How to answer when a seller asks how an investor makes money

Why sellers ask this question

A seller who asks how you make money is often looking for transparency and reassurance. He or she might be wary of investors due to past negative experiences or common misconceptions. He or she wants to understand if he or she is being taken advantage of, or if the deal is fair. This is a moment to build trust, not to get defensive.

This question shows he or she is engaged and thinking critically about the transaction. It is an opportunity to educate him or her about your value proposition and differentiate yourself from less scrupulous operators. He or she wants to know your incentive.

Explaining the cash offer model simply

Start by explaining that you are a real estate investor who buys properties for cash, as-is, and closes quickly. This is the core value you provide. You can then explain that your business model relies on buying properties at a price that allows you to cover your costs and still make a reasonable profit.

You might say something like, 'We buy houses that need work directly from homeowners. We take on all the repairs and renovations, then we either sell it to another investor or put it back on the market. Our profit comes from the difference between what we buy it for and what we sell it for after all expenses.'

This is a straightforward explanation that outlines the process without overcomplicating it. It highlights your role as a problem solver for properties that need significant work.

Transparency about repair and resale

Be honest about the need for repairs. You might say, 'As you know, your house needs a good bit of work. We factor in the cost of those repairs, plus holding costs like taxes and insurance, and then our own operating costs. When we resell it, we aim to make a profit that justifies all that effort and risk.'

Do not try to hide the fact that you intend to make money. Every business operates to generate a profit. The seller's motivation is to sell quickly and without hassle, and your motivation is to make a return on your investment. These two motivations can align perfectly.

For example, suppose you spend $50,000 on repairs, $10,000 on closing and holding costs, and then sell the house for $200,000. Your profit would be the difference after all these expenses.

The value of speed and convenience for the seller

Emphasize the benefits you provide to the seller, which are often the true reasons he or she is considering your offer. You offer a quick closing, you buy the property as-is (meaning no repairs for him or her), and he or she avoids agent commissions and fees. These are tangible savings and conveniences.

You can say, 'While we do aim to make a profit, the value we provide to you is the speed and simplicity of the sale. You get cash quickly, you do not have to make any repairs, and you do not pay any agent fees. For many homeowners, that convenience is worth a lot.'

This frames your profit as a fair exchange for the services and solutions you provide. It focuses on how your business helps him or her solve his or her problem.

Avoiding jargon and over-explanation

Keep your explanation simple, direct, and free of industry jargon like 'assignment fee,' 'double close,' or 'ARV.' These terms can confuse a seller and make him or her suspicious. Use plain language that anyone can understand.

Do not over-explain or get bogged down in the minutiae of your business finances. The goal is to provide enough information to satisfy his or her curiosity and build trust, not to give him or her a full accounting lesson. Stick to the basics: you buy, you fix, you sell, you profit.

If the seller keeps pressing for specific numbers, you can politely reiterate that your offer is based on the fair market value given the condition and necessary repairs, and that your profit is built into that. Reassure him or her that your offer is firm and fair for an as-is cash sale.

Building trust from the start

Your response to this question is a critical moment for trust-building. Homeowners who respond to text messages, like those from Speed to Seller, are already indicating some level of motivation. Your job is to convert that initial interest into a solid relationship.

Be confident, calm, and direct. Transparency about your business model, even the profit aspect, can actually strengthen a seller's trust in you. He or she respects honesty. This sets the stage for a smoother negotiation and closing process.

Remember that you want to be known as a straightforward investor. Your reputation matters.