I was recently thinking to myself about operating my personal investments as a business: maintaining systems, gaining efficiencies, automating as much as possible…customer service….

And then I thought, who are the customers in a real estate business? As an individual investor, it seems to be easier to answer, since there are fewer parties involved. When you are investing without partners, the stakeholders are you, the lender and your tenants. It seemed easier to argue that the tenants are your customers. They pay you rent and in exchange you provide great and safe living and responsive service when that support is needed.

Now, when you are scaling to multifamily and bringing in investors, the simple question of who are your customers seems more complicated. I liken it to the same situation where public corporations, or even private organizations, serve customers but have investors to service and satisfy. So who are the customers, the residents or investors?

My belief is that as the owner of the business and general partner in deals, the customers are both passive investor partners as well as residents:

Investors

Without investors, the larger, higher-earning income properties would not be possible to acquire. Investors are incentivized in the first place because of the relationship with the sponsor, alignment of values and goals and the expected return from the investment (hopefully in that order). Every sponsor in a syndication has an obligation to serve the investors with timely, honest and open communication on operations and the state of their investment in the deal. Without a doubt, investors are customers in the real estate syndication.

Residents

Some would consider the resident to be the product because they generate the income and the more residents, or units, you obtain, the more income and cash flow are produced.

However, residents are not items on a shelf. They are real people with heart beats and needs for healthy and safe shelter. To operate the business in a manner that only benefits the bottom line is to prepare for corners to be cut in the interests of those people who trust you enough to live in your property.

Furthermore, if you do not have happy resident, you do not have an occupied unit. Unhappy residents means more vacancy, which translates into lower valuation of your asset. For moral and operational reasons, the right thing to do is to always take care of your residents and provide them with top customer service.

Alignment of Interests

The great thing is that in real estate, if values are aligned between all investors, there is no conflict in serving the needs of residents. Investors are served well by a solid business plan and execution and recognize the value of timely maintenance, capital expenditures and overall health and safety of residents. Residents in return expect safe living, appreciate great service and decide to renew leases as tell friends and families (other great future residents) about available units in your apartment complex.

For any syndicator and passive investor, recognizing your customer and providing exemplary service is essential for success.