometimes include a few multi-family property transactions, it is probably closer to 90% when you calculate the percentage of our income that came from real estate investors from our real estate investing group.

For now, let’s go through the different types of real estate investors together and why you may want to work with each type.

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Why Start and Run a Real Estate Investor Group

So, we’ve talked about the different types of real estate investors, what they’re typically looking for, and how you might work with them as a real estate agent running a real estate investor group. Now, I’ll get right to it: why start and run a real estate investor group.

I think there are 4 compelling reasons for starting and running a real estate investor group.

  1. Toll Bridge
  2. Saleable, Appreciating Asset
  3. Attract Great Clients
  4. Simplified, Value Adding Stay In Touch Tool

Toll Bridge

“In an inflationary world, a toll bridge (like company) would be a great thing to own because you’ve laid out the capital costs. You built it in old dollars and you don’t have to keep replacing it.” – Warren Buffett

Once you take the time to setup your real estate investor group, it continues to produce for you over time. When we talk about ways to monetize your real estate investor group, you will also see that you can get paid for access to your group or profit directly from the group by offering your services as a real estate agent to some of the members.

Saleable, Appreciating Asset

Last year in our local market, one of the investor clubs sold. While I do not have inside information as to the sale price, my best guess is that it sold for just under $100,000.

Investing in growing your own investor group is investing in a saleable, appreciating asset. The longer you own and grow your group, the more it is worth.

A real estate agent coming into my market could buy my real estate investor group from me and start generating commissions from it right away. It is like buying an established, up-and-running, highly profitable, lead-generating machine.

Attract Great Clients

I consider the first two reasons for starting and running an investor group as bonus reasons. The next two reasons for starting and running an investor group are the best reasons of all.

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What are Nomads™ and Why Work with Nomads™ as a Real Estate Agent?

There is a strong argument to be made that when discussing the types of real estate investors you’ll find at a real estate investor group meeting, that I should start with bird dogs and wholesalers, and move on to flippers and buy and hold investors. I’m not going to do that though. I am going to tell you about what I consider to be the absolute very best clients to work with: Nomads.

We made up the term Nomad™ to describe serial investors that buy houses regularly over time.

When we originally taught it, we would explain it as:

Nomad™
Nomad™
  1. Buy a home as an owner occupant
  2. Live there for a year
  3. Then buy a new home
  4. Convert the previous to a rental
  5. Repeat the process until you reach your financial goals

Early on, we emphasized the moving into properties component as a key attribute to being a Nomad. We have since expanded the definition and added variations of the Nomad model to include ones where you don’t need to move in (which was probably the most common objection to the model), but you’re still buying a series of rental properties.

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What are Bird Dogs and Why Work with Bird Dogs as a Real Estate Agent

Real estate bird dogs are usually brand new real estate investors that are looking for a way to generate some extra income without investing any of their own money. While I wouldn’t seek out these types of clients to work with, it is important to understand what they are wanting to do, how you could work with them, and how they might ultimately become clients for you.

As I describe in more detail in the other books in this trilogy, when you start and run a real estate investor group, you should teach classes that attract your personally preferred types of clients. But, no matter how narrowly you create your class content, you’re going to attract a few of the other types of investors that are not necessarily your ideal client. That’s OK. Having a few of these other types of investor clients will help round out and optimize your brokerage business. The easiest example for me to make to explain this is: while I don’t necessarily recommend that you focus on finding tired properties that need fixing up and working with all fixer upper real estate investors, having one or two as a client will allow you to sell the fixer upper properties you happen to stumble upon while you’re working with other clients. You don’t want 50 fixer upper investors, but 3, in addition to a bunch of Nomads, will add a few extra transactions per year to your bottom line. The same logic applies to the other types of investors as well; you’ll probably want a lot of your primary client type, and a few of each of the others.

Now, back to bird dogs.

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What are Creative Real Estate Investors and Why Work with Creative Real Estate Investors as a Real Estate Agent

Creative real estate investors are looking for creative financing deals. These deals involve buying properties using less common financing options like:

Creative Financing
Creative Financing
  • Owner Financing
  • Wrap Financing
  • Loan Assumption
  • Rent To Own, Lease To Own, Lease Option, and Lease Purchase
  • Agreement For Deed, Bond For Deed, Contract For Deed, Installment Land Contract
  • Subject To

Most creative real estate investors will be seeking these types of deals outside the MLS. While markets shift and change making some of these creative strategies appear inside the MLS from time-to-time, our current real estate market makes these types of transactions rare to non-existent inside the MLS. So, except for the same reasons I discussed with bird dogs and wholesalers, many real estate agents will opt not to focus on working with creative real estate investors.

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The Real Estate Investor Group Trilogy

In 2003 my friend and business partner Paul and I began investing in real estate together in Northern Colorado.

I’m not certain how it started, but almost immediately other local real estate investors were interested in learning what we were doing. I was getting so many requests for coffee and lunch meetings where we’d have essentially the same conversation repeatedly that Paul and I decided we’d get together once a month at the public library instead of individual coffee and lunch meetings. As I recall it, the decision to get a group of real estate investors together was a practical solution to take back control over some of my time. I figured I could save time and share what we were doing in our investing business, what was working, and what wasn’t just one time each month instead of having the same conversation over and over.

We held meetings just about every month at the library for quite a while, but eventually, we changed to having meetings at various restaurants as we increased the frequency of the meetings from monthly to weekly. I first got my real estate license in 1998, but never really used it consistently to help local buyers and sellers. When I finally decided to start using my real estate license to help other people buy and sell houses, the real estate investor group we had formed quickly become my primary source of business. I guess it should not have surprised me; the majority of my friends and network were people I had met through real estate investing and most through the investor group meetings. Over the last 15 years, I learned a lot about what makes a good real estate investor meeting that attracts the right kind of real estate investors and what doesn’t work.

On a profound, life-changing cruise through the Panama Canal in 2018, I decided to write three books to help other real estate agents learn the why and how of working with real estate investors through a real estate investor group. It did not take long for me to realize that this information was equally valuable to lenders, accountants, insurance agents, financial advisers, real estate attorneys, title representatives and other real estate investors.

The trilogy I envisioned consisted of three books that covered:

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How to Make Money with a Real Estate Investor Group

At this point, we have talked about the different types of real estate investors you’re likely to find at your own real estate investor group meetings and why, I believe, you should start and run your own group. At times, we talked about how you can monetize working with real estate investors that come to your club, but mostly we discussed earning commission income. I believe that commission income is the largest source of income and the one I use primarily in my business to earn hundreds of thousands of dollars per year, but there are other models and other … Read more