Tapping Into Hidden Real Estate Revenue

Learn how to profit safely despite the market's ups and downs.

Even as many real estate markets are starting to slow, remodelers can still find plenty of opportunities to increase profits. Experts say building strong relationships with area real-estate professionals can make a big difference in a remodeler's referral business. Additionally, by using their knowledge of buildings and neighborhoods, remodelers have the opportunity to profit directly from their own strategic investments.

Here's how you can safely jump into the real estate game without getting soaked.

Reach Out

Professionals on both sides of the relationship agree that remodelers who work to develop and maintain partnerships with realtors can recoup that investment of time with increased profits. They say that reaching out and being available to realtors whose clients want to learn how much a potential new home's renovations might cost can lead to work from those prospective buyers — and future referrals from that real estate agent.

"There's a spike in remodeling activity with the first year of buying a home," notes Josh Bogle, president of the Idaho Remodeler's Association. As a result, he notes, getting your foot in the door early in the home-buying process can mean more business down the road.

Mark Brick, president of Glendale, Wis.-based B & E General Contractors, says his suburban Milwaukee company earns up to 15 percent of its annual revenue from just these kinds of consultations. He says the key to getting called in for these visits is to make yourself available when an agent needs you.

"They have all my phone numbers and know I'll return the call," he says, noting that he's followed this strategy for all 21 years he's been in business. "I can be reached in the evening or for a Sunday appointment if they need it — Realtors work seven days a week."

Let Your Professionalism Show

Real-estate agents agree that responsiveness and professionalism are keys to the success of remodelers' outreach efforts. Simple things, like making sure you have a business card available when meeting with agents and their clients, can make a big difference.

"I don't go back and chase someone down for a card," says Mark Nash, an Evanston, Ill.-based agent, and the author of 1,001 Tip for Buying and Selling a Home. "A lot of contractors are sole proprietors and forget the whole marketing part of their business."

Nash also suggests remodelers invest in color brochures highlighting "before" images as well as finished projects.

"The agents need to see what the remodelers do, how they transition between before and after," he says, adding that literature also should include precise information on services, instead of just using general descriptions (such as general contracting). "You really have to educate people on all the things you do, and give people reference lists."

Play the Market

In many areas, remodelers are getting directly involved in the real-estate market of buying and fixing up rundown properties and profiting by reselling them. This practice generated easy money for some during the real-estate boom years, when quickly rising prices almost guaranteed a good return. Today, experts urge caution and suggest remodelers concentrate on homes at lower price points.

"There are always people who want to get into the market," he says. "The real estate market is like a pyramid, and the number of buyers is highest at the lowest [price] point."

And, Nash notes, in this slower market, remodelers also need to understand that their costs of selling the property once renovations are completed may be higher during a slowing market.

"Marketing costs are going to grow to a much larger part of your operating costs," he says. "You should plan for a worst-case scenario when doing your budget."

Think Long-Term

Not all remodelers are only thinking about short-term profits with their real-estate investments. Milwaukee-based Brick has turned his remodeling skills to buying and renovating small commercial rental properties. He says he looks for buildings located near a busy street that have an obvious use — he doesn't want to get bogged down in extensive renovations. And he looks for projects that can return his out-of-pocket expenses within two to four years.

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