3 Things Your Investment Provider Should be Offering You

Your investment capital is far, far more than just a tool to generate returns for your portfolio. It is a manifestation of your hard work, determination, and fortitude! Not everyone can save capital the way real estate investors must, and not even all real estate investors are creative enough to leverage the capital they do have to generate returns that will, in turn, give them more capital to work with!

As a smart, savvy real estate investor, there are certain things you deserve from your investment providers. Of course, everyone deserves honesty, respect, and responsible custodianship of their assets and capital. Those are all important things to require from any professional associate. However, it is important to look beyond these “basics” and evaluate investment providers based on three additional things they should be offering you as a client and investor – even if you have not asked for them. If you are working with an investment provider or firm that fails in these three areas or refuses to adjust when you inquire about them, then you may want to reconsider the parties you trust with your money.

1. Education is a Mandatory Requirement.

Although many experienced investors like to imply that they already “know it all” when it comes to real estate investing, you will find very, very few investors who actually have stopped educating themselves. Think about doctors, lawyers, nurses, and all the other professionals who hold your trust; they all must engage in a certain level of continuing education to make sure that they are able to accurately interpret the various scenarios and environments that they encounter on behalf of their clients. As a real estate investor, you must do the same to make sure you are able to accurately interpret the various scenarios and environments that you encounter on behalf of your real estate investment portfolio!

A real estate investment firm has a responsibility to its clients to provide education on multiple fronts so that clients can easily learn about their options for leveraging their assets at any given time. For example, it is imperative to receive a basic level of economic reporting from a firm; clients must know how the investment provider sees current economic conditions and what they are doing to address changing trends. Responsible investment providers also offer basic education about the types of investment strategies they employ so that clients and potential clients have the ability to ask informed questions about asset deployment.

Best-Case Case Study: The investment provider offers ongoing economic reporting on a regular or semi-regular basis along with an existing database of educational resources.

2. Consultations are Recurring and at No Cost to Clients.

If an investment provider is too busy to speak with clients whose assets are already under management then they are too busy to manage an investor’s assets. Although some large Wall Street investment firms “skate by” on this requirement because they argue they are so big and powerful and busy leveraging that size and power to clients’ benefit that they do not have time to actually consult with those clients, most real estate investors get into the space because they are individuals with unique goals, strengths, and abilities. As such, real estate investors deserve dialogue and must be viewed as more than just an account balance or a series of tally marks in an investment portfolio.

The best real estate investment providers are as picky about their clients as real estate investors are about their investment providers. Regardless of how much (or how little) capital an investor brings to a given project or investment opportunity, they deserve the advantage of a custom consultation designed to maximize the returns the investor can expect and the benefits that the investment manager can provide them. For example, consider two real estate investors, each with $30,000 to deploy with the same real estate investment firm. With no consultation, the firm would likely deploy those funds into identical projects or even the same pool of projects in order to flesh out a project’s budget. In this scenario, the project in question has a five-year horizon and does not offer quarterly distributions. This could turn out really well for both investors, or it could end up creating friction for an investor who needed (but failed to mention the need for) quarterly distributions and instead ended up in line for a large payout five years down the road. The investor who doesn’t need the distributions will likely be pleased, but, due to a lack of consultation up front, the firm will likely deliver less-than-stellar results in the opinion of the investor who would have taken lower returns with regular payouts.

Of course, it was the investors’ responsibility to understand the terms of the investment project. The firm itself did nothing wrong as long as those terms were provided! However, the fact remains that when it comes to investor satisfaction, the firm now has a 50 percent success rate instead of a 100 percent success rate simply because no one took the time to consult with the investors one-on-one and discuss their goals. Because the firm prioritized the project over the capital providers, a misunderstanding was created.

Best-Case Case Study: Both investors receive the one-on-one consultations they deserve and are able to select projects offered by the investment firm that meet their specific needs and goals for their capital.

3. Transparency is an Obligation, Not a Favor.

In the context of real estate investment firms, the term “transparency” is often used to indicate a sort of “favor” that a project manager provides investors. Because many investors want to invest their capital in passive ways, meaning that they do not want to be engaged in the day-to-day operations of the projects, it can be easy to assume that these investors are not entitled to access to the nitty-gritty details of the investments. In reality, if the capital is yours, the access to information should be yours as well. Otherwise, your peace of mind will be compromised and the credibility of the firm usually deteriorates over time.

Here is an example:

“Bill” the real estate investor has $50,000 that he wants to deploy in the rental market in Savannah, Georgia. He acquires a property with the assistance of an investment provider and uses his remaining capital to fix up the property so it may be rented out. The investment provider handles the entire process, but Bob starts to feel concerned about the progress of the work about two months in. The provider is not doing anything wrong, but Bob is unable to monitor the process because they do not have transparency in place. Instead, he must wait for updates from the overworked administrator at the firm, which makes him frustrated. Even though Bob ultimately has a great property that generates rental returns for years to come, there is unnecessary friction between Bob and the investment firm because Bob did not have instant access to information. It’s unfortunate because it means Bob does not work with that provider again and loses out on a lot of good deals as a result. You might think Bob is being unreasonable, but the truth is that Bob is being human by wanting to know what his capital is doing. Your investment provider owes you access to information about your projects and your capital because you deserve the peace of mind it brings when you are a passive investor!

Best-Case Case Study: An investment firm uses push-button software to permit investors to monitor their projects without having to wait for someone to “grant” them entry.

You Deserve the Best

As a real estate investor, you deserve the recognition and respect that anyone leveraging their own hard-earned capital to improve their life and that of their family deserves! Do not be afraid to ask your own investment provider if they offer these three important benefits: education, consultation, and full transparency at every stage in the process.