“Business happens over years and years. Value is measured in total upside in a business relationship, not by how much you squeeze out of any one deal.” — Mark Cuban
Mentors, partners, lenders, cash buyers, motivated sellers, investors, contractors, attorneys, employees — the list goes on and on. No matter if you want to own one rental property or 10,000, flip one home or wholesale 10,000, building strong relationships in ANY business is a must.
We all would like the perfect lender or motivated seller to knock on our door and say, “Please, I need your business!” But that will never happen. It’s up to each of us to build and foster these relationships over time. Strong business relationships are built on trust and value. So often, the beginner investor will understand the value of strong relationships but completely miss how they are actually built or where to seek them out. This results in people doing things like posting on the BP Forums asking for mentors or asking for someone to partner with.
I’m writing this article to remind those who have great business relationships the importance they should place on them. I also want to show the beginner how they can also make use of strong relationships in their investing. I hope to do this by sharing some of my own stories to illustrate these points.
“If you want to go fast, go alone. If you want to go far, go with others.” — African proverb
It doesn’t matter what your goals in real estate are; you will need the help of others to achieve them. Having strong, lasting relationships built on value and trust is like setting up a concrete foundation to build your business atop. Trying to take on every role is like building your business on swamp land. Even if it works for a short time, eventually it will fail.
In my own experience, the more foundations I build out of concrete, the bigger the company grows, and the easier it becomes to operate. So the big question is, how do you build strong business relationships? The answer is quite simple. You have to earn trust and add value. The answer is that simple — executing it is another story.
I racked my brain on how I could illustrate the importance of relationships and how they are built. Because relationship-building is such a variable, intangible process, the best way for me to explain is through my own experiences. I hope you all will gain from these stories of relationships in my own business
“If people like you, they will listen to you. If they trust you, they will do business with you.” — Zig Ziglar
How I Bought, Rehabbed, Rented, Refinanced, and Repeated for 14 Rental Properties
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At a local BiggerPockets meet up, I met another guy my age named Coleman who wanted to get into real estate but hadn’t made the jump. He approached our company and asked if he could help manage our rental portfolio in any way, and in return, he would learn how its done. Coleman is a CPA with a Master degree in Accounting. Being that I don’t enjoy that side of the business, it was a great opportunity for us to have someone more skilled taking on that role and cleaning up the system around it.
Fast forward several years, and Coleman is now an equal business partner in our businesses. When we first met, Coleman made an offer that added tremendous value to us at the right time, and that is how the relationship formed. Over the years, trust has been built and value has continued to be exchanged.
Years back, I went to buy a dryer off Craigslist. After some quick small talk, real estate came up in the conversation, and the dryer owner mentioned a duplex he wanted to sell. We drove over to the duplex, talked for a while, and after a few days of talking, he accepted our offer on the property with 90% seller financing at 5% interest.
Outside of paying a lender on time, how could we add value? I came up with the idea to write this gentleman thank you letters every time we would buy a property, letting him know that without him, we couldn’t have grown our company in this way. This not only kept him up to date with our growth, but it also added value to his life to know he was helping these young entrepreneurs succeed. Years after we bought that duplex, he sold us other property, lent us more money, and now is still interested in doing more business with us in the future. All this came from a $50 dryer off Craigslist. That is the power of fostering relationships.
That partnership example, of course, is a major one, but in business, the many small relationships hold great importance as well. We have built a tremendous relationship with a local bank that has played an important role in our growth. We have hosted networking events at that bank to help drum up more business for them. We also shifted some of our banking to them to help them meet deposit goals. This trust has led to several millions of dollars being lent to our business to buy investment property.
While doing fix and flips, we would hire out a lot of the work, which meant we often had lots of people at the job sites working. One thing we always did for our contractors was to buy a fridge for the job site and stock it with drinks. This cut down on people leaving to run to the gas station, which made our job faster, and it kept them hydrated and safe. Even more than that, it built trust and added value for all of them. This, in turn, led to lower bidding on jobs and priority scheduling. Our only rule was that they could only take one for the trip home, but we allowed them to have as many as they wanted while on site. Sure, it would cost us $200 to stock a fridge full 3-4 times during a job, but in the grand scheme of things, we got that back tenfold.
One of our full-time maintenance men for our management arm came to us after he had worked on one of our flip projects as a sub. He said when working on our jobs, it never felt like he was working for us but rather with us, and because of that, he wanted to come on full-time to work exclusively with us.
As our business has grown, we have transitioned into buying large apartment complexes. In this niche, your name and reputation is everything. Brokers are well aware who will stick to their word and get a deal done or who will waste their time. On our first larger deal, the listing broker was the top performer in our market. We took this into account during due diligence and the closing process. We made sure we were as easy of buyers to transact with as we could be.
This allowed a great relationship to form with the well-known broker. At closing, he said, “I look forward to doing more deals with your company, and please feel free to use me as a reference to other brokers and your investors.” Being able to name drop the top broker in our market and say, “We just closed a deal with him, and he’s happy to recommend us as a strong buyer” has helped us get in the door with many brokers who otherwise would have brushed us away. Yet again, gaining the trust and adding value has resulted in a great relationship and foundation on which we continue to expand.
My list could go on and on, from title agents, attorneys, and mentors to friends and associates.
“People do business with people because they choose to, not because they have to. We can always find others doing the same thing or selling the same product. It’s the personal connection that makes the difference.” — Unknown
Most of us already have many of these types of relationships. I hope after reading this article, you will put even more conscious thought on how to add value to those relationships and continue to hold the trust you have to a very high standard. And for those who are looking to form new relationships, always go in looking for how you can earn trust and add value. In the long run. you will end up with a huge concrete foundation on which you will achieve whatever you set out to.
How do you build relationships in your real estate business?
Let me know any examples you have with a comment!