3 Scary Bad-Raps For Real Estate Investors And How to Beat Them
So, I am perfectly aware of how difficult is may be to read an advice article from a guy dressed like a pirate. But hey…it’s Halloween and this is pretty scary stuff. Make mistakes like these and you could be dressing like this for kids parties just to make a living! And no, that is not why I am dressed up. I have 4 kids and I would do anything to make them smile…
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I was recently at a meeting with a group of real estate investors. It was a group that I had stopped attending a while ago and for some reason, call it momentary amnesia — I had forgotten why I had stopped attending. It did not take long for me to remember! I was surrounded by the walking, talking epitome of the three worst bad-raps attached to real estate investors today.
It is not a secret that real estate investing gets a bad rap. Property Management companies get a bad rap. Unfortunately for both, the bad raps are sometimes earned. For now, I will stick with real estate investing and save my property management comments for another article post.
Real estate investors can get a bad rap as opportunistic vultures. Real Estate investors can get a bad rap as slumlords. Real Estate investors can get a bad rap as lazy business people. All three are absolutely true, but can also be overcome with well thought out and carefully executed plans to combat each stereotype.
Real Estate Investors As Opportunistic Vultures
Somewhere after the advent of social media and instant communication sites (insert your favorite photo sharing, status updating, gloating website here), it became fashionable to go online and post copies of the check you just received from the closing attorney or title company. Then, as if it could get any worse than that, the pictures of new cars, nice watches, fancy bottles of wine . . . anything you could imagine that says “hey, check me out,” started showing up online.
Now, I am a huge fan of using social media. I think these sites are incredible tools for communication, education, and brand building. On the other hand, it has absolutely fueled the impression among the general public that real estate investors are opportunistic and preying like vultures on misfortune. Showing off and using gaudy images is a tactic that has been used by infomercial salesmen, including those selling how to products about real estate, for years. This tactic made its way onto social media when product sellers began to use it to show how successful they were. Before long, it began to show up on everyday posts from people who thought this was a good way to earn “respect” in the real estate world. Unfortunately, in my opinion, those kinds of tactics are more likely to earn scorn.
As investors, many of us are buying properties where the previous owner suffered some form of misfortune. None of us should care how that misfortune came about. It is an event from the past that none of us can change and which we bear no responsibility for. Who is to blame is not a question for us when we are buying the property. Instead, we should be focused on how to bring this property back to market either as a property for rent or for sale, and how to make that transition a profitable one for us as investors. Each time we have a positive story to tell, if we focus on the right story and leave the “bling” out of it. Others are absolutely watching and still some are taking notes and keeping score — that is the last thing this industry needs. On a small level, each time someone posts a pic of that “fat check,” someone else is telling a story of greed.
I want to point out one last thing on this first bad rap. I am all for celebrating! Anyone who spends time with me or seeks my advice will tell you that I believe in celebrating all wins. I am a big believer that no matter how big or how small that victory is or how you define it, life has enough adversity in it that experiencing wins should be celebrated. Celebrate with a big dinner or a nice bottle of wine or by splurging on yourself or your wife/husband/kids or anyone else who is important to you. Celebrating can be going for a jog in the middle of the day when you would usually be working or taking the whole day off for that matter! Whatever it is…do not stop celebrating your victories. Just stop posting ridiculous pictures on social media!
Are Real Estate Investors Slumlords?
I am a real estate investor and I am NOT a slumlord. The same cannot be said for every investor out there. We are all aware of the problems associated with real estate investing and the whole notion of being a slumlord. Some of it has been earned over time and some of it has not. I recall a city council meeting I attended some years back with several hundred real estate investors, where a councilman referred to the “slumlords” in attendance. It made a lot of people very upset, but not me. I knew, just as many others knew, that there were slumlords in attendance that night, just not all of us.
