Is Now the right time to Dive Into Real Estate?

I recently ran a webinar with Iulia Neicovcean on this subject. Below is the detail behind that webinar. Whether you are considering starting your own brokerage, expanding or want to become an agent then it could be useful information for you. Any questions please feel free to contact me on [email protected].

What is happening in the Real Estate market in the UAE?

Information - The Dubai Land Department has announced a total value of sales transactions in Dubai’s residential market of AED 27.8 billion in the first five months of 2020. The director of the Real Estate Studies & Research Department at DLD, Latifa Ibrahim Ahmed said in a statement:

“Currently, the Dubai residential real estate market is going through a V-shaped recovery and when analysing various indices for May 2020, we are seeing the same V-shaped pattern in the recovery".

But what a V-shaped recovery means for real estate?

As most states and countries around the world have begun the post-corona virus reopening process, Dubai has announced that it will also be open for tourists and international travel from 7th of July, allowing foreign investors to explore the current stock in the residential market in person.

A V-shaped recovery is, of course, the best-case scenario after an economic downturn. A study conducted by Ernst & Young showed that most pandemics have resulted in sharp recoveries, with 38% of business owners around the world preparing for a V-shaped recovery. This would see housing prices and sales volume pick up in the near future.

The Dubai real estate market quickly hit bottom during stay-at-home period, however now we can see a vigorous bouncing back and a hope for a long-term strength, marking a favourable time for end-users and investors alike, with great inventory available for lower prices than usual, lower interest rate, discounted service charges and other incentives offered by developers.

Personally, I would like to stay cautiously optimistic, as it might be a little too early to jump for joy, even though there are indicators to suggest that the market may see a quick recovery. I know some of my fellow colleagues in the real estate business may agree with or disagree with me (feel free to share your opinion) depending on their current struggles right now. Fact: there are still challenges to be overcome, also fact: the sales transactions have almost gone up to pre-pandemic levels, which gives us all hope for a better future.

V-shape recovery definition, according to Wikipedia:

“In a V-shaped recession, the economy suffers a sharp but brief period of economic decline with a clearly defined trough, followed by a strong recovery. V-shapes are the normal shape for recession, as the strength of economic recovery is typically closely related to the severity of the preceding recession”.

Do you have what it takes to Run your own business?

Not everyone who thinks about starting their own business will open one and statistically those who do, nearly 70% will fail in the first twelve months. Are you one of the 30% who will make a success of it?

What will it take? It can be stressful, requires extreme focus, dedication and it takes a tremendous amount of sacrifice. If you make it a success, then it can be very fulfilling both emotionally and financially. Not everyone has the determination and tenacity to make it work.

The first step is to take an honest look at yourself. Being good at what you do now does not mean you will be a successful business owner as this involves a different set of skills. Do you have the motivation and leadership skills to build a team and motivate them?

The best mechanic does not make the best garage owner. You must have the leadership and organizational skills to run the business.

How will your business be different from the other businesses out there already? What will be unique about your business that clients will want to do business with you? This can be about a product or service. If its service, such as Real Estate, why will your company be different? This can be a focus on an area perhaps, or a segment of the market.

Do you have the money to make it work? There are set up costs, working capital requirements. Most businesses fail because they run out of cash. You need a properly worked out business plan. Do not start a business without enough cash. Make sure you have enough to live and pay your bills. If you do not have enough cash, then start to save and reduce unnecessary spending to get the money together.

Think about how you will build your company profile. Marketing and networking are not just about selling but also getting yourself known as an expert in your field. This can be through educational content through digital platforms. A good profile will attract good people who will want to work for you.

You must have the systems in place to understand the science behind your business. Statistically, you need to know how your business is performing and where you make and lose money. What happens to the leads your business generates, how much do they cost and how much do you make from them. Who are the best and worst performers in your business and where do you need to support and train them to improve them?

Finally, you must keep learning and make time for this, to read and research for new ideas that can help you grow you and your business. You can only coast downhill and you move your business you need to keep pushing and keep moving out of your comfort zone. Your leadership skills will be the key to your success.

What does it take to be a business leader?

As I have said before, the best mechanic does not always make the best garage owner. The reason for this is that the knowledge about fixing cars is not the same knowledge you need to be the leader in your business. You are the boss, and this is your dream.

This is a whole new set of skills and some people think that you are either born a leader or not. Whilst some people have some natural traits that make them a more natural leader we all have the ability to lead if we understand what leadership is and just as we learned to be a good mechanic we can learn to be a good leader. A good leader is not all about a big personality as some may think, it is also about being an intellectual and genuinely caring about the progress of your employees in your company. The more motivated the staff the more they will produce for you, which will appear on the bottom line - Profit!

A leader is not a manager. There is a useful saying that distinguishes the two, "a manager does things right, whereas a leader does the right things."

There is plenty of material on the internet that relates to leadership skills and I would recommend researching online courses, such as those on Udemy for example. These courses take about 3 or 4 hours and are broken down into short videos making it easy to complete the courses over time.

Leadership is about understanding what motivates your employees and what leadership style best suits a certain situation and/or employee. I have found that Maslow’s theory of motivation is the closest to the reality of the workplace.

This theory lists the hierarchical needs of a person. It starts with safety, security and belonging and finishes with self-actualization. In summary, we come to work to make money to fulfil our needs for safety, security (We can make money to pay for somewhere to live, food, etc.) and belonging but what actually motivates us is achieving something