There Are No Short Cuts In The Real Estate Investing Industry

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As a real estate entrepreneur, this is a story that I feel needs to be shared.  It hits very close to home and includes some of my early missteps in building our brand.  Ultimately, it is about sharing with the rest of the real estate world that in business, as in life, there are no short cuts.  If we allow ourselves to get seduced by the lure of short cuts and the peddlers of promises like “I can help you” for a fee, well, I‘ll share the information and let you see how that ends.

What Are Real Estate Short Cuts

For real estate investing professionals as well as real estate companies, there are all kinds of short cuts that are offered to us every day.  These short cuts are often disguised as “can’t miss” target lists with active email addresses, buying leads from online source sites, paying 3rd party vendors to bring you ALL of their clients, or real estate marketing magazines that promise they have the magic distribution list or all of the best relationships and “key channels” to introduce you to. 

Here is the problem.  Each of these short cuts misses one basic and very powerful ingredient that is required if you are going to build a real estate business.  There are no short cuts to building great relationships.  Either you know how to serve your clients or you do not.  No amount of publicity, advertising, list acquiring, magazine covers or favorable article buying is going to be able to help you build relationships.  In the end, if the product does not meet the hype, then you are actually going backwards.

The Real Estate Marketing Hype

When I was first tasked to developing our marketing department in 2009, I knew nothing about marketing.  I knew a lot about relationship building.  There was one common understanding that I, my dad Kent Clothier and my brothers Kent Jr. and Brett all shared.  We all agreed that if our company was going to grow, it had to be because the product investors were buying and the service investors were receiving, met what our marketing was promising.  Early on, we tried several different things to get our message out including using print media, radio advertising, full-page ads in newspapers, Google Ads and pay-per-click advertising.  The messages were all the same and it didn’t take long to realize that leads from these sources were mostly lousy with only the occasional winner.

It took us a while to recognize that our single best lead generator had nothing to do with any marketing or advertising and everything to do with our day-to-day business conduct.  Our clients were generating more new buyers for us by simply telling others about their experiences than by any of our marketing efforts.  We were wasting tens of thousands of dollars trying to formulate this story about why investors should buy investment real estate from our company, when our current investors were having more success than we were in generating new business for us.  Our clients were not telling stories; they were sharing their experiences.  There was no way any other form marketing could match our investors’ personal testimonies– and that did not always make the marketing firms that wanted our advertising dollars happy.

We had zeroed in on niche real estate investing magazines and tried advertising with several that were geared toward single-family real estate investors.  For our company, this was by far our largest expense on the marketing side and, in our opinion, had the lowest payoff in terms of buyers.  On the positive side, we produced marketing pieces through the magazines, including covers, short article pamphlets and large, informative mini-mags that we could send to leads.  However, every time we ordered an ad to be run in the magazines or paid for articles, we began to see over time diminishing returns as fewer and fewer new leads were responding to the ads.  Unfortunately, it took us a while to recognize what the real estate investor magazines really were.  They were marketing pieces that only got your name out.

We were paying for positive coverage — and there was nothing wrong with that.  Just like every other company in the magazines, if you advertise you get coverage, if you don’t advertise you don’t get coverage.  We wanted to use them to tell our story, but from a journalistic perspective.  This is where the dilemma occurred.  Unfortunately, in my opinion, when you are paying for coverage, the journalistic integrity goes out the window.  We began to see this actually erode our brand and by the time we ran our last ads, we did not see a single new lead generated, and this attempt at a marketing short cut had run its’ course.

This is where our decision to find other ways to tell our story has really paid off.  We took a huge leap of faith by deciding to no longer pay for positive coverage of our company; while it has been difficult, this decision has helped us to build a brand known industry wide for the quality of our product and our services…not for taking short cuts.

Growing For The Right Reasons

When we decided that paying for positive coverage ran totally counter to our values and integrity, we went in the opposite direction and began to take our story directly to where our clients lived.  There was a great commercial I recalled watching where the owner of a company walks into his offices handing out plane tickets.  He tells his staff that it is time to quit all the marketing gimmicks and short cuts and get to know their clients again.  That is very similar to the decision that we made.

I have personally traveled nearly 200,000 miles over the past two years meeting with clients all over the country.   We have taken the time to personally meet clients where they live and give them a chance to bring other family, friends or colleagues to meet us in person.  We have sold relatively few properties each time we travel, but have built relationships that have lasted years, and our long-termed clients have sent us many new clients because of those up close meetings.

We have poured our resources back into growing our staff and growing the services that we offer clients.  How does that help?  When you have a full staff and are able to quickly answer questions, quickly handle problems, and quickly respond to a clients needs, you are moving your company in the right direction.  We have chosen to run our company like the growing service provider that it is, and sought to improve those services at every opportunity.  What might have appeared as expenses with no payoff, have in fact been some of the best marketing expenses we have ever spent.

Skip The Short Cuts

When I first started, I thought the answer to developing new clients was to be constantly advertising.  My view was the more times your name appears, the more business you will get.  I fell into the same holes that so many other companies find themselves in today.  It took a very smart businessman to point out to me that every market has to have the low price leader and high price leader.  But not every company can excel at excellence.  If you provide an excellent product, with excellent service at an excellent value, then don’t chase the “cheap” client.  Instead, provide quality and chase the value client who will stay with you over the long haul.  It is easy to be cheap, but takes much more work to be the high price leader and still provide exceptional value for your clients.

