Charlie Munger, Warren Buffet’s partner and a beloved fountain of business and life wisdom once said “Tell the truth, tell it fully, tell it fast.” We live in a cynical world where our perceptions of the most wealthy and powerful individuals are inevitably those who lie, cheat, and steal their way to the top. There are definitely people like that who have achieved financial success. What I think most people don’t realize is that a dishonest person will usually get themselves into trouble in the business world. Real estate is no different. Real estate transactions involve huge sums of money and the industry in general is full of people who have no time for games. There is too much money at stake and too much to lose. That’s why your reputation is so important.
On average, the honest businessperson will have more success over the course of their career as opposed to their dishonest counterparts. The media makes it seem that the business world is full of evil people stomping on others to achieve their goals. In my experience, some of the most successful developers and real estate investors I’ve met were also some of the most straightforward and honest people I’ve ever met. Here are a few reasons I’ve learned over the course of my career why honesty will pay dividends in real estate:
Buyers:
Are you a developer constructing and selling properties for end users? Or perhaps you are looking to sell your home or investment property? The world is full of dishonest people looking to sell real estate. Maybe that works every so often, but the average real estate buyer is extremely motivated to make sure they are not making a foolish purchase with undisclosed problems. If you try to cover up problems with your property, you will have to contend with property inspectors, appraisers, and attorneys that will eventually catch up to you and make you regret your decision.
Renters:
You have a moral responsibility as a landlord to provide your tenants with the level of quality they were advertised. You also have to follow the tenant-landlord laws in your state or municipality. These will vary from place to place and need to be studied closely when you invest in a new market. Renting to government or non-profit subsidized tenants will also require additional inspections. If you do not disclose issues or attempt to hide violations you will be legally liable for those damages to your tenant. Keeping your rental properties in tip-top shape and avoiding any deferred maintenance is not only the right thing to do, but also the wiser move from a business perspective.
Branding and Agents:
One of the things you need to do for your real estate business is build a brand. This will help you establish instant credibility when you network. People can visit your website or social media and see your activity. This is one of the important stepping stones to establishing a thriving business. The catch is that by putting you and your business out there for more eyes to see, you’ll be under increased scrutiny and more people will be waiting in the wings to react angrily if someone uncovers you being dishonest or unprofessional. Growing up in the early days of social media, I learned to avoid it because of all the drawbacks we’re already all to familiar with. I actually think this habit held my business back when we were starting out because doing business in today’s world inevitably involves a heavy marketing presence with a social media component. You don’t have to be the dishonest guy driving a rented Ferrari to gain a following. Build a smarter and more advanced audience and following by giving genuine, honest information about your company.
Contracts
Real estate contracts are drafted and reviewed by attorneys looking to protect their client and are designed to prevent any party from engaging in dishonest and illegal behaviors. Contract law in the United States and the western world in general has arisen in order to uphold fair and honest business practices. The potential penalties for violating a properly drafted contract can be extremely steep. Always disclose any issues in your property. If your real estate agent selling your property is your uncle, he should disclose that too. Tell the truth fast – if it’s a deal breaker, better to get that out of the way sooner rather than later. The longer you wait, the higher a price you will pay.
Investors:
If you’re syndicating real estate purchases with several or many investors involved, all of the points we’ve outlined so far are even more true. Accredited investors that have found their way to alternative passive investments are extremely savvy and perceptive. They expect you to directly present the risks and downsides involved in your investment. They don’t want a low-level salesperson approach where you are desperately focusing on all the positives of your deal and covering up all the negatives. I’m not trying to say that you should focus heavily on everything that’s wrong about your property.
The point is that most people are afraid of letting an investor know about the downsides of their deal because they think it will scare them away. This mindset is the wrong way to approach things. If you’re investing in a solid deal and you have built a proper network, you should have confidence in your deal. That includes you acknowledging the potential risks and being upfront about them because you have grounded projections showing this is a profitable opportunity and you also have a plan in place to mitigate any issues. Investors want to hear the risks involved with you deal. Every deal has them. If you try to leave them out and paint a picture of a perfect deal, investors will get skeptical. Just picture any time a salesman has been too pushy and you feel in your gut that they are up to no good. This is the same concept, it’s just that an accredited investor will be even more perceptive of any dishonesty. Just tell the truth quickly. You’ll be thankful in the long run.
