Agent Advice on Creating a Real Estate Investment Division

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I have some questions for other real estate agents who focus on investment clients (and do it with some degree of honesty or integrity).

I left corporate sales to manage my wife's growing real estate team two years ago. She worked in the family construction business rehabbing, building and managing investment property and as a rehabber-focused mortgage broker prior to becoming a traditional real estate agent in 2004.

Early on we felt her expertise in investment real estate would make a nice niche business for us (I strongly believe in agent specialization). This year we hired a second agent (who is also an experienced rehabber) to focus on acquisitions while she focused on rehabber listings to grow this niche into a division of 4-5 specialized agents.

Unfortunately, this "division" is floundering a bit. When I look at the resources I'm dedicating to it (staff, marketing budget, etc) and the sales/revenue it generates compared to our residential or relocation business, I get frustrated. As such, I would love some advice from other agents who work with investors.

To date we've been inundated with "newbie" investors who consume time and resources but either hesitate to pull the trigger (even when we have financing in place) or loose their taste for it after one or two deals (in other words, we aren't seeing the repeat business we had hoped for).

The repeat business we have had has been rehabbers who ignore our acquisition advice and produce low end, low quality product that is expensive (if not impossible) to sell. They also expect discounted commissions and more marketing resources than a "traditional" residential seller.

There's a real expense associated with the carrying costs of marketing these longer selling listings and we've lost our stomach for it. Basically, it's been less revenue, higher operating costs and longer sales cycles than our residential sales- and getting it in volume doesn't help. (This summer we finally cut loose 30-40 rehab investment listings because they were positioned to financially drain us when the market slowed down).

We've also had two larger rehab groups that absolutely consumed my wife’s time this year (basically she became a free consultant training their staff on how to rehab until we we're forced to let go of the clients and their listings). Again, a lot of work for little or no revenue.

To make matters worse, we originally structured ourselves to focus on rehabber clients but due to changes within our market place over the past few months we've been advising our clients to shift from rehabbing to long term acquisition- which is obviously forcing a change in our go-to-market strategy.

Over the past week we've been in planning mode to build a business and marketing plan to get this all back on track for 2007. My desire is to do things right or not do them at all- which means building a turn key solution for our clients (or throwing in the towel and focusing on other aspects of real estate).

My primary question is, IS IT EVEN WORTH IT? We have a growing inventory list from seller's who were "suckered" into bad investments that just want out of investment real estate (and we're the ones who get to tell them they're going to loose money). Although I feel sorry for them and want to help, I can't build a profitable business with clients who never want to invest again and tell everyone they know to stay out of real estate investing because they were scammed by someone else.

Also, we can't find property managers to partner with that even return our client's calls. We repeatedly find clients with unrealistic earning expectations or less-than-reputable motives. When we try to educate them, they ultimately run away from us to find people who will "promise" them they can get rich quick.

At this stage, I don't have the financial resources to bring in a top notch REO or foreclosure person(s) and we don't have experience on our (existing) staff in commercial (and I don't want to venture off into areas I know little about or that doesn't complement traditional residential sales- like, say, relocation sales would). We're looking hard into a 1031 exchange specialist (either on staff or as a partner). However the more planning I'm doing the more I just want to run away from investors (we saw a 200% growth in residential and relocation business this year).

Have I just had a bad run of luck?

Am I focusing on the wrong aspects of investment real estate?

Other agents, what has your experiences been?

What am I missing?

Advice?