I always love numbers. Numbers are predictable. They follow rules. I started in real estate looking at just numbers: what is the price of the house? How much can I rent the house for? What are my expenses? What is my return? I figured if I knew my numbers, I could make it work all right. I never thought much about real estate as a people business.
For awhile, I could not help but to think that was the way to go. The game in town had been all about sending in tons of offers through the MLS and seeing what stuck. The process was:
- visit the property,
- come up with repair costs,
- calculate an offer that made sense.
I never met the seller (who are Mr. Bank of America and Ms. Chase?) or the listing agent.
Suddenly at the end of 2011, the game changed as the government and banks decided to stem the flow of foreclosures to artificially boost price levels. The REOs (real estate owned) properties dried up and soon there were no deals any more. Even the ever fun courthouse steps auctions had stopped. As much as I hated to admit, it was time for me adjust to the times.
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Shifting My Perspective on Real Estate
At first, I was too proud to reach out to other real estate investors because I thought I was doing well enough and did not need any help. Thankfully, once I got the whole ego thing out of my head I attended networking events and classes, which taught me a lot about other creative ways to purchase real estate I had never thought about before.
What I didn’t realize was that savvy real estate investors were buying homes directly from sellers instead of through the MLS. Some of these investors were even getting financed by the sellers! Clearly I had been operating with my blinders on and missed a ton of opportunities because I thought I was good enough.
The amazing thing was that real estate investors were almost always happy to shell out advice when I asked for them (I am always grateful for their help and I hope to keep that spirit going by helping others whenever I can). I soon set out to follow their steps, though it was never as easy as it sounded. While I had no trouble seeing real estate in plain numbers, I had to learn about establishing a meaningful relationship with sellers before thinking about buying their house.
Buying Real Estate is not Like Going to the Supermarket
This concept was different from the chasing for deal mentality. Instead of always thinking about how I could profit from this real estate deal, I was taught that my first goal was to solve the seller’s problem. For the most part, sellers wanted to sell because they had a problem they couldn’t solve, whether they be missing payments, getting tired of landlording, or moving away quickly. My role as a buyer was to solve their problems. I had to dive into a real estate deal looking beyond the selling price. In fact, often the selling price is not the biggest obstacle to the deal.
But I would have never found their problems if I had not taken the time to get to know them. Real estate is not like the supermarket, where you go down the aisle and pick something up. Real estate is a transaction between two parties that can have a lasting impact on each other. It is extremely important for the seller to know who you are and for you to know who the seller is. Rapport and trust must be built. If the seller does not trust you, then you would not have a deal. Likewise, I have also given up on deals with people I did not feel comfortable working with.
With that being said, I would never try to take advantage of a deal and I would never advise a seller to sell if I did not feel like it was the best scenario for him or her, even if it would have been a great deal for me. Reputation is important in life. I would not want to compromise that.
Following those guidelines, I have bought quite a few houses since then. All of those purchases have been financed by the sellers. Some sellers even sold me multiple properties. I think it is all attributed to the fact that I spent the time to get to know them as well as the effort to solve their problems. When they come to me with another deal it is because they know I deliver and I have their best interest at heart.
Real Estate is All About People
Overcoming the assumption that real estate is just about numbers has allowed me to expand my real estate business a lot more than what I thought I could be capable of. Most importantly, I could not have done it without the help from other great real estate investors. Real estate is about building, maintaining, and growing a relationship with people. (Tweet this quote!) So unlike numbers, it can be unpredictable. Yet it is not a lone wolf game. It is not a cutthroat competition. Deals are not done behind a computer screen. Real estate is transacted between people. And if I had not put people first, I would not be where I am today.