Real Estate Riches: Harnessing the Power of Referrals
Asking for a referral is a proven way to build wealth.
Good salespeople regularly use referrals to find new customers. For example, imagine there’s a knock on your front door. You open it and there is a salesperson offering a VIP wholesale price on a range of vacuum cleaners. You say you’re not interested, and as the conversation closes, the salesperson thanks you for your time before asking, “Say, do you happen to know someone who is in the market for a great new vacuum? I’d be happy to offer them our VIP pricing just for being your friend.” In other words, the salesperson is asking for a referral.
If you provide any useful information then you can bet the salesperson will mention your name when he makes contact, as the chances of a sale are much, much higher if the contact comes from a trusted person.
“Hi Bob. I’m just calling because Sue – your neighbour – gave me your details and mentioned you might be in the market for a great deal on a vacuum cleaner. I think I might be able to help you out. Is now a good time to chat?”
You can harness the power of referrals in real estate too.
A Promising Deal Found
Just the other day, while driving some fellow Aussie investors around some real estate owned in my US property Fund, we noticed an adjacent property with a sale pending sticker on the For Sale board. I called up Chase, the sales agent mentioned on the sign, to ask what the sales price was in order to gauge what our nearby property might be worth.
Chase was happy to share the price (it was a good one!), and just before the call ended, I asked him whether he had any properties on his books that he thought I might want to take a look at. That is, I asked him to refer me to any good properties for sale he knew of.
“Well, I do have this off-market retail site that I think’s a good deal. Why don’t I give you the address and you take a drive by and let me know what you think.”
We did just that later that day. Sure enough, the retail site he mentioned did look promising, and there was no for sale sign at the front and no online ad as this was a silent listing. I called back up and asked for the Operating Memorandum (sales outline) to be emailed, and then made an offer the next day.
By asking for a referral in the form of “do you know of anything else”, a deal appeared that was otherwise unknown, and could not have been found by traditional means. I’ve bought many properties this way and some of them being my most profitable investments.
Using Referrals for Finding Tenants
You can also apply the referral concept to tenants. If you have a good tenant then you can offer them an incentive for recommending a friend or acquaintance that ends up leasing the same property (upon it becoming vacant), or another property you own. The logic here is that birds of a feather flock together, so if you have a good tenant then they’ll associate with like-minded people. Of course, you will need to do your normal due diligence to make sure that’s the case.
In Summary…
The lesson here is that there are whole sub-markets of people and properties that could be just waiting to know you are interested in them, or that you have something of interest for them. If you can harness the power of a referral, then your enquiry will come via an established trust network, and that will open doors and facilitate a quicker transaction. The words I use are:
For Finding Properties To Buy
“While I have you (on the phone or in person), do you have anything, or know of anything, that you think I should take a look at?”
For Finding Tenants
“{NAME}, thanks for being a great tenant. I wonder if you could help me with something… do you happen to have a friend or colleague who is looking for a great deal on another property I have for rent? I’d be happy to offer them a discount and you an incentive if you could help by recommending someone as good as you.”
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