4 Ways To Stop Politics From Sinking Your Deal

What is the quickest way to sink any real estate investing deal? Variables. Specifically, variables that were unaccounted for when evaluating your investment. BiggerPockets often stresses the need to account for these financial and management variables. For example, when looking at an investment deal it is critical to account for capital expenditures, repairs, vacancy, etc... these are variables that, with a little forethought and action, can save you thousands in unintended costs! It is the difference between buying a good deal and a bad one!

So why do we not hear more about political variables?

Perhaps because politics is so polarizing or we are afraid of what the people around us might say, but is this really an excuse? Think of it this way, if a management company was slowly eating away at your profits and dictating how you run your business, would you hesitate to fire them out of fear of offending them? No! (or at least I would hope not!)

I would argue that legislation that impacts our businesses is massively underestimated and is going to play a much bigger role in our lives in the coming years. 

Let me first say that this is not a Republican or Democrat issue - there are misguided politicians on both sides that probably have never bought an investment property. I often like to say that most politicians don't understand our business, but they won't mind their own! Have you ever met an elected (or unelected) official that minds their own business? I haven't.

So why care? Most investors think that rent control is the only thing a politician can do to impact our business and that is just dead wrong. There are dozens of regulations and policies that politicians propose that cost landlords and investors large amounts of money every year! What if I told you that you could make a difference and help to stave off those policies from coming to your city? Would you invest a small amount of time and money to make that happen?

Now, i'm not saying investors need to become political experts to make a difference. Here are four tangible steps you can take to make a huge difference!

1) Set up alerts!

This is one of the best ways to stay informed. If you're a serious investor you likely already have google alerts coming in and read the local real estate journal regularly. There are a few keywords that can help you determine if something is on the horizon! Keywords like "(your city) rent control" "landlord" "eviction" "housing prices". Eventually, you'll start to recognize the same local journalist covering rental housing issues. Make sure that you follow their stories and keep an eye on the local narrative. This is what politicians read and will likely respond if they hear from their constituents.

2) Take action!

When you see an alert for, let's say capping rental application fees. Educate yourself on the topic a bit and send an email to the local politician proposing it and follow up with a phone call. Let them know how this will hurt your business. If it is being heard at the local city council, send an email to every council member! If it is being heard at the state legislature, attend the hearing and sign up to testify. This might sound daunting, but it really isn't. It is a process that was built around public discourse and you should take advantage! Trust me, I’ve heard some disastrous testimony so don’t be afraid of flubbing a word or two.

3) Become a local voice!

You don't have to know a lot about politics to know that something will impact your business. If there is a law or regulation being proposed that you think will hurt your business or cost you money, you are exactly the person that should be involved with discussions. Additionally, become the source of information about that topic in your network. Facebook, Linkedin, your newsletter should all hear about your opinion on that issue. Don't worry, no one is getting uninvited to Thanksgiving dinner over disagreements on housing policy!

4) Invest a small amount of money

This one will take you out of your comfort level if you've never done it before. Write a small check, maybe $50 to $100 to your local city councilperson AND state representative or senator. Email them and ask to meet and buy them a coffee. Tell them you have a contribution for them, but you'd prefer to meet them in person and discuss housing issues. This will get their attention.

When meeting, ALWAYS be friendly and offer to be their trusted resource on rental housing issues, or flipping houses, or buying and selling houses, or multifamily investments; whatever you invest in make it known to them. Offer to testify or write letters that will help shine a positive light on housing providers. They may hate your guts or they may love you. The point is that they know who you are and now have put a friendly face to an investor.

Many times elected officials believe real estate investors to be rich snobs who need to pay their fair share. They don't realize that these investments are our retirement plan or our children's inheritance, or our only source of income. Make sure they know that when they regulate "the housing industry" they are regulating you!

With all this in mind, how does your political underwriting look? Do you factor in the political environment when evaluating a market? Do you make an effort to stay informed of new regulations on our industry? Let me know!