October 10, 2023

Many real estate agents early in their careers focus on traditional activities like listing and selling homes. However, the most successful agents expand their skill sets to include investing in real estate as well. Recently, Kyle Whissel and Bryan Koci dove into creative tips for agents on episode [#] of The Whissel Way podcast about how agents can graduate from sourcing deals for investors to becoming an investor themselves.

The Drawbacks of Sending Deals to Investors

Kyle reflected on his early years as an agent during the foreclosure crisis in the late 2000s. He would frequently find discounted distressed properties like foreclosures and short sales and then pass these deals along to his network of real estate investors to rehab and flip for a profit.

On the surface, this seemed like a win-win. The investors were happy to get discounted properties handed to them. And Kyle was able to “double end” some of these transactions, meaning he acted as the buyer's agent when the investor sold the flipped home and earned both listing and buyer side commission.

Sometimes, Kyle could even “triple end” deals if he represented the buyer of the final flipped property. While double and triple ending deals generated nice commission checks, Kyle realized he was making a fraction of what the investors were earning. The investors may walk away with $50,000 or $100,000+ in profit, while Kyle would make around $20,000 in commissions on a triple ended deal.

Bryan agreed that too many agents think they need to have deep pockets to be a real estate investor, when the reality is capital is often the easiest piece of the puzzle to figure out. Access to discounted deals and the ability to accurately analyze a property's after repair value is much harder.

Overcoming the Capital Challenge

Agents interested in flipping houses themselves often let fears over securing financing prevent them from getting started. But what if capital was accessible with just a few conversations, text messages or social media posts?

Kyle insists that is the case in most markets, observing, “I literally was in a text thread recently with one text message raised almost a million dollars.” Here are some of his favorite tips for financing fix and flips:

Join Local Real Estate Investment Groups

In most cities, there are dozens of established real estate investment clubs and meetups. These are full of aspiring investors eager to partner on deals. Attend a few meetings then tell the group you have a property under contract and are seeking investment partners to fund the purchase and renovations. Provide the ARV, expected rehab costs, and projected profit. If the numbers pencil out, you will generate interest. Seek small investments from several people to spread risk rather than relying on a single backer.

Tap Into Your Existing Networks

Think about what other networking, trade or special interest groups you are involved with that are filled with high net worth individuals. This could include chambers of commerce, BNI, alumni associations, professional organizations like Entrepreneur Organization or YPO, and more. Tell these contacts you are seeking capital for a real estate deal that will return 20% or more over a short time horizon. The key is focusing on groups with people most capable of say investing $50,000 to $200,000 in a single transaction. Avoid soliciting capital from people without sufficient resources or experience with higher risk investments.

Leverage Social Media

Post on your social channels that you have a promising real estate investment opportunity seeking funding. Ask if anyone has friends interested in earning 20%+ return with short term real estate projects. You only need a few interested parties to fund any given deal so cast a wide net.

Crowdfunding

While still relatively new, real estate crowdfunding sites allow you to post deals online so both accredited and non-accredited investors can browse and invest in projects. This opens up funding sources beyond just an agent’s own network. Some leading real estate crowdfunding platforms include Fundrise, RealtyMogul, CrowdStreet and RealCrowd.

Friends, Family & Home Equity

Be cautious soliciting personal friends and family members who may not have experience with riskier investments. However, tapping home equity lines of credit or refinancing to access capital can make sense if you have sufficient equity and the numbers pencil out on expected returns. Just be sure to carefully consider the risks before investing your own capital.

Finding Discounted Properties

Coming up with the money is just the first step. Actually sourcing profitable fix and flip opportunities takes diligence and creativity. As Kyle observes, real estate agents have a built-in advantage here over the general public.

Off Market Listings

Every listing appointment represents an opportunity to make a cash offer and wholesale or flip the property. Do not assume the seller absolutely requires a formal listing and marketed sale. Many will consider an immediate cash closing, even if it means sacrificing some sale proceeds for speed and convenience. Ask questions to understand their goals and constraints. Make an offer on anything that makes sense for your flip business.

