Somewhere along the way, one typically becomes a stocks/bonds person or a real estate person. I very rarely come across someone who invests large portion of their savings in both. The complexity of understanding and executing stock/bond investing or real estate investing successfully generally precludes someone from becoming proficient in both.
Through a geographic accident, I manage a rental property for a family member. Basically, I live close to the property so, by default, I am the person the tenant calls when something goes wrong. I use the term “manage” loosely given, as long time readers know, I am a stocks/bond investor so my function is basically to receive the calls and do something to fix the problem. Given I am not a handy person by nature, the do something typically involves calling someone else to fix the problem; I acknowledge my limitations readily.
The only thing I really having going for me as a property manager is that I reply quickly. Given that I don’t have any proficiency to fix anything of consequence, the least I can do is acknowledge the tenant’s pain quickly and someone else will be fixing the issue. I sometimes wonder if I got this job because I am a lawyer by training; the thinking being I am used to dealing with people with problems so what’s one more problem to tackle?
The last time there was a problem with the property, I was out of town. My fill-in basically told the tenant to call such and such a person to look at the appliance issue. I ended up receiving the email from my fill-in and my response was to strongly advise my fill-in to call the person for the tenant. After all, if the tenant is paying you good money, they do expect a little customer service when things go wrong. It is analogous to buying a car still on warranty and the dealership telling you how to fix the car instead of doing it for you.
Ultimately, this little fable does highlight one large difference between stock/bond investing and real estate investing which is often over-looked. Both types of investing require some financial acumen and understanding of cash flow management. But real estate investing does require some customer service skills. Certain personalities are simply more fit to be landlords than others.
Real estate investing is not just investing in land. It is about customer service. Good customer service reps know how to weed out bad potentials immediately by asking the right questions, keep the good customers through quality service, hire other good customer service reps and convince the customer to pay for a price increase without voting with their feet.
Is the customer always right or reasonable? Of course not. But we have all seen situations where a good customer service rep basically says no to someone and makes the disgruntled customer somehow understand it or actually agree with their position.
I recently helped someone move from an apartment building that was 50% empty. Why? Having exchanged some correspondence with the property management corporation over a legal issue, one could see that the property management company was extremely bad handling tenants (slow response time and basically rude) and the super was missing his two front teeth and was pretty creepy looking.
One would not eat at a restaurant if the hostess was missing her two front teeth and the wait staff was rude. Why would one rent from a place with the same type of customer service?
To get back to my original point, if you are at the fork in the road where you have to pick between stock/bonds or real estate just ask yourself whether you have the tolerance to deal with people and provide good customer service even through gritted teeth or would you rather remove the human element out of the equation altogether.
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