Inside the psychology of real estate investors (or :: why we're different)

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 Ok, I’ll tell you something you already know:  Real Estate investors are different than other clients that you might serve. 

But most of you will agree that even if you know something it’s sometimes useful to hear it again.  Especially when it come to understanding the psychology of a client – and particularly when it involves something emotional like negotiating.

Your investor client isn’t buying a home to live in, so her buttons aren’t going to be pushed in the same way as your client who is looking for he dream home.  And if she’s a smart investor she’ll be think very differently when she does into a negotiation. 

A real estate investment is a pile of bricks that generates cashflow, and which hopefully will appreciate in value.  Based on this expected cashflow and appreciation, your client should go into any negotiation with a predefined walkaway price.  A line in the sand, not to be crossed - unless a concession can be bartered for something of equal value.

Five things to remember when running the numbers on a real estate investment.

This can seem frustrating, as the give-and-take of the negotiation will feel different than for a client who, for example, has fallen in love with a property’s spacious closets and the magnolia tree in the front yard. 

Some investors, however, don’t grasp this concept.  If your client is the seller then there’s less of a problem (and that’s why some investment properties get bid up and sell for uneconomic prices.)  If you’re client is the buyer, however, you can coach him. Insist that your client calculates a walkaway price before he gets into the emotion of the negotiation – otherwise he’ll end up making uneconomic decisions in order to win a deal that he shouldn’t.  And investors who make poor decisions won’t turn into good long-term repeat clients for you. 


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Chris Lengquist
Ad Astra Realty - Olathe, KS
Kansas City Real Estate Investing

I love my investor clients.  They don't care where the baby grand piano should go.  That green counter top?  Who cares so long as it is functional.  Clean, safe and cash flows.  That is the good news when working with investors.

Of course for the uninitiated, it can be frustrating as well.  Their walk-away dollar is just that.  Not an extra $2,000.  They have no compunction what-so-ever to killing a deal if it turns out to be a bad one. 

Personally, I've built my entire business around serving the investor.  It suits me well.  But I know others that refer me anyone who says they are an investor because they get too frustrated. 

Mar 22, 2007 07:57 AM #1
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