THREE BUYER TYPES THAT COULD HELP DOUBLE YOUR SALES VOLUME



Second-home sales are ripe for the picking, says BUILDER contributor Mike Kalis, so don't hesitate to ask buyers to double down on their investment.

By Mike Kalis

Consumer confidence in the real estate market has never been higher. In fact, according to a recent Gallup poll, Americans now see real estate as the safest long-term investment they could make — and they've actually felt this way for the past two years.

Yes, you read that correctly. Real estate is now seen as the safest bet out there. Safer than stocks and safer than gold. As a builder, this should make your eyes light up. Now is the perfect time to ask home buyers to double down on their purchases and scoop up a second home. What do you have to lose? Even if most people shy away from the idea, the 5 percent who don't will provide a significant boost to your bottom line.

Back in 2013, before real estate officially became the American investment of choice, around 2 million Americans already owned investment properties. With the rising confidence in the market, it’s safe to say that number has grown — and will continue to grow.

There is no one-size-fits-all approach to earning a second sale. You need to tailor your sales pitch to each person's unique goals, finances, and preexisting knowledge of real estate investing. Here's how to properly frame a second sale to three specific types of buyers:

1. The Accidental Landlord: Every once in a while, you'll come across an unassuming buyer who is sitting on a pile of cash. Whether it’s in a savings account or a retirement fund, many people would love to convert those savings into real estate — they just don't realize it yet.

When you encounter these buyers, don’t immediately try to sell a second home. Instead, begin by educating them on the overall concept of real estate investing. Dive into the numbers and explain how, on a cash purchase, they would likely get a 7 to 10 percent cap rate, plus 3 to 7 percent property appreciation, for a total of 10 to 17 percent return on investment. Or if they put a mortgage behind the purchase, that number would balloon even higher. Reiterate your warranties to show the buyer exactly why new construction poses less risk than other avenues. And if he or she seems hesitant, suggest a neighborhood with smaller, less expensive homes to get started.

Lastly, make sure they know there are property management firms out there — like mine — that'll guarantee rent for up to six years! If you play your cards right, you won't just sell a second home; you'll create an investment partner for decades to come.

2. The Savvy Investor: These people already own multiple properties, but they're always on the lookout for a bargain. They might make it seem like they came to your development looking to scoop up one home, rent it out for a few years while you build out the rest of the neighborhood, and then unload it for a healthy profit after the area appreciates. But deep down, they’re just waiting for you to pop the magic question: "If I can get you a really great deal, would you be willing to invest in a second property?"

This "great deal" could come by way of a price cut on the second home or even a guaranteed rent arrangement on both properties — depending on whether you have partnerships in place that allow for this to occur.

You don't need to waste any time explaining the benefits of real estate investing because these folks are already reaping them. Just cut to the chase, sweeten the pot, and begin the negotiation process.

3. The International Tycoon: International money is pouring into the U.S. real estate market by the billions. In 2015, for example, foreign investors acquired $91 billion in U.S. properties — double the amount from the previous year.

Naturally, this trend makes international buyers excellent candidates for second sales. They are eager to invest in the American economy, and to them, American builders are the gold standard. Both the quality and price of what you offer beats anything they can find in their homeland.

In my experience, many international investors assume they won't be able to qualify for financing in America. Either that or the idea of dealing with our banks and filling out all the paperwork seems too daunting. But if you, as the builder, can pave the way by partnering with mortgage companies that specialize in international clients, you would be doing them a huge favor.

If you help an international investor stretch $200,000 cash into multiple properties, you would be doing him or her a huge favor. In addition to earning a second (or third) sale, you would also be planting the seed of a potential long-term partnership. You could become the go-to builder for his or her international colleagues.

Don’t be shy about upselling. America has never been more receptive to real estate investing. Stay on the lookout for these three types of buyers, and make them an offer they can't refuse.