To better understand the psychological nature of real estate investing, you first need to understand the nuances of the real estate market, and how the opinion of the market differs between investors and the rest of the universe. Consumers might use the following terms or phrases to describe the current real estate market: bleak, dismal, sluggish, and catastrophic.
Investors, on the other hand, might use a slightly different set of descriptions for the exact same real estate market, because we will always view market conditions different from the majority. Examples include: opportunistic, a rare gem of possibility, a millionaire maker, ripe for the picking and a never-ending opportunity.
The truth, for investors, is that there has rarely ever been a market condition that is better than the one you are experiencing right now. Like the hundred year flood, you may never see the likes of this again in your business lifetime and it represents a rare and exciting opportunity for people like you and me. The public, influenced as you know by the popular media, sees things differently and in a much more pessimistic light. As real estate investors, you have an amazing opportunity in front of you, and in the spirit of building a multi-million dollar business, you also have to bear in mind that your view of the market is dramatically different than the one your clients will have. This is a gap that needs to be bridged if you are to have optimum success.
In part because of the difference in perception about the market and in part for reasons I’m about to describe, it is the unfortunate truth that investors, as a group, often get a bit of a bad rap and have a questionable reputation in the world of real estate. Why is that? I can think of several reasons that are worth discussing:
Lack of Credibility
First, you have the greed factor. Basically, in a nutshell, what I’m referring to here is the small percentage of real estate investors who let their pursuit of power, money, and glory get in the way of running an ethical business. Ultimately, the emphasis should be on creating outcomes that benefit all parties. We’ve all come across examples of greed in this business, and if you haven’t, you will. It could appear as the slumlord that maintains slovenly apartment units to better line his or her pockets with revenue from rents. It could appear as the scam artist who dupes others into sinking funds into phantom projects that never actually materialize. It could appear as the heartless person who promises the world to a client in pre-foreclosure and then leaves them stranded at the eleventh hour. I could go on and on.
These select few make a bad name for the rest of us and it is an unfortunate reality for those of us who wish to run our business the right way. There’s not much you or I can do about it. Real estate is a commodity from which tremendous profits can be realized, and as a result, some greedy people are going to get into the mix. What you can do is recognize how these people affect the reputation of real estate investing as a business and place extra emphasis on building a reputable business that will show the true colors of your craft.
Second, you have the issue of jealousy. I might be going out on a limb or sparking a little controversy here but some of the current reputation for real estate investing as a profession comes from that which is explained by real estate agents and brokers. It is unfortunate, but some (not all) of your real estate brethren are often working against you either consciously or subconsciously. If these select few would simply take the time to learn something new, and open their eyes to the many unconventional and creative opportunities that real estate offers then they would truly understand why you choose to be a real estate investor, rather than a real estate agent. There are hundreds of differences between selling houses for a commission, and buying and selling houses for equity and profit. Personally, I’ll take the equity and profit any day of the week.
Should real estate investors to be alarmed? Not necessarily. Rather, it is important to be aware of the preconception that exists in this business. Credibility must be built in spite of this obstacle, rather than simply expecting that things you can’t control will somehow change.
Third, you have the issue of ignorance, not as much on the part of your colleagues but on the part of the general public. I’m not suggesting the public is ignorant in a general educational sense. What I am suggesting is that the general public is very unlikely to be up to speed with the kinds of concepts and techniques that you will be utilizing as a real estate investor. For example, the majorities of homeowners only buy and sell a few homes in their lifetime and in doing so utilize realtors who are pretty much driving the transactions based on conventional wisdom. We as investors on the other hand are trained to buy and sell properties as a business and perhaps have completed dozens if not hundreds of deals or more. That said, while this type of ignorance may impact the reputation of investing as a profession, it also opens a key door of opportunity for you to really establish a local name for yourself and your business that will literally make believers out of your clients.
Next, is the unfortunate issue of a few dishonest investors out there who threaten what you do on a daily basis. Whether it’s an unscrupulous developer who cuts corners or abandons a project, or foreclosure investors who skim equity or take funds up front from clients and then disappear, the bottom line is the same. Like any industry, real estate investing has its share of “bad apples” and unfortunately, these people get more attention than the good ones. The media loves a story where some evil investor scams an innocent consumer because; (a) it’s negative, and (b) people pay attention to that kind of stuff. My commentary on the media aside, it’s important that you recognize what your clients are likely hearing or reading and how it relates to what you do for a living. You do not want to let yourself become defensive about it but understand that your reputation will in part be built upon showing clients that you do not fall into the “bad apple” category.
Last on my list of things that give investors a poor reputation is a simple lack of true knowledge & professionalism. In short, some of your investor colleagues just don’t know what they are doing and this can impact the overall perception of what you do as a business. While I can’t oversee proper education for all investors, I think (in fact I know) that this can work to your advantage. Where other investors fall short, you will finish. Where other investors are weak, you will be strong. Business is about survival of the fittest and, even though some investors may damage the reputation of the business as a whole by not being very good at what they do, that can and should be seen as a great opportunity to establish your own reputable foundation and build from it.
I will continue this topic next week. Until then, check out my set of tools that when used correctly will easily make you stand out as the educated, smart, and confidant investor. Using the same techniques with the integrity and honesty with which we should all do business, I have created a very successful and highly profitable investment company.