Why It Pays to Be a Straight Shooter in Real Estate (Even if It’s Uncomfortable)

by | BiggerPockets.com

A common saying among medical practitioners is to “manage expectations.” If the likelihood of someone who’s been in a car accident of ever walking again is low, it’s a very bad idea to tell that person to “just think positive and of course you will be able to walk again.” This sentiment may sound nice, but it will set up a heartbreaking letdown if walking again doesn’t come to pass. Instead, the goal should be to do everything to make the patient walk again while managing their expectations so that if they don’t, they can still learn to be happy and make the most of the cards they’ve been dealt.

Luckily, in real estate we don’t have to deal with anything quite so dire. But there is still the temptation to “over-promise and under-deliver.” It’s a lot easier to sell a bill of goods now that doesn’t have a downside because that will make the other party more amenable to whatever it is you are saying. But the problem is that after you’ve sold this bill of goods, then you have to hope and pray that the rosy future you’ve promised will come to pass. Spoiler: It often doesn’t.

It’s better to be up front with people about what the future problems could be and/or what the downsides are. Indeed, this plays off the idea of “getting to no” that I discussed in relation to the book Never Split the Difference. When the person you are negotiating with says “no,” they are more likely to feel like they’re in control and not being manipulated. Counterintuitively, getting someone to tell you “no” is actually a way to get that person to trust you more.



Related: Yes, Customer Service DOES Matter in Real Estate: Here’s How to Make Yours Top-Notch

Download Your FREE copy of ‘How to Rent Your House!’

Renting your house is a great way to enter the world of real estate investing, but most first-timers (understandably) have a lot of questions. Fortunately, the experts at BiggerPockets have put together a complimentary guide on ‘How to Rent Your House’. All the skills, tools, and confidence you need to successfully rent your house are just a mouse-click away.

Click Here For Your Free Guide to Renting Your House

Examples of Managing Expectations in Real Estate

Let’s say you are a wholesaler and you are negotiating a deal with a potential seller. If you tell that seller that “I can close in 15 days and buy it with cash,” only to turn around and try to wholesale the property, you are not properly managing expectations. Maybe you can usually sell it. But “usually” is not always.

When that 15-day period comes and goes and you have no deal, what do you tell the seller? Do you spin another web of lies about “the financing not lining up” or “needing more time for title issues”? Being dishonest or “selectively honest” is no way to do business and is likely to eat up a lot of your emotional energy fighting off angry sellers. Maybe you’ll lose a few deals up front, but it’s better in the long run to safeguard your reputation, your energy, and your integrity.

Another example would be when signing a lease. We go through a whole hour-long rigamarole with each tenant who signs a lease. We make sure to go over every single item in our six-page lease. Perhaps this is a bit excessive, but we want to make sure there is no confusion down the line. If a tenant calls us irate about some policy we have, they can’t feign ignorance because they have a copy of the lease and know that we went over it with them in painstaking detail.

In all this time, we have only had one group walk out of a lease signing because they didn’t like the terms. The couple was upset that they wouldn’t be allowed to smoke in the unit. What this means, obviously, is that had we let them in, they would have smoked in our unit and ruined the paint and carpet and who knows what else. Quite frankly, that “loss” was addition by subtraction.

Back before Josh and Brandon had realized my uncanny literary brilliance and I was marooned in the Member Blogs, I wrote a post about what happens when you don’t properly explain things to a tenant up front—a mistake we made early on and lived long enough to regret:

“…A while back the person signing leases didn’t emphasize much of anything. She just ran through it. Shocking as it may be, many tenants never read the lease and so this is the key time to make it clear what the rules are.

“One thing she left out was that the emergency maintenance line was only for use for basically if a pipe burst and water was spraying everywhere. So instead, our property manager started getting barraged by calls about the A/C going out when it was 80 degrees outside at 8:30 at night and what not.”

How fun.

The examples of not properly managing expectations are really endless. For example, another problem we ran into was “implied future raises” when hiring people. Sometimes an applicant or new hire would say something like, “This isn’t really the wage I was looking for, but I want to work here, so I can work at this wage for a while.” Oftentimes, we would nod our heads or give a non-answer like, “Well, we can’t promise anything, but we are a growing company and will try.”

Now we give plenty of raises, but it’s a really bad idea to promise or even imply that they will be coming soon. Often, your time horizons are different, and if employees feels like you are stiffing them, they will grow bitter and begin to resent you. Their output will likely suffer, and that makes it even harder to give a raise.

Sometimes an employee doesn’t turn out to be as good as you hoped, but that employee is also not bad enough to fire. Now if you’ve implied there is a raise coming, you are at an impasse, as it’s unlikely that employee also believes he is mediocre. Employees will often believe they are doing a great job when they are not. I am unfamiliar with any case of the opposite happening.

Related: 7 Types of Tenants Who Cause MAJOR Landlord Headaches

Instead, it’s better to manage expectations up front even if it’s uncomfortable and you may even lose a potential employee here or there. Try something like, “While we try to reward good work, we cannot promise anything about the future. If this isn’t a wage you would be happy working at, I’m not sure this is the best situation for you.”

best-investment

Conclusion

It’s tough to tell people what they don’t want to hear, but it’s an important skill to learn. It’s a lot better than dealing with those same people when they’re upset their expectations haven’t been met (whether those expectations are reasonable or not). You may lose an applicant, deal or employee here or there, but from my experience, it’s very rare. Generally, all you will have done is increase the likelihood that both of your expectations are aligned and decrease the likelihood of a blowup later on down the line. In addition, you will build trust with others and create a reputation as a “straight shooter.” And it’s worth it to be a straight shooter, even if it’s a bit uncomfortable.

Do you have an incident that blew up because you tried to sugarcoat or stretch the truth?

Share below!

About Author

Andrew Syrios

Andrew Syrios is a real estate investor in Kansas City and a partner in Stewardship Properties along with his brother and father. Their company owns just over 500 units in four states.

5 Comments

  1. Erik Whiting

    Very nice piece. It’s refreshing to see someone preaching ethics in real estate investing, a business often known for crooks and shysters.

    I also checked out your website after seeing the name is Stewardship Properties. I’m deeply involved in my church’s stewardship program and that’s why it caught my eye. Reading up on your company history and plan was a treat.

  2. John Sanderson

    Great article Andrew, I always enjoy reading your stuff. I’ve done this from day one investing. I don’t have any employees yet, but I go over each and every lease in painstaking detail with every tenant. Sometimes I get some buffs from impatience, but more often than not I get questions about the lease that get cleared up before signing and would’ve probably caused a problem down the road.

    Dame thing now that I’ve started working with partners on deals that are unfamiliar with real estate. I run them through possible scenarios that could eat up cash flow or decrease return when we sell or whatever it may be. I’ve had some walk away, but all of them have thanked me for making them aware.

  3. Vaughn K.

    I’ve always had this habit, sometimes, arguably, to a fault! But I’ve always believed it was for the best. I’ve worked with people over the years who habitually oversell things, and it has always driven me mad. If you have to stretch the truth to close a deal, you’re not going to have a happy camper on the other end of that deal! I believe in value for value transactions. If you can’t sell the other person with what you’re actually bringing to the table then it is better that they walk. It will ultimately save you both a lot of time and trouble in the long run, and you’ll have a better reputation for it as well.

    I much prefer to under promise and over deliver. That way you make people extra happy because they get more than they were expecting… And if you feel your pitch needs a little more oomph you can just promise exactly what you KNOW you can deliver, and that’s still good too. People have often given me flack for being like this, but I wouldn’t have it any other way.

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here