"Your Investment In Rental Property Should Include This Line of Thinking"
Your investment in rental property should include this line of thinking. This might sound a bit harsh and I go off topic a bit at the start, but hear me out. I promise there is a great lesson in this.
In business, it is important to understand your costs and your return on investment. I think that is fairly simple. But it seems that many people just have not clued in yet.
Recently I ran an ad in the local paper by our offices. This is a company, and ad rep, I have spent tens of thousands of dollars with, in under two years. For the first time since I started working with this company, they ran the ad without my final approval.
I am not an overly picky customer so I would have been fine with it EXCEPT they made changes to the ad that I didn't ask for. So I have now paid for an ad (just over $600) that is not what I had requested, and I wasn't given the final say on the changes.
Now, I have never been in advertising sales but what I can say is that I have placed many ads with a lot of different companies. And I'll let you guess what the one constant thing is........Right, they all send you a proof before the ad runs to make sure you are happy with it. I even get this service with a $100 classified ad if I ask.
So I decided to call and mention that I was not sent a final proof of the ad for approval and changes that were not requested were made. I was not angry but I felt that there should some sort of recourse for such an incident. Really I thought this would be a small thing that we would get resolved and move forward......it wasn't!
I will keep it short for our purposes but by the end of it, I was in contact with the Advertising Director at the paper. And after a couple of emails to which he did not even acknowledge that they ran an incorrect ad or answer any questions posed to him, he finally called me. His tone was harsh and condescending but he grudgingly agreed to a 50% refund. Which works out to about ($300 + tax).
It sounds good, but the only problem is now I am left with an entirely different outlook on the company as a whole, and it persuades me not to do business with them any longer.
Let's look at this because it applies directly to business and any investment in rental property.
Let's guess that I have only spent $15,000 with this company, and up until this point was happy with everything. Because of the way I was treated for their mistake, which they did not verbally accept responsibility for, I am now left with a bad taste in my mouth. All because of the $300 I has asked for.
If handled correctly this could have been the best $300 they ever spent. If that's what it took to keep me happy and spend another $15,000 that would be a 5000% return on their investment in under two years. Did you catch that? 5000%
Would you be willing to spend $300 to have a customer with a proven track record that shows that kind of return?
I would every day of the week, and do it happily. And so would any other smart business owner.
The problem is that this Advertising Director didn't understand the long-term value of the customer or the big picture of a business relationship.
I agree, it is sad but true. Think about the owner of the paper that just lost out on this future revenue, he or she must be thrilled right? Nope!
So, How Does this Apply to Investment in Rental Property?
How does this apply to investment in rental property?.....Good question.
The same principle applies. You should be looking at your potential tenant (customer) thinking about the return on your money for working with that person.
I have seen negotiations that would make an investor over $20,000 break off over paint that would cost $500. You can do the math on that one.
This investor wasn't looking at this person as dollars. If he was and he realized the dollars these poeple represented, he would have, and should have spent it. The success of your investment in rental property hinges on these decisions.
In business or investing each person or customer we come in contact with has a value to them. Our job is to determine the value, and if justified, establish the relationship needed to maximize it.
Investment in rental property is a business and as with any other one, it is a heck of a lot easier to keep good existing customers (or tenants) that to find new ones that are good.
That is why I just spent $300 on a new BBQ for some good tenants that I have. I could have said 'No', it was not my obligation to do it. But through working with them over the last three years (remember, I am 'working' with them, investment in rental property is a business) I have realized they are people I want to continue dealing with.
It is becasue I see the dollars in our relationship and because I value them. And little things like a BBQ help them value me as well.
Oh and by the way, I didn't even flinch at the request, I smiled and agreed.
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