Choosing Your Character as a Real Estate Investor

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Before you ever begin real estate investing, you will have to choose who your character will be while working in this business.  You may make this choice consciously or unconsciously.  You must choose how you will represent yourself to the general public and more importantly to your sellers, tenants and buyers (not including money or JV partners).  The two main choices you have are to represent yourself as a medium to large scale investing business or a single local real estate investor working for yourself and your family.

Let us now take a look at a few of the advantages and disadvantages to being viewed as either.

Higher Authority: Whether negotiating the purchase price of a property you are buying or selling, refusing to waive a tenant’s late fee, or not sure of an answer to a particular real estate question it is always comforting to be able to refer any problems to a higher authority.

As a new investor there were times that it felt great to say, “Yes, this is my property.  Would you like to rent it?  Then you must go through me.”  That was admittedly a bit of a power trip and also a feather in my cap.  I soon realized that when you place yourself at the top of the pyramid you place a burden on your shoulders and also must be responsible for quick decisions on the fly.

I realized that with my baby face and boyish good looks at the time I was not being taken seriously by sellers, buyers or tenants.  Whether you know your stuff or not, the general public puts a lot of stock into the old adage “with age comes wisdom.”

Likewise, if you are newer to real estate investing or simply do not know the answer to a particular real estate question it is not because you are dumb or that you are not seriously interested in the property for sale, it is simply because you have not been taught the answer yet.  I have seen firsthand the worried look in a seller’s eyes when I, representing myself as sole investor, have said, “I do not know the answer.”  Conversely, if you associate yourself with a larger company it is very easy to shrug this question off with a quick call to the boss, committee or partner for the answer.

When Renting: Most of us that come from the normal 9 to 5 work life are ill-equipped to deal with renters and tenants.  Oftentimes as a landlord it is easy to become too close or empathetic to certain friendly tenant(s).  Having a soft spot for any tenant(s) can put a strain on your business’s monthly revenue.

Positioning yourself as low man on the totem pole can help you stick to business.  To remain friendly with your tenants and still collect a past due collection fee say something as simple as, “You know I would waive that late fee if I could, but the boss just won’t allow that.”

Qualifications: What are qualifications?  Cash reserves, years in business, better business bureau status and the basic ability to buy property are all concerns that will be thrown at you from time to time when talking with property sellers.

I challenge you to an experiment.  If you normally present yourself as a single investor I encourage you to represent yourself as a small to medium sized investment business.  Simply allude to the idea that you work with a group of investors or money partners that make the ultimate decisions.  Notice the differences in the way the buyer, seller and tenants treat you.  Conversely if you project the image of a business, start using the word “I” when referring to buying and selling; notices the differences here.

In reality being tied to a business or acting alone has nothing to do with how capable or knowledgeable you may be.  It is import to keep your own values and business practices whenever you are negotiating major investments such as real estate.  Ideally you should already have an arsenal of real estate investing techniques at your disposal to buy and sell property in a variety of situations.

Retaliation Power: I have personally been told by a tenant that was renting one of my properties that, “I was just going to leave this month and not pay rent but I didn’t want your company to come after me.”  I do not know if this tenant would have said the same thing if he knew I was the entire company.  However this eye-opening event did make me realize the importance of the unsaid intimidation power that comes from being associated with a big business rather than just an individual.  Most people associate the bigger the business with the more capable you are to pursue legal action against the would-be deadbeat tenant, buyer or seller.

In reality it does not matter whether you are a big business or an individual; you can and should still demand past due rents, pursue evictions and garnish wages for non-payment of rent and/or property damages.

Whether you are representing yourself or a bigger investment company, remember to always be thoughtful, accurate and sincere when making sale offers to sellers and buyers.  Many people think a big business should be a cold, calculating, cash oriented business, etc; this is not the case.  No matter which character or combination of characters you choose, remember that you are the face that everyone will see.  Be whoever makes you most comfortable and encourages you to take forward action today.

– John Fedro

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.