Traditionally, property management has been thought of as a local profession. Most often, properties are a comfortable distance from your home or office, easily shown and supervised. Our daily activities usually lead us around our own county and perhaps the adjacent county. Thinking about the entire world is far from the mind of a Property Manager who is just trying to get across town for an appointment.
However, as I and many others have discovered, there are clients all around the world that are thinking about our local cities and towns. I recently started the process of obtaining my Certified International Property Specialist designation (CIPS). Earning this designation has totally changed my perspective on just how “local” my business really is.
When I began this process, I was convinced this would be a sales-focused presentation, with very little to offer a Property Manager. That was not the case. I gained some truly valuable insight. Lessons on how our global economy operates and how it affects local business was just the beginning. I learned how a new client could come from anywhere in the world, why they choose the United States, and, what was perhaps the most useful information of all, how to provide world-class service to the foreign investor.
So, What Brings Them Here?
Foreign investors are attracted to the very things we take for granted: our regulated and stable banking system, our private property rights, the unrestricted ownership we enjoy, and the landlord/tenant laws that protect us. Our business climate has created a very welcoming atmosphere for the global investor.
The Allure of a Foreign Investor
As a Property Manager, solid growth is important to me. Owners that purchase investment properties to hold long term provide stable portfolio growth for your company. Between the arduous process of getting to the closing table and the possibility of capital gains, holding their investment for a period of years is usually the best option for a foreign investor. Also, these investors are often cash buyers. Many lenders require documentation that might be hard or even impossible for them to provide. Cash is simpler and much faster. Perhaps the most desirable trait of the foreign investor is their investment preferences. They are inclined to choose high-quality properties and seek only modest returns on their investment. A high-quality, long-term rental, a reasonable return expectation, and an owner prepared for the expenses involved in maintaining an investment, all add up to what I consider a top-tier client.
It’s a Matter of Trust
We all strive to earn a reputation of “Trusted Advisor.” Our clients have come to expect our loyalty and rely on our expertise. As a licensee, you are considered to be an “expert.” There is an expectation that your skill set gives you an advantage over the public. As a result, we disclose our credentials upfront and operate in good faith. A foreign investor has limited knowledge concerning the real estate practices in our country, and no real idea of what they could expect from a licensee. That creates a lot of uncertainty and highlights their need to rely on your trustworthiness. The relationship with the global investor will be a combination of that trust, your customer service skills, and your work ethic. They will feel their vulnerability and will need your help with every detail to overcome that uncertainty.
Location, how to set rental rates, rental restrictions, and the property features that are most popular with tenants are just a few of the areas of expertise that will be important to them. This is where you really begin to prove to them that your experience and knowledge are valuable assets. All of this will take time to establish. Your value to them will continue to grow with each action step you take. They will want to see an attitude of service and ethical behavior, along with a communication style that is informative, not persuasive. After all, you are a trusted advisor, not a salesperson. They do not respond to the hard sell. They will want to see how you are different from your competitors, that you have experience, and can display expertise in your specialty without pressure.
A Taxing Situation
Foreign investors have tax considerations and will look to you to help point them in the right direction. Often, they buy properties and are not given information concerning their tax obligations on rental income. This information is quite valuable to them, and your knowledge on this subject will be another opportunity to prove your value. As a professional, you know there are federal obligations, as well as State and local laws, ordinances, and regulations of which they must be made aware. All of this could get very overwhelming for investors, if not for you, their trusted advisor. You should also be able to point them in the direction of a tax expert that is part of your established team.
Show Them the Money
A Property Manager should have basic investment knowledge. Brush up on your skills so you can help them determine a property’s potential. Know your formulas and keep a calculator handy. A serious investor will expect you to be adept at calculating a return on investment and to know what a cap rate is. In order to be truly effective, you should also have some knowledge of currency conversions, exchange rates and wire-transfer information. Develop a relationship with a trusted “money” source to help you service your client’s needs.
Get It in Writing
Your role as a professional is to educate. Our customs and practices are what we know to be true, and the same can be said for other cultures. A foreign investor will need to know how we do business. In some cultures, contracts are just the beginning of negotiations. Our experience is much different than that. When these expectations don’t match reality, frustration will follow. It will be up to you to make sure your client understands that a contract is a binding document and understands how to navigate the process. Take the time to educate your global clients on how our business process flows and what each step along the way means to them.
Most foreign investors are very tech savvy. They will expect you to be proficient as well. With time zones and a global market, business never sleeps. Information needs to be readily available and accurate. QR Codes are very popular around the world. Though the popularity of these codes have lost some of their momentum in the US, other cultures have continued to embrace them. Become familiar with the other ways people access information. Be open to trying various ways to extend your reach.
Are You Smarter Than a 5th Grader?
Does anyone else remember being told that one day we would all be using meters and centimeters? That our inches and square feet would disappear, and that we would need to catch up with the rest of the world? Perhaps you didn’t really bother to learn hectares and square meters. Now would be the time to brush up on your 5th-grade math skills and reintroduce yourself to our old friend – the metric system. The rest of world has managed to adopt the metric system, and using Realtor.com/Global or helping an investor understand size will mean knowing the basics. Just another case of “I wish I listened back then!”
It’s All in the Family
Our culture has a very relaxed attitude concerning family order, family affairs and name preferences. We don’t rely on age or gender to establish who will speak for a group. Some cultures consider these matters to be extremely important. In some countries the highest ranking person in a group will lead the conversation. Status is often dictated by wealth, position, age, and gender. It is important to know these facts and be sensitive to them or you will risk insulting your client. Also, in many cultures, family matters are private. They do not share details as easily as we do. Wait for information to be offered. Another consideration is the family name. It could be different than what we have come to expect. Some cultures put the family name first and then the first name. Paying attention to these details will show your commitment to the foreign investor.
Mind Your Manners
Often, good manners will help us navigate through uncharted territory. So, brush up on your business etiquette because many cultures have customs of which you might not be aware. Talk less and listen more. This will help you discover little pieces of useful information. I spent many years being a wallflower and I learned a lot.
Be careful not to do anything to embarrass the other person. We like to tease each other for fun. This is not accepted behavior everywhere. Don’t use slang. It could be confusing or even insulting. Be careful with your gestures and keep your hands out of your pockets. Even crossing your legs could be misinterpreted as impatience.
It is said that successful transactions require a “meeting of the minds” and your knowledge of global business practices, cultural expressions, and international customs will help you and your global client find a path to success. As Harvey S. Firestone said “The secret of my success is a two-word answer: Know People!” That could very well be the secret to your success with a foreign investor, too.
This article originally appeared in Residential Resource - The Official Monthly News Magazine of the National Association of Residential Property Managers (NARPM) October/November 2016 Issue.