Investors should be a good portion of your business, especially in today's market. Well-qualified investors can produce a bountiful stream of transactions. Poorly-qualified investors will take inordinate amounts of your time and may lead to many transactions that fallout in the middle of escrow. Here's how you can qualify a prospect in 5 questions, in less than 5 minutes.

Question 1: “Why do you want to invest?”
If the answer is any variation on getting rich quick, it's time to refer them to your most disliked competitor. That type of investor will take a lot of time and consistently be disappointed. The only exceptions are those who plan on renovating and have either extensive experience or a unique competitive advantage, like owning a construction company. The best answers are those that focus on diversification beyond stocks and bonds, long-term opportunities in the market, or specific, well-researched scenarios.

Question 2: “What are your assets and where did they come from?”
It may seem overly direct but trust me, it isn't. Even a basic single-family renovation requires at least $150,000 of liquidity. Investors interested in multi-unit properties should have at least $200,000 of liquidity. Equally important as the amount of funds is the source of the funds. Funds must be verifiable with a 60 day history by the time the loan is underwritten. In practical terms, an investor isn't ready until they have the money in-hand, in an account.

Question 3: “What is the state of your credit?”
In most cases, you can glean what you need without running a credit report. While excellent credit is not an absolute requirement, it's amazing how many doors are open for those who've got it. 10% down on a flip house with stated income and a rate below 7% -- no problem with a 740 FICO. The general rule is this, the worse the condition of the credit, the more assets your investor will need and the more they will pay for financing.

Question 4: “What is your biggest fear in investing?”
How the prospect answers is just as important as the content of their answer. You do not want to waste your time with a client who will be ultimately unhappy as an investor. Anyone who seems less than confident in their ability to identify their fears should raise a red flag. You're looking for those who have given this some thought. The best are those who mention fears you think you can alleviate or mitigate.

Question 5: “What do you expect from me?”
This is your final hurdle. If someone expects things from you that you cannot deliver (or that you cannot have someone help you deliver), they will inevitably be disappointed and unhappy clients. At the other end of the spectrum, be wary of investors who mention they just need you for MLS access and pushing paperwork. This means they consider you a commodity and won't have much loyalty. You are looking for prospects that need your expertise and the expertise you can corral from others.

After this short conversation you'll know whether it's worth your time to build the rapport and demonstrate your expertise. It also means it's time you to prepare to be the best agent for an investor you can be. We can help by providing customized analytic software, strategy, and financing on all types of real estate investments. Just ask.