Investors – think customers, not tenants

Attention real estate investors: it’s time to change the paradigm of the landlord-tenant relationship. It’s not only a smart move, it’s a strategic business adjustment that will help you survive as a market cycle shift approaches in 2016.You are in the business of real estate investing to make money. Anyone investing in real estate who doesn’t change their paradigm, systems and strategies to match this important shift, will struggle as the cycle changes and a new reality emerges.Tenants, as you know them today, will change foreverAs an investor-landlord, you must understand you are not in a unique business.As a landlord, you are providing a product and service to the community. If your product is poor or mismanaged, your income will be lower. If it is priced right and is of greater quality, your income will be higher.To succeed over the long term, strategic investors must rely on clear and proven business strategies covering: marketing, income, expenses, accounting, financing, day-to-day operations and balancing assets and liabilities.Once you grasp this, you can begin implementing proven business systems. This includes a key shift in thinking:Think customers, not ‘tenants’That’s correct, from this day forward, you no longer have any tenants. You now have only customers/clients for your rental business. Your new job description must include a renewed focus on attracting and keeping quality, loyal customers who are willing to pay a premium price for your product and service.Sure, our product is unique (housing), and it is regulated (Landlord & Tenant laws). But other than that, your job is to treat good customers just like other successful businesses do.Keep in mind that if your customers are paying $850 per month for your product, they are paying you more than $10,000 per year. For just about any business, that’s a good customer, one who would be treated special. And like in any other business, the customer does not care what your “costs” are – they care that they are receiving value for their dollar. It’s your job as a business owner to control your costs, make sure your product matches your market demand and charge the perfect price for it.Without loyal customers, you won’t have a successful business – no matter how hard you work or how many properties you own. When you change your thought paradigm from tenant to customer, you open a whole new world of marketing and business management opportunities not usually associated with rental property.Beginning in 2016, our main customer base will begin a massive shift, and it is in your best interest to stay ahead of this change, and thus create loyal and happy customers who can fuel your business for decades.(What exactly is the “next wave” coming in 2016? That’s the subject for another column, but here’s a hint: it involves GenYers and Millenials.)Create customer loyalty – eliminates focus on rentsWe’ve all been customers of businesses that we've become loyal to. Once we became loyal, price became a lower priority (look at what loyal Starbucks drinkers did to the cost of a cup of coffee over the years).Your job as a landlord is to make your rental property the place that your customers want to remain loyal to. We can all learn from our loyalty experiences by analyzing what they do to retain us as a loyal customer. Examine why you return to the same store or service provider, then find ways to transfer these strategies to your real estate business.For example:

• Does it seem like they intuitively know what you need?
• Do they listen to and address your concerns?
• Do they make dealing with them an experience you enjoy?
• Do they reward you with loyalty rewards or points?
• Does the business location have a special atmosphere?
• Do they do little things to thank you for your loyalty?
• Does it feel like they appreciate your business?

Repeat in your own business, strategies that worked on youAdopt into your rental business those key elements that kept you loyal. Once you begin the process of acknowledging your best customers and finding ways to keep them and attract more like them, your turnover costs will begin to drop incrementally.By showing these loyal customers more respect, your operations costs will decrease, since a loyal customer will treat your property with more respect. Your advertising costs will decline, since your loyal customers refer their friends to your business. You will discover that, over time, these customers will be willing to pay a premium (think Starbucks) to rent your units because of the loyalty relationship you’ve created.Long term, premium-paying tenants who treat your properties well – it doesn’t get much better than that.