In buy and hold investing, who are my clients?

Question

Hi there! I read a lot of business books that emphasize the need for knowing your customers and marketing to your clients. However, my buy and hold real estate business doesn't seem to match the ordinary sales or services model. I have a property manager who advertises for tenants, draws up leases and attends to maintenance issues. Basically, I am just the person who buys the property, so I really don't need to market at all — or so it seems. And yet I want to run my operation profitably, according to professional practice. What do other buy and hold investors think? Do I have clients and, if so, what sort of marketing should I be doing?

Kimberly T. · Answer

We still view our tenants as our customers/clients, even for the rentals where we have a PM.  I think of it this way: if someone owns a business (plumbing, accounting, etc.) and runs the office, but never deals with clients directly because their employees do that, those owners still have clients.  Just because you don't deal with them personally doesn't mean they aren't your clients.  You're still the one calling the shots that affect how the clients/tenants perceive their experience with your product.  If you're slow to approve maintenance requests, let the building exterior get dilapidated, etc., your tenants will notice and the good ones will likely leave.

You may be thinking of marketing as just the advertising and person-to-person relationship with the tenants when the rental is vacant, but I believe that how you run and maintain your rentals is also a part of marketing.  If people drive by it and think "Gee, that place looks well-maintained" and then later drive by and see that it's for rent, you've already done some great marketing.

Anyway, that's just my 2 cents.

Bill Gulley · Answer

"Client" is rather a miss-used term, RE agents have clients, representatives have clients, an art dealer-broker has a client, attorneys have clients, it infers an agency relationship or acting on behalf of another principal.

The toy store owner has customers, the burger joint has customers, an RE agent who doesn't have an agreement to represent someone has a customer, landlords have customers they don't represent a tenant, they don't act on their behalf, they provide a product and service.

Further, a "lead" is an unqualified business party, they might be interested in conducting business. A "prospect" is a qualified lead, they are know to be interested in conducting business. A "qualified prospect" is a prospect who is able to perform in a business transaction.

A "customer" is one you have conducted a business transaction with, they bought the toy, the burger, bought the car or signed the lease. :)

Jon Holdman · Answer

If you're doing buy and hold and managing the property yourself, I would say your customers are your tenants.  But with a PM this is much more of a passive investment, just like stocks or bank CDs.   At the end of the day, though, the tenants are still your customers.  Your PM is your voice with those customers.

Steve Vaughan · Answer

As a landlord, my clients are my tenants.  As an investor seeking new purchases, my clients are homeowners/sellers.  To get to the sellers, you may have a subset of clients like title co's, lenders/banks, real estate brokers, attorney's, insurance providers, etc.  I know what you mean trying to fit your investing into a normal business model.  We aren't just selling widgets!

Leanne Hunt · Answer

Scott, you make a very important point. I wholeheartedly agree that venders need to be high on our list of people deserving recognition and respect. I work hard at building relationships with contractors over time so they will respond promptly when I need them. Thanks for the reminder!

Leanne Hunt · Answer

So, here is good evidence of my dilemma. Dev makes the very good point that real investors need to market to motivated sellers to build their portfolio, while others say my main focus should be on tenants.  The idea of marketing my brand to investors has also come up, and this reflects the scope I was so overwhelmed by when I posted the question.

I guess it comes down to my priority at this point. Right now, although I have a property manager, I am struggling to find and keep tenants, and it isn't exactly clear why they are dissatisfied.  I reckon I'm going to regard tenants as my focus until I have an acceptable occupancy level and improved cash flow, at which point I will be better positioned to think about expansion and further investment.

Thaks for all the valuable input!

Dev Horn · Answer

When you have a PM that is responsible for marketing, you have - in essence - outsrouced that role just as you have outsourced the property mgmt itself.  Marketing is happening (we assume) if he is getting tenants, so what's your worry as far a tenants go?  That's covered.

Seems like your marketing focus would be towards sellers - looking for the next property to acquire (buy & hold)... and that would be the basic marketing challenge that we all face, regardless of exit strategy...  the SEARCH FOR MOTIVATED SELLERS. (FYI - I have a video in my BP profile on that topic).

Leanne Hunt · Answer

Thanks, Chris. Your comment makes a lot of sense. Looking back, I suppose I knew this intuitively because I really do care that my properties match what the market is looking for. It was just that I have been working on my business plan and got stuck at the part about market analysis. I wasn't sure if my focus needed to be on attracting investors, t or tenants I'm feeling a lot more confident now!

Chris K. · Answer

Actually, even if you're not the one posting the craigslist ads or putting up the signs, most of the marketing that does happen depends on you knowing your *Potential* customers.  A property with an updated kitchen and granite counters or washer/dryer will be more marketable than a property without them. The more marketable the product, the easier it is to market.

In buy and hold investing, who are my clients?

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