Charlie Munger, Warren Buffet’s partner and a beloved fountain of business and life wisdom once said “Tell the truth, tell it fully, tell it fast.” We live in a cynical world where our perceptions of the most wealthy and powerful individuals are inevitably those who lie, cheat, and steal their way to the top. There are definitely people like that who have achieved financial success. What I think most people don’t realize is that a dishonest person will usually get themselves into trouble in the business world. Real estate is no different. Real estate transactions involve huge sums of money and the industry in general is full of people who have no time for games. There is too much money at stake and too much to lose. That’s why your reputation is so important.
On average, the honest businessperson will have more success over the course of their career as opposed to their dishonest counterparts. The media makes it seem that the business world is full of evil people stomping on others to achieve their goals. In my experience, some of the most successful developers and real estate investors I’ve met were also some of the most straightforward and honest people I’ve ever met. Here are a few reasons I’ve learned over the course of my career why honesty will pay dividends in real estate:
Buyers:
Are you a developer constructing and selling properties for end users? Or perhaps you are looking to sell your home or investment property? The world is full of dishonest people looking to sell real estate. Maybe that works every so often, but the average real estate buyer is extremely motivated to make sure they are not making a foolish purchase with undisclosed problems. If you try to cover up problems with your property, you will have to contend with property inspectors, appraisers, and attorneys that will eventually catch up to you and make you regret your decision.
Renters:
You have a moral responsibility as a landlord to provide your tenants with the level of quality they were advertised. You also have to follow the tenant-landlord laws in your state or municipality. These will vary from place to place and need to be studied closely when you invest in a new market. Renting to government or non-profit subsidized tenants will also require additional inspections. If you do not disclose issues or attempt to hide violations you will be legally liable for those damages to your tenant. Keeping your rental properties in tip-top shape and avoiding any deferred maintenance is not only the right thing to do, but also the wiser move from a business perspective.
Branding and Agents:
One of the things you need to do for your real estate business is build a brand. This will help you establish instant credibility when you network. People can visit your website or social media and see your activity. This is one of the important stepping stones to establishing a thriving business. The catch is that by putting you and your business out there for more eyes to see, you’ll be under increased scrutiny and more people will be waiting in the wings to react angrily if someone uncovers you being dishonest or unprofessional. Growing up in the early days of social media, I learned to avoid it because of all the drawbacks we’re already all to familiar with. I actually think this habit held my business back when we were starting out because doing business in today’s world inevitably involves a heavy marketing presence with a social media component. You don’t have to be the dishonest guy driving a rented Ferrari to gain a following. Build a smarter and more advanced audience and following by giving genuine, honest information about your company.
Contracts
Real estate contracts are drafted and reviewed by attorneys looking to protect their client and are designed to prevent any party from engaging in dishonest and illegal behaviors. Contract law in the United States and the western world in general has arisen in order to uphold fair and honest business practices. The potential penalties for violating a properly drafted contract can be extremely steep. Always disclose any issues in your property. If your real estate agent selling your property is your uncle, he should disclose that too. Tell the truth fast – if it’s a deal breaker, better to get that out of the way sooner rather than later. The longer you wait, the higher a price you will pay.
Investors:
If you’re syndicating real estate purchases with several or many investors involved, all of the points we’ve outlined so far are even more true. Accredited investors that have found their way to alternative passive investments are extremely savvy and perceptive. They expect you to directly present the risks and downsides involved in your investment. They don’t want a low-level salesperson approach where you are desperately focusing on all the positives of your deal and covering up all the negatives. I’m not trying to say that you should focus heavily on everything that’s wrong about your property.
The point is that most people are afraid of letting an investor know about the downsides of their deal because they think it will scare them away. This mindset is the wrong way to approach things. If you’re investing in a solid deal and you have built a proper network, you should have confidence in your deal. That includes you acknowledging the potential risks and being upfront about them because you have grounded projections showing this is a profitable opportunity and you also have a plan in place to mitigate any issues. Investors want to hear the risks involved with you deal. Every deal has them. If you try to leave them out and paint a picture of a perfect deal, investors will get skeptical. Just picture any time a salesman has been too pushy and you feel in your gut that they are up to no good. This is the same concept, it’s just that an accredited investor will be even more perceptive of any dishonesty. Just tell the truth quickly. You’ll be thankful in the long run.