You know who the slumlords are as soon as they begin to tell their philosophy on investing. They discuss things like how to limit maintenance costs instead of how to prevent maintenance costs. That is code language for ignoring needed repairs or complaints and keeping things running with duct tape if need be, instead of replacing. They discuss things like how to get a property occupied quickly with promises of future fixes and then ignore the request for those fixes. They discuss things like early morning visits to the homes that do not pay rent and carrying a hammer to bang on the front door (I would imagine to sound very menacing). Now notice, this has nothing to do with the neighborhood and everything to do with the actions of the landlord. Unfortunately, those that can least afford to move are usually the targets of these types of landlords and these types of ideas really only work in older, more run down neighborhoods. Again, the targets of slumlords are often those that can fight back the least and cannot afford to move.
The solution here is a much harder one to tackle. These thoughts and actions have been prevalent since land ownership began thousands of years ago. They just come across differently today and with a 24 hour news cycle, the stories of slumlords come out much more quickly and in greater detail. My advice is to distance yourself not only from tactics that are clearly designed to “hold down” the renter to increase your profit, but to also distance yourself from those slumlords all together. Do not waste your time or your reputation by being in business, or by associating with investors that think this way. Your best bet is to always treat your investments and your tenants exactly as you like to be treated. Most of us would agree that firm but fair, is the best policy.
Are Real Estate Investors Lazy?
It’s funny that these types of bad raps can be so general and non-specific and yet any one of us can get lumped into an over-generalization. Part of the reason this happens, is that so often those that want to get started or even take the plunge into real estate investing, say they are doing it to get rid of the JOB. But what does that really mean?
Unfortunately, getting rid of the JOB can be easily equated with “I don’t like to work”. That idea is sometimes reinforced when you look at the work, craftsmanship and sales pitches made by some real estate investors. It is shoddy at best and often over-hyped. But again, lumping all investors into this category is unfair.
So how do you combat this bad rap?
Don’t be lazy! With anything you do, make sure you have a well thought out plan and you execute the right way, paying very close attention to the smallest of details.
That can include:
- the way you present yourself at meetings
- the way you present yourself to home sellers
- the way you present yourself to homebuyers
- the way you present yourself to banks
- the way you present yourself to contractors
Do you get that I am a big believer in the way you present yourself? If you do not want people to think you are lazy, clean up your act and at the very least, look like a professional!
I watched a video recently that a company posted from a bus tour they had with investors from out of town. I was blown away by the way they presented themselves to potential buyers, especially considering the fact that ALL of the buyers were from out of town. You would think that an out of town investor is going to want to see the very best of your company, to have a level of confidence in you, in order to trust you with their investment. Every person in the video from that company was dressed SUPER casual. No big deal right? Except they were in t-shirts with shirts un-tucked, wearing flip-flops, wearing ball caps and jeans with holes in the knees and backsides just to name a few, little details.
The words you hear on the video are about paying attention to details, but the pictures show a different story. The properties shown were before they were renovated, and the buyers are hearing about how great they will look when they are done, and how closely the company inspects all of the details. Now, I do not know how well their bus tour went . . . they very well could have sold a property to every single buyer. In fact, they could run the tightest ship in the industry, where every detail is covered, but they gave the impression to me of being lazy real estate investors. They gave the impression that little details really don’t matter.
I know how unfair that is, believe me. I know that you should not judge people or even companies in such a way, but that is how people think. How you present yourself is absolutely the judgment you will get from others. If you do not want to be judged to be lazy, then do not give people ay reason to think you are!
As real estate investors, not only do we have a story to tell the rest of the world about the good we do in our cities and in our neighborhoods, but we also have preconceived ideas we have to combat. We are constantly going to be judged by the lowest denominator in our industry. In order for us to improve those stories and drown out the noise caused by the bad raps, we have to operate with the highest level of professionalism and highest level of integrity, and must pay very close attention to all of the little details. That is how we overcome the stereotypes. That is how real estate investors can do away with the bad raps.
Photo Model: Chris Clothier