How To Build A Referral Based Real Estate Business
By Paul Esajian on November 24, 2014
There is something to be said in the business world for working smarter than everyone else, as opposed to working harder. There is certainly nothing wrong with a little hard work, but why run yourself ragged if you don’t have to. As an investor, oftentimes the biggest challenge you have is finding new deals. You can be the sharpest, most efficient investor in your area, but unless you have deals to work on, nobody will know. This leads to spending money to find deals without any guarantee that it will yield the results you are looking for. The best way to grow any business is from the people closest to you. If you focus more on the people already in your network, you may never have to pay to find deals ever again. Work on gaining referrals, and your business can increase exponentially.
The process of advertising and marketing directly to homeowners can be costly, and time consuming. You mail out your marketing piece every so often in the hopes of attracting a few phone calls back from which you hope to turn one into a deal. Even though the homeowners you are marketing to need your services, there is nothing saying that they will use you. There is also no telling how long it will take to get to a closing, and if the deal will even be profitable. Direct mailing and relying on homeowners for leads can be a pricey and unreliable source for deals unless you really know what you are doing. Instead of waiting for the phone to ring, seek out the people you have an existing relationship with already.
People like to work with people they know, are comfortable with and ultimately trust. If you have an established relationship with someone, you are already ahead of the game. Instead of spending time and money trying to develop a track record, you have one you can refer to. Every closed transaction should be viewed as an opportunity to gain a relationship that could help your business grow. On almost every deal you have a seller, one or two realtors, multiple attorneys, an inspector, appraiser and possibly a mortgage broker. If worked properly, all of these people can be a source of deals in the future. All it takes is a little work on your end to help the relationship take off.
This starts with being cordial, available and efficient during any deal. Assuming you have done your part, you should take advantage of it. Not enough investors, or business people in general, do enough with the people right in front of them. This means sending thank you emails, texts or calls after the deal closes. This could mean stopping by an office personally to thank them for all their work on the deal. It could mean asking if they would like to sit down for coffee or lunch to discuss how they can grow their business. If you do not put the time in and reach out you may be missing out on a golden chance to gain a valuable contact. Because this is the exception rather than the norm if you do these small things it will set you apart from everyone else in the industry. If you do this enough times on every deal you will slowly start to see your phone ring with more opportunities. Once you close these leads that are provided you will gain a reputation and see even more deals come your way. This starts with doing the small things before, during and especially after every deal.
Not only can realtors and attorneys be valuable referral sources you can also reach out to wholesalers, hard money lenders and even fellow investors. It is a natural reaction to stop doing something after you have failed the first time. Building a referral business takes reaching out to contacts multiple times until you are the first person they think of if they need an investor. This could mean starting an email cycle, following up once a week or sending a monthly newsletter. Your referral network can be anyone you have every worked with, want to work with or are even friendly with. You can use your friends and family for referrals just as easily as you can lean on your realtor. The bigger your umbrella is the easier it will be to find deals.
Growing your referral network takes time and can be repetitive but so is any kind of marketing. The difference is that when you mail to homeowners it will cost you money and there is usually only one deal to be gained from it. When marketing for referrals it will cost you significantly less money and the amount of deals could be endless if you establish the right relationship. The key to any marketing or advertising is consistency. Just because nobody responds to an email doesn’t mean they haven’t read it. They may not have a need for you at this time or have a deal that fits right now. If you continue doing what you are doing regardless of the results eventually you will see a crack and your phone will start ringing.
By building a solid referral base, the deals you do get will have a much higher chance of closing. Word of mouth is a very powerful thing and once one person touts your services you will quickly gain a reputation. This is more valuable than any deal you will ever close. A strong referral base will allow you to cut back on your marketing and allocate those funds in other areas. This all starts with taking the time and reaching out to everyone on every deal. If you do that, and nothing else, you will be surprised in how many people reach out to you.