Choosing Carefully: Why Investor-Agent Partnerships FAIL - The KEY Reasons
For eons, Investors & Agents have tried to work together in a synergistic partnership. It makes total sense they would. However, the vast majority of these "partnerships" fail for a handful of predictable reasons, causing frustration, hard feelings, & resentment. Leading one side to always feel like they're getting the short end of the stick.
Reason #1: No Commitment Or Loyalty
Investors might be the worst in this capacity. They seem to want to use real estate agents as free labor, in the context of running them like bird dogs. Find me a property & I'll let you list it on the back-end after renovation. The problem is, agents bring them dozens of properties, but the investor, who is actually a wannabe, never buys. He doesn't actually have the cash. Often he doesn't even have the 10-20% down to get the hard money loan. Worse, he's just a wholesaler, who locks up properties & assigns those contracts to other investors, basically, in the process, giving away your listing on the back-end. Most investors are terribly disloyal.
Reason #2: No Equal Skin in The Game
Partnerships are like poker. If you want to be in the game, you have to ante up. I've shown you, we're about to spend $150k+ on generating Cash Offer Request leads. We have a shit ton of skin in the game. Over the years, it shouldn't surprise you, many agents have asked about getting referrals from us. Our answer is always the same. These are pre-vetted "Come List Me" leads, from sellers we've already built rapport with. How bad do you want them? Bad they say. Prove it. Are you willing to put skin in the game? Are you willing to ante up? Inevitably, agents just want the referrals, all the upside, without wanting to take on any of the risk.
Reason #3: No Long-Term Mindset
Nothing is more destructive to a partnership than misaligned mindsets. Instant gratification vs. delayed gratification. Short-term mindset vs. long term mindset. Easily frustrated in the absence of achieving immediate results vs. knowing things will need to get improved & optimized as data get collected & processed. It amazes me how many investors & agents alike are so short-term focused. Nothing great happens overnight. Look at the exponential growth curve. Growth is slow & painful until the critical inflection point is reached. Most never reach that inflection point, though, because they quit before putting in the work to achieve it.
Reason #4: Not Equally Strong Systems
This gets to the difference between professional entrepreneurs who run their business like a business, with dialed-in SOPs (standard operating procedures) versus the amateur who just hustles, lives in a state of constant chaos & drama, & constantly is trying to put out fires as fast as their lack of systems, & weak SOPs, are creating them. I can attest: It's torturous for the professional entrepreneur to get paired up with the amateur & visa-versa. The Professional has incredibly high standards for excellence. And is constantly trying to drag the amateur along. While the amateur thinks the professional is an asshole because he expects everyone around him to rise to that top level of performance.
Reason #5: Not Equally Matched Ambition
Reason #6: Not Equal Respect For Each Other's Time
Both investors & agents are guilty of this. They believe that each other should jump when they say jump, or be “on call” whenever they need even the smallest detail. They call. They text. They leave a voicemail. Then they text & call again. Like, fuck. Shut up. Go away. I got your message. I'll call or text you back as soon as I'm able to. This is about having mutual respect for each other's lives. Most people have families & kids & other things going on. Most people want to live their life without being “available” & “on call” 24/7. Mutual respect for each other's time means both parties work together to create a communication protocol that optimally serves both teammates. It's about trust. It's about planning in advance about how data & information gets shared & not waiting until the last minute.
Reason #7: Not Equally Aligned Interests
This is the guaranteed death of any good partnership. Each party prioritizes their own self-interest above the best interest of the partnership. This is why divorces happen too. People start to think only about themselves. They stop prioritizing what's best for the marriage. This gets back to short-term mindsets & instant gratification. Sure, an affair or one-night stand might sound exciting. But is it worth blowing up & destroying your entire family? I can't even begin to tell you how many business partnerships I've seen destroyed by ego, pride, greed, insecurity, envy, jealousy, instant gratification, short-thinking, &/or the inability/unwillingness to communicate about issues festering beneath the surface. Open communication is our highest priority.
Reason #8: Not Equal Distribution Of Labor
This is probably the biggest reason WHY Investor-Agent Partnerships fail. For one party to profit, the other party first gets “used." Typically, it's the investor that wants to use the agent. This gets back to not having equal respect for each other's time. The investor says, “Go find me a property suitable for investment, that I can acquire for pennies on the dollar. I'll renovate that property & then you can list it on the back end.” This means the agent is “free labor.” Further, as you've seen by our data, less than 2% of leads are suitable for high-profit flip projects. Thus, agents have to hunt down, run the numbers on, & vet up to fifty properties before an investor, even the really good ones, will pull the trigger. From the start, this is a flawed relationship structure. There is a “mismatch of labor.” On top of that, most investors do not complete their renovation on time or on budget. So their expenses & holding costs are 20-30% higher than expected. So now, the investor, to account for this, prices the renovated property too high & expects the agent to take a discounted listing commission for the "good of the team.” Again, screwing over & fucking the agent. Within the context of this relationship, the investor works only while renovating the property, while the agent works BOTH to find the property, which is the hardest task of all, & also when selling it, often at an inflated price & for a discounted commission thanks to the greed or incompetence of the investor. For a partnership to be strong, there cannot be a mismatch of labor. This means finding investment properties & listing renovated properties should be “bonuses” of the partnership, not the foundational structure.
Only Logical Conclusion
Finally, an Investor committed to the relationship, not just wanting to use agents as “Free Labor” & “Bird Dogs” to do the painful grunt work. By fixing the relationship structure of the Partnership, you unlock the amazing possibilities for Agents & Investors to profit together in a way that is leveraged, synergistic, & enjoyable for both parties.
