America is Great,Real Estate Investors don’t speak same language.

One thing i have always loved about living in the United States is getting to walk down the street of any large American city and hear the different languages.  I hear mandarin, Spanish, Hindi, Arabic and of course my native tongue, English.  Our diversity has made America what it is. (I happen to think America is great.)
The different languages heard represent someone who is here trying to make a life for themselves and eventually we know they will likely find our language to make operating here a little easier.

I have been a residential investor for 19 years. One thing I have come to know is as residential real estate investors… we all speak english… but don’t speak the same language.

Let me give you an example...

Inquiring investor Client Question; “Hey Mr/Ms Investor/seller why should I invest in this house here? What makes this a good deal?”

     Brilliant Investor/seller Answer; “Because of the cap rate, i mean the GRM (gross rent multiplier), i mean the ROI...no the IRR… um because you make lots of cash flow after you pay the expenses...as long as you don’t include the mortgage and property tax… i mean it just depends….”

OMG! Why? Why? Why don’t we speak the same?  We sound like contradicting buffoons all trying to justify our means of justifying the strategy.

Until an investor can pick up a phone and call another investor and we all have an agreement on how we evaluate residential real estate investments we will continue to lose credibility with clients and we will face up-hill battles on the sales process trying to convince them of our method of investment justification.

We can dig deeper.

Lets all say we agree on ROI as the base-line means of making an apples to apples comparison of one investment next to another.

Then it begs the questions…

HOW did you get that ROI? Is the ROI Gross or Net?

OK if it is NET ROI then I guess I will assume it is cash on cash ROI …

BUT if I am a buyer is it safe for me to assume that you considered ALL the expenses as a seller? Or did you leave out the ones that maybe didn’t appear to be as important like maintenance allocation or vacancy allocation (Both extremely important by the way!)

I think you get my point. Until we all come together and determine and agree on the best means of evaluating and discussing a residential investment property we may all be speaking english but we will not be saying the same thing.

These issues put us in the exact same spot as the foreigner who comes here who does not understand what we are saying.  When we meet this non-english speaking person we believe if we …. KEEP RAISING OUR VOICE LOUDER THEN MAYBE THEY WILL UNDERSTAND. :)

All of the yelling won’t make someone who speaks a different language then you understand you anymore then telling me cap rate, cap rate, cap rate when I as an investor only believe in evaluating based on ROI or GRM.

As an investors how do we come together the way the commercial real estate industry has? How do we work together so we have our own nomenclature when evaluating and discussing a residential investment? 

PS- this was NOT a political post about America being great or not great, Nor was it a post about or against any ethnicity, Any examples used were merely used to make the point about a real estate topic.