5.2 New Buyer Consult

This is a lengthy and comprehensive video that gives a great insight into the mind of our different types of buyer.  To ensure your buyer consult goes well, you do need to explore their goals and find out the ‘Why of the Buy’.

The Buyer’s End Goal

To understand your buyer’s motives you’ll need to ask some searching questions:

• Do you want the property to generate cash flow or does it just need to pay for itself?
• Do you plan on using the property at any point? If yes, when would you be most likely to use it?  If the answer is peak season, they will lose a lot of income
• How hands-on do you want to be with operations? The answer to this will also determine to a great extent how profitable the property might be.

The initial questions you ask can uncover motives, and set the stage for your choice of properties to show them.  You can also discover the gaps in their knowledge and plan a strategy to fill them.

What you need to find out from the start:

• The buyer’s cash flow goals and whether they are realistic for the market
• If their property-use goals align with their income-use goals.
• The time they have available to invest in the project.
• Their understanding of what’s involved in owner management.
• How much experience do they have in real estate investing?
• How much experience do they have in short-term rentals?

Identify your client’s experience level

Some buyers will come to you with zero experience and all they know is what they’ve read online that buying a property for short-term rental is a good idea. 

Others will have experience in long-term residential rental, and you’ll have to explain the differences to them.  Go back to Modules 2.2 and 2.3 to remind yourself what these are.

Experienced real estate investors but not STR – Educate

Experienced owners buying a second property – Focus on inventory

Brand new to real estate investing – Educate with case studies

Every buyer will need education in your own market to establish the unique aspects of it.  If they previously bought a condo in a destination market and are now looking in an urban area, the criteria for success is likely to be very different.

Let’s look in greater depth at the different buyer types we identified in Module 1.5

The Retirement Buyer

This buyer is interested in buying now for moving into permanently in the future

• They want to cover all expenses and get additional income to pay down the mortgage quickly.
• Minimal involvement in day-to-day booking activities is usually preferred.
• Markets with high equity appreciation is important.
• Less transient neighborhoods are preferred for future residential ownership.

The Lifestyle Investor

May not have a large amount of investment funds and will probably be pulling equity from their primary residence to support the purchase. They may have a small downpayment and enough residual funds to cover furniture and minimal reno costs.

• They want to cover all expenses and get additional income to pay their personal vacation expenses.
• They will likely want to be involved in day-to-day booking activities.
• Markets with high equity appreciation is important.
• Their preference is to be close to attractions (beach) and airports.

The Investment Buyer

This buyer usually comes in out of the gate with questions about cap rates and NOI.   

• They want good cap rates and cash on cash returns.
• Deals and off-market inventory and foreclosures are of interest .
• Their goal is to build a large portfolio of vacation rentals.
• They want good cash flow and equity appreciation.

The Arbitrage Buyer

• Want to buy under market value in equity potential markets.
• The goal is to sublease the property from the owner and do short-term rental
• The buyer looking for lease options with the ability to assign the contract.
• They want good cash flow after all expenses are paid out.

Determining buying power and urgency level

This information is helpful to establish whether they can qualify for a second home loan or an investment loan

• Their capacity for handling downpayment, closing costs and vacation rental start-up costs.
• Their understanding of the difference in financing options.
• Their lender’s familiarity with vacation rental sales if pre-approved.

The Workflow

Following a specific workflow with each client will help you become more proficient and streamlined in finding out the buyer’s wants, needs and ability to make the purchase successful in line with their goals. You’ll need to establish:

• The buyer’s end goal
• Their experience level
• The buyer type
• Determine the urgency of the purchase
• Determine the buying power
• Consider the buyer’s specific needs