A common attack leveled at our company by some is that we are an over-priced company that has to churn and burn for new clients or the whole thing stops.  I find that claim amusing.  During the last two years, we have grown 63% in 2011 and are on pace to grow 68% in 2012.  We have been named to the Inc. 500/5000 Fastest Growing Companies in the U.S. list, have been honored as both Business of the Year nominees and recipients with several local business councils and have opened up in a second market.  Our company has grown from 11 employees to 38 employees during that time with plans to continue growing.  I believe Truett Cathy said it best when he said that “If you plan to get better every day, then your clients will demand you get bigger”!

And here is the kicker…

63% of our company’s 321 closed transactions so far in 2012 have gone to existing clients building out their portfolio.  Clients that are discouraged, or are not satisfied, or are purchasing over-priced investment properties, are not clients that continue to build portfolios.  Building your business through existing clients that continue buying multiple properties over time and share their success with others, is by far the best marketing decision you are going to make.  After all, it follows the simple rule that those who take short cuts always seem to forget. 

Real estate investing is a people business and real estate businesses are built one quality relationship at a time.

Photo: rick

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About Author

In 2005, Chris Clothier (G+) began working with other investors and has since helped hundreds of investors purchase over 2,300 properties in Memphis, Dallas and Houston through the Memphis Invest family of companies.

12 Comments

  1. When a company takes the time to under promise but over deliver the satisfied customers will pass the news on to other investors. There is nothing better than FREE word-of-mouth advertising from happily satisfied customers. Same also goes for a company that doesn’t do so well in the other direction. One investor will tell 10 friends and these will in turn pass it on to 10 on down the line until that company is basically out of business. Modern technology has some advantages, but the face-to-face meetings are where the money gets made.

    Dale

    • Chris Clothier

      Dale –

      Unfortunately, investors are bombarded with offers from so many different directions and they all promise to deliver sales. And some, for whatever reason, latch onto these offers and end up either completely duped or beholden to the people or companies making these offers. The best best, as you noted, is always one-on-one relationship development.

      Chris

  2. Great article Chris.

    I learned a long time ago when I had my home inspection company, that it was all about relationships and customer service. There will always be someone cheaper. The same is true for real estate. Most investors will by once from a particular individual seller. Even though it is once, they will still give you referrals if you do a great job. I have found in my business, the same buyers buy from me time and time again. Your buyer’s list is where the gold is.

    I have a real estate investor friend that is very successful. He has a party every Christmas for all the folks that brought him deals or he sold deals to. He also invites his accountant, insurance man, closing attorney, painter etc. He wants everyone on his team to know that he really appreciates them and all that they do for him.

    Sharon

  3. Chris Clothier

    Sharon –

    You brought up a great point that I didn’t bring up. I promised Josh I would start cutting back on the length of my articles!

    The entire team is so important. Relationships, relationships, relationships. There is nothing more important. Absolutely nothing. If you are transparent with your business and deliver what you say you will deliver…then everyone from your clients to your partner companies will absolutely help you grow.

    Thanks for taking time to comment!

    Chris

  4. It’s all so true! I read recently about the “10,000 hour rule”… that it takes about 10,000 hours of work and effort towards something to really get it accomplished. I think the majority of this is time it takes for the relationship-building! Well, and in a close second is the website building because I’m horrible with computers :) But seriously, build those relationships. It makes the difference!

    • Chris Clothier

      Ali –

      Thanks for taking time to read and comment on the article. You are correct. It does take an enormous amount of effort to build relationships and those that try “short cuts” like marketing gimmicks, usually find that out the hard way.

      All the best – Chris

  5. Building relationships and putting the time and in turn money into that effort is vitally important but hard to put on a balance sheet. I can install a window myself and know it saved me $100 but it is hard to see the value on paper of answering every phone call and all the little things that excellent service requires. Time has shown this is extremely valuable and is key to having a successful real estate investing career.

    Keep up the great work Chris.

    P.S. I don’t think you need to cut back on the legnth of your articles!! ;)

  6. Chris Clothier

    Hey Kyle –

    Thanks for the comments. One of the big points of the article was that some real estate entrepreneurs think that by paying to have good articles in niche magazines is a short cut to build their business. And the reality is that those articles are nothing more than marketing. They cannot build your business. Only you can – and the best way to do it is to provide quality and great service. Success builds on success and if your clients are successful, you’ll be successful. Same thing goes for any part of the real estate business.

    Help enough others get what they want and they will help you get what you want!

    Thanks for taking time to read the article and leave a comment.

    Have a great one – Chris

  7. Jeff Brown

    Hey Chris — This is me, givin’ you a great big man hug. :)

    What my mentors (Including, like you, Dad.) told me, and I’ve told all I mentor, including my own son, is what I personally believe is THE gold nugget in this post. (Besides the personal relationships, or at least equal to them.) It’s ALL about the product or service — the value it adds and it’s ultimate performance, which is another way to say RESULTS. The rest is HappyTalk.

    Maybe your best effort, Chris.

    • Chris Clothier

      Jeff –

      I like that term “happy talk”. The article is really a warning to all the real estate entrepreneurs out there who think that “happy talk” is a good marketing strategy. You nailed it on the head when you said RESULTS. In the end, that is all that is going to matter and if your happy talk does not match your results – forget about it. No amount of marketing is going to be able to help you build a business.

      Chris

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