Facebook was first launched in 2004. Since its humble beginnings, the company has become one of the biggest in the world. Facebook’s rise gave way to their now famed motto, coined by Mark Zuckerberg, “move fast and break things.” Though Zuckerberg’s credo was timely and pointed, meant to celebrate the high-velocity innovation that drove Facebook’s initial growth, it fosters the idea that urgency and decisiveness in the early days of a company, project, or deal can lead to groundbreaking results.
Investing in real estate is a big commitment that requires a lot of time and money. In this post, I address why urgency and decisiveness are integral traits of a successful real estate investor and the importance of exercising both to build and strengthen your investment portfolio efficiently.
The importance of exercising urgency and decisiveness in real estate
Generally speaking, real estate deals are notorious for being long, stressful, and the product of many moving parts. While the end goal is to close the deal, there are many steps and procedural formalities that must come before.
As an example, let’s look more closely at the process of investing within the multifamily segment. In addition to the due diligence involved—including market research into where to invest and possible rental strategies—securing a deal hinges on the investment analysis process (consisting of the real estate market analysis and the investment property analysis), the investment property financing process, negotiations, inspections, and a whole lot of paperwork. All things considered, the closing process can take anywhere from a few weeks to a few months. Moreover, when you factor in investor reluctance, this process tends to err on the longer side. This is where creating urgency becomes important.
The concept of buyer urgency is a fairly simple one to understand. It involves the buyer (in this case, the investor), their specific needs, and their desire to make a buying decision before they lose the opportunity. Without that latter factor, there is no urgency.
Creating urgency while avoiding sales pressure
If you’re working with a client who’s looking to invest, it’s important to note that there’s a distinction between creating urgency and applying sales pressure. When creating urgency, the needs and best interests of the buyer(s) should take precedence. In other words, instead of pressuring your buyer(s) into a deal, your goal should be to show them properties, prices, and terms that they cannot resist.
Buyer urgency can occur naturally—for example, if you’re working with a highly coveted location or if there are multiple bids for an opportunity—but more often than not, it’s up to you as the investment professional to motivate potential investors and drive up that sense of urgency. In the next section, I explore some tried-and-true strategies for creating that critical urgency, combatting investor reluctance, and securing a deal sooner rather than later.
Understanding buyer reluctance and inspiring decisiveness
Buyer reluctance can often boil down to fear of making a wrong decision. Real estate is a costly investment with many caveats, so if you have reservations, it’s important to get to the root of why. The same goes for if you’re working with a client looking to invest: if your buyer is hesitant, it’s important to understand why they are reluctant so that you can more effectively cater to the nature of their concerns.
If you’re faced with an opportunity you’re not sure you should move forward with, or you’ve come to crossroads with a potential investor, consider these direct methods for overcoming reluctance and fostering urgency.
Make a case for the market
Amidst the coronavirus pandemic, real estate has emerged as a safe and lucrative investment option on a national scale. This is especially true in the GTA and surrounding regions, where the real estate market has rebounded—and then some. According to information released by the Toronto Regional Real Estate Board this month, realtors in the Greater Toronto Area reported 11,081 sales in July 2020. That number is especially impressive if you consider that it’s a 29.5 percent increase over July 2019 and a new record for the month of July.
Identify market trends
In real estate, market trends have a lot to do with socioeconomic factors. The global pandemic poses a prime example. COVID-19 has ensued a shift in housing and lifestyle demands across the board, rendering the desire to move out of the city as something of a trend. This has resulted in an increased demand for family-style dwellings and multi-family accommodations in the regions surrounding the city centre and in the outskirts of the GTA.
Identify fleeting opportunities
Per the aforementioned TRREB July housing report, year-over-year sales growth is being driven by condominium apartment sales in Toronto and home purchases in the regions surrounding the City of Toronto. This knowledge can be used to identify where demand is highest, due to supply shortages and buyer/renter concentrations. For instance, there is strong demand for housing and rental supply within the Niagara/St. Catharines region and Hamilton, with home and condominium prices surging as buyers return to the market following the coronavirus lull.
Enhance your real estate portfolio
Investing in real estate is a great way to cultivate cash flow and build equity, while safeguarding from inflation and becoming eligible for tax breaks. Real estate investments also tend to decrease the volatility of your overall portfolio through diversification. When you consider the returns involved, investing in real estate is the quintessential way to strengthen your overall portfolio while minimizing your risks.
Indirect methods for creating urgency for a potential investor
Inspire confidence from the get-go
Urgency begins with the way you present yourself and how well you demonstrate what you have to offer to your clients. This can extend to include anything from perpetuating a professional and business-ready atmosphere in your office space to doing your research on market expectations so that you can offer your buyers fact-based information to ease their reservations. Instilling confidence in your buyers can be as simple as making yourself accessible by phone or email whenever questions and concerns do arise. Developing strong rapport with your clients from the get-go will ensure that they trust you and feel assured moving forward with you through the investment process.
Consider your language
The language you use should depend on the state of the market. For example, if it’s a strong market cycle, you might want to draw attention to lifestyle features, such as luxury-style amenities. On the other hand, a slower market might render practical features—such as proximity to major highways, transit, and grocers—more marketable.
Tap into the “why”
Understanding the “why” behind your client’s reluctance is often the key to combatting it. Whenever possible, offer your client fact-based reassurance in response to their reservations, based on your research of the market, market trends, and fleeting opportunities. But beyond asking your clients why their reservations are as such, don’t forget to find out “why” their needs are as such. This will allow you to tap into their true motivations and offer them investment opportunities that are truly tailored to their needs.
Beware of choice overload
When confronted with too many choices, particularly under a time constraint, many people prefer to avoid making a choice at all. This rings especially true when it comes to real estate. You can present your clients with 15 investment opportunities that are the realm of what they’re looking for—or you can provide them with five opportunities out of that 15 that meet their search criteria the best. In addition to consuming less time, presenting your clients with a fewer number of potential investment opportunities that are truly promising will keep them from getting confused and frustrated, helping them to make a clear and confident decision in the long-run.
Understand the root motivations
At the end of the day, creating urgency boils down to either a fear or loss or an anticipation of gain. It’s up to you to drive motivation by showing your potential investors that there’s an unparalleled, time-sensitive opportunity at hand. If you’re able to do that, you have the ability to offset buyer reluctance and cultivate buyer urgency.