To be a successful long-term real estate investor, you need to build great relationships and always keep your reputation in mind. You might be surprised how far a good reputation can go. Let me give you an example.
“When you make a commitment, you create hope. When you keep a commitment, you create trust!”
– John C. Maxwell.
Growing up, my grandfather would often tell a story about a man committed to starting a business in Mexico. As the president of the bank, my grandfather had to determine who was most likely to successfully repay a loan. This was challenging, as the legal system was not reliable and credit histories could be fabricated. Your reputation in the business community was the credit that mattered. This man had built strong relationships and was well-regarded, and so my grandfather granted him a loan. The man started his business. After some time, the business failed. Distraught, the man took his own life. Years later, a young man entered the bank and asked to see my grandfather about an old loan. My grandfather didn’t understand until the son explained he had come to repay his father’s debt.
Why did the son return to pay his father’s debt? Honor, reputation, relationships, and a keen understanding of the value of a long-term mindset. When I tell this story here in the United States, people tell me such ways of being are long gone. I disagree.
Trust and Commitment in Real Estate
Let me tell you a secret. I can quantify the value of a property, estimate the future returns of a deal, but a good reputation and strong relationships have unlimited value and having this, people want to work with you. The long-term real estate investor intuitively understands something many professionals forget:
The relationships you build and the reputation you cultivate is far more valuable than the money in the bank.
True, money drives business and commerce, but people choose who to buy from, who to sell to, and ultimately who to trust. We live in a reputation-driven world. Consider this: There are countless brokers, lenders, and other professionals in the real estate world. The strength of your reputation will either drive business to you or away from you.
Consider the perspective of those looking to do business with you. Brokers often have deals they can’t or won’t market publicly. If you have a strong relationship and a good reputation, the brokers will know you are loyal. They will reach out to you when they have something you may want. This will help when you work with lenders too. Lenders would want to be more flexible in terms to clients who have a strong and positive reputation. Partners and investors will trust you to protect everyone’s wealth when they know you are trustworthy, that you value their investments as much or more than your own. Independent contractors such as lawyers or engineers will move your projects along if you’ve cultivated a family-like relationship built on trust and unity. Let’s not forget tenants. Good tenants may find less things for you to fix, lengthen there leases, be more transparent about their incomes, and pay early when they feel taken care of and respected.
Good relationships and a solid reputation go a long way in the real estate world. Here is one more true story.
An investor was selling a retail property. He received two offers, one 15% above the other. Sounds like the better option, right? The investor thought so as well and turned down the other offer. Unfortunately, the higher deal came from someone who had a history of claiming he had capital but was often banking on a 1031 to close. Well, the 1031 didn’t close and the first offer was no longer available. Had he checked this buyer’s reputation, he would have known the he had done this many times before.
The Real Value of Reputation and Relationships
Reputation is built on a foundation of trust. Trust takes honesty, transparency, and the willingness to communicate news – good or bad – as it comes. If you are trustworthy time and time again, others will respect you and admire you. Good business will follow.
My advice and the advice my family has learned as investors and real estate professionals is this: Build great relationships and always keep your reputation in mind. Long-term real estate thinking is not about numbers nor about deals. How you treat people will determine how much people want to work with you and how often they refer you to friends, partners, and other real estate professionals.
Read another article on how crowdfunding and relationships are linked here.