One Secret to Scaling a Real Estate Investment Business
First, remember that a real estate investment business is better thought of as a “market trading” system. Successful market trading systems require a set of principles, or rules to guide effective decisions based on data & intuition, NOT emotion or ego. Many bad deals are made because of emotion & ego. (Read “Alpha Trader” to understand the Market Trader’s mindset)
We have a set of 9 Operating Principles at Diamond Equity
Our 9 Operating Principles have become the guiding rules-helping most in situations where emotions become charged-which could result in poor outcomes. Instead, by framing our thoughts and decisions within those operating principles-by putting those principles before personalities- we create better outcomes.
How to Form Superior Partnerships:
Operating Principle #4: Be the Best Partner Possible –Â Team First and Exceed Expectations
If I’m your partner, I am doing my best to deliver 100-fold the value that you’re expecting. I hope to exceed your expectations. If you’re doing your best to deliver 100-fold the value that I’m expecting we create exponential results. This is how 1 plus 1 equals 7.
Being the Best Partner in a Real Estate Transaction
As a BUYER – Here at Diamond Equity, as we sell property, we routinely accept offers which are NOT the highest price & not the highest net. We often judge the offer on whether we expect the BUYER to be the Best PARTNER throughout the transaction, not necessarily the best bottom line
The Best Partner (buyer) goes to closing as agreed, on time, or ahead of schedule with no renegotiation attempts. While this partner doesn’t always present the highest price, the certainty of closing wins them the deal.
As a BROKER – Brokers earn the reputation of being the best partner possible by making sure the offers they present on behalf of buyers will close as mentioned above.
The Best Brokers have a bulletproof reputation-being unwilling to work with buyers who will not perform as agreed. These brokers, as the buyers mentioned above, often win deals because of their reputation for being the best partner possible.
How to Apply the Principle When Deciding Whether to Make a Deal
The buyer & seller in a transaction engage in a sort of partnership, a short term marriage, to consummate at the closing table. The buyer will risk money conducting due diligence. The seller will lose the opportunity to remain on market by choosing to deal with that buyer.
When you are deciding whether to make a deal at a verbally agreed upon price, ask yourself, “Will this Buyer/Seller be the Best Partner Possible?”
If the Answer is Yes, you do the deal. Sometimes you do the deal at a slightly higher purchase price (when you are the buyer) accepting a little less profit to win the deal and go to closing. Or, you sell the deal at a slightly lower price (when you are the seller) because you know there is no renegotiation coming. I prefer being that latter type of buyer-my offer is probably not the highest, but is the most certain to close.
If the Answer is No, you still might do the deal, but price in the risk. You limit your purchase price to increase your expected profit to account for that added risk up front (when you are a buyer in commercial property, you routinely invest $25K-$30K in environmental & property inspections, only to watch the deal die). If selling to a less than ideal buyer, a higher price must be sought to account for that renegotiation likely to occur late in the deal, maybe even at the settlement table (when you are the seller).
The bottom line is this: Real estate investing is a high stakes game where thousands & millions can be gained or lost. The partners you select with whom to do deals will be a major factor in which outcome you experience. Be the Best Partner Possible & choose Partners who would agree in word & ACTION.
Perhaps this principle belongs on your own list of Operating Principles by which you run your investment business?
Perhaps this principle becomes your 1st Operating Principle on a list which you develop over time to amplify your own results?
We Own, Operate, & Buy:
- Industrial & Commercial Property, 10K sq. ft. – 250K sq. ft.
- Mobile Home Communities (50 pad minimum)
- Well located Retail Development Sites
- Residential MFR & SFR
- Ideally long term rented asset with below market rents