How To Compete In Today’s “New” Real Estate Market
Have you ever heard that “history has a tendency to repeat itself?”
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Growing up, I always thought of that phrase as it related to world politics or some huge issues effecting all of humanity. The older I get, I realize that it relates to so many other minor occurrences in life. As a real estate investor I realize that it affects me every day. If we have learned anything from the history of real estate investing it is that there is no “new” real estate market…it is just a repeat of history.
Competing As A Real Estate Investor
I don’t think there are any secrets to being successful as a real estate investor. However, I get inundated daily with the next answer to all of my problems in the form of some new strategy that is going to help me “beat” the evil forces that are changing the real estate markets. I hear how there is an answer to all my problems and I can finally get back in the game. Truth be told, I never left the game. When I look around at my business and the thousands of other real estate investors out there and I wonder who it is that is losing in the real estate investment game? It’s certainly not any investor who has been through the many cycles that real estate investing has followed over the past 10 years. It does not matter what city you are in or how long you have been investing, there are still some fairly simple guidelines to follow if you want to be successful in real estate investing. And competing…well, that is all about doing these basics very well.
Real estate is and always has been a people business. It does not matter what the market is doing around you or who you are competing for houses or buyers against. If you do not know how to build personal relationships then your success will be limited at best. When the phenomenon of funds entering markets and buying up properties in bulk began to occur, there was a lot of running around screaming like chicken little. I personally had multiple conversations with investors and entrepreneurs who owned investment companies and all were worried about the same thing. What are we going to do? How are we going to stay in business?
My answer was always the same. Personal relationships are the key to your survival as a real estate investor.
In any market and against any competitor, real estate buying and selling has always been about personal relationships. If you are good at developing relationships then you have solid ground to build your business. A business built on solid ground can stand any test from any competitor because people, yes even listing agents, brokers and home sellers, want to do business with people that they know, they like and they trust. Now, there is a lot that goes into building relationships. Sincerity for one is an important aspect to building genuine relationships Whether you are trying to build a consistent pipeline for properties or a consistent list of buyers, sincerely caring about the person on the other end of the deal and their needs will go further in building your relationship than any amount of contractual bonuses you can throw in.
Learning to Listen
The second aspect to building great personal relationships is learning to listen. Listening is critical if you want to be able to compete in markets where all the talk is about how hard it is to invest. If you can hear subtle little hints from buyers and sellers alike about EXACTLY what they NEED in a deal, then you are way ahead of the curve in this industry. It has been my experience to this point that too many investors think they know WAY more than they actually do and the whole art of listening is lost. They lock in on numbers and attitudes before they even begin discussing a deal to purchase a property and fail to make a connection by listening to the owner and understanding what they need to feel happy with selling a property. Inability to listen kills the deal. On the sale side, I see more than my share of investment providers who put price ahead of everything else and instead of listening to the value a buyer puts on service, they try to sell on cheap price. More and more investors today who are buying property from investment providers are looking for strong companies, with strong staff and appropriate infrastructure. It gives them a feeling of comfort and security with their investment and they are perfectly willing to pay a higher price for better service. In my opinion, more sales are lost due to a provider wanting to compete on cheap price, when a buyer wants to buy on service and security.
Listening is truly an art because the only way to know that you have been doing it well is when you can change your approach to buying, selling or even renting a property based on what you hear. That is when you know you are truly serving your clients and building strong, personal relationships.
What you Do Matters More Than What You Say
If you concentrate on personal relationships and building strong pipelines of buyers and sellers, then the only way you can mess that up is by saying one thing to build the relationship and doing another. That is the quickest way to losing not only credibility, but also any good will you have been building. Do not let your actions fall short of your words.
I think we have all been told this since we are little, which is why it is so amusing to write it as a critical step in a “how-to” succeed at something article. But it is true and not a week goes by where I am not floored by the stories I hear directly related to this. I was recently asked by a new investor how we built such a loyal group of buyers as well as a consistent ability to buy just about any house we want in Memphis and Dallas. The answer was simple. We have always done exactly what we said we would do. Case in point, contracts. When you put a property under contract – stick to it! If you want to buy the property – then buy it! Have we ever had to cancel a contract? Yes. It has happened, although very rare and always for circumstances that went far beyond the property itself. Each time we knew we were risking our reputation so we took the time to sit down with the owner or the listing agent and go over our issue. We have closed on bad properties before and accepted a bad deal instead of risking our reputation by canceling a contract. What comes in return for operating with that level of integrity? An incredible level of respect that earns us contracts even at times when our price is not the highest. The value of a contract with someone who closes the contracts they sign is much higher than a contract for a higher price from someone who has a reputation for canceling.
For those investors who are very fearful of large institutional buyers, reach out to other local investors and see what is happening in your market today with contracts. We win contracts on a weekly basis where the property was previously put under contract with a large buyer only to be cancelled. The higher price won the original contract, but the sure bet closing won the second. I have a good friend in Tampa, FL. who has been a huge benefactor of this process in his market. He continues to buy the properties that are cancelled by large funds and has a very nice business building only on properties given back to the banks. He has built a reputation as the guy who will clean up the new mess being created by large buyers canceling contracts on the old mess. That is where any investor or investment company can separate themselves from the rest of their competition. Be the investor who builds a reputation on actions, not on run of the mouth!
Extra Touches Leave Impressions
Lastly, the best way to build consistent, repeat business is to leave an impression. If you are trying to build a real estate business, do more than just find cheap properties or provide cheap rents. Do something that makes you stand out and makes others say ‘Wow”! You want to wow a seller, a listing agent, a buyer and even a tenant. Wow every one you come in contact with. Leaving impressions are so easy to do and remember…you are always leaving an impression…either good or bad.
We have a wholesaler here in Memphis that has been selling properties to our company for nearly 10 years and I can imagine he will be selling properties to us for 10 more. Why? Because he became an expert at estimating renovations. Every property we bought from him in the past came with a report on renovations. He knew how we wanted to renovate properties. He knew the details of properties that we valued and the details that we saw as detriments. He became an expert in what we wanted to see in a home and how to show it to us in a way that left us with little work to do before buying the property. He essentially made our job very, very easy and that made a HUGE impression on us. He became our go-to guy for buying homes and we essentially made an internal decision to make sure we never competed with him on properties. He was so good at delivering what we wanted to see that we did not need to compete with him. We allowed him to develop his own sources for properties and simply provided the avenue for him to sell. This was a tremendous benefit to both of us and it made him a big asset to our company. We do so much business together that some have questioned if he works for us, which he does not. He simply found a way to work with us and it has made a big difference.
If you think about it, he is a great example of all three things. He built a great personal relationship with our company and listened very closely to what we wanted. He then became an expert at getting us exactly what we were looking for and that made a lasting impression. Today, as a wholesaler, he easily makes well into a six figure income and never has to worry about who will buy the properties he puts under contract. Over the last 10 years he has seen prices rise, fall, fall some more and now start going back up. He has been around for individual investors flooding the market right through the introduction of hedge funds and yet every day, he competes for business on three very simple things all our parents taught us early on!
These are just a few very simple ways that we have learned to compete and ways that we know will allow us to be competitive even in the “new” real estate market. What are your competitive advantages?
Photo: Fadzly @ Shutterhack