There Are No Short Cuts In The Real Estate Investing Industry
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.
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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.