Target Motivated Sellers

Keep an eye out for people needing to sell due to common life events. This includes the “10 D’s” – death, divorce, debt, disaster, disability, disease, diapers (new kids), diplomas (college), deployment (military) and even diamonds (selling to afford a ring or wedding). Read the obituaries and probate records to find estate sales. Market directly to absentee owners who may have inherited a property. Follow up on expired and withdrawn listings.

Creative Deal Finding Strategies

Successful investors leave no stone unturned when seeking discounted deals. Strategies include driving for dollars, researching recently filed deed transfers, looking for pre-foreclosure lis pendens filings, partnering with home service providers, bird dogging, and direct mail / digital marketing campaigns. Join buyer farming services like ListSource that identify motivated sellers in specific zones. Maintain a constant marketing presence so sellers seeking cash offers find you.

Wholesaling

As you expand your spheres of influence, let everyone know you buy houses for cash. Other agents, brokers, contractors, attorneys, accountants, estate planners and even your social networks likely contain people who come across discounted homes before they hit MLS. By offering to quickly buy these deals “as-is” and find a buyer through your marketing systems, you can pocket an assignment fee. This avoids needing to fund renovations and hold flips yourself.

Analyzing ARV like an Expert

Securing funding and finding deals are big hurdles. But equally important is accurately determining a property’s after repair value (ARV) and renovation costs to calculate potential flip profit. This is another area where real estate agents have key advantages over the average investor.

Agents price homes for a living, leveraging MLS data on recent comparable sales. When taking a new listing, an agent will tour the home to assess its current condition and sales appeal. You should already know which upgrades and repairs are required to maximize value. Apply this same approach when evaluating a flip.

Tour the property and inventory needed repairs, making notes and taking photos. Then research comparable homes that have been renovated or newly built within the past 1-3 years. Compare their list and sales prices to your subject property to project value after completing similar upgrades. Account for differences like lot sizes, views, custom finishes, and so on.

Get multiple contractor bids to estimate renovation costs based on the scope of work needed. Budget for other expenses like carrying costs, marketing fees when sold, and your desired profit. Now determine the maximum you can pay to acquire the property and still earn your target return-on-investment after rehabbing and selling. This purchase price should guide any offers made.

Making the Leap from Agent to Investor

Kyle sums up the path to flipping homes yourself: “The money is actually the easiest thing to find. The properties or the deals, which is deals is probably a better choice of words, that deals is the hard part to find.”

He observes even brand new agents have experience and skills vital to successful investing:

Access to motivated sellers and off market deals
Knowledge of local home values, sales trends and buyer preferences
Ability to accurately estimate ARV and required renovations
Relationships with contractors, lenders, attorneys and more

Yet most newer agents self-impose limits by never considering themselves potential investors. They think finding money and deals is only possible for more experienced, capitalized investors.

In reality, securing capital and deals gets easier over time through expanding your networks and marketing channels. You gain confidence analyzing deals and managing renovations. The key is taking action before self-doubt creeps in.

As Bryan emphasized, even listing appointments contain nearly all the information needed to assess flipping potential. You have already previewed the property, run comps and know the seller’s goals. Compile a simple one page summary including:

Condition notes and photos
Scope of work and estimated renovation costs
ARV based on recent comparable sales
Maximum purchase price to earn target ROI

Approach the seller or listing agent with this information and your cash offer. Many will accept if it gets them to their desired outcome.

Follow this blueprint to start wholesaling or flipping your first deal. Momentum builds once you complete that initial transaction. Soon you shift from sourcing deals for other investors to funding rehabs and selling for profits yourself.

Want to flip houses but still need to work on finding funds and deals? For more great tips from Kyle and Bryan, be sure to subscribe to The Whissel Way on your favorite podcast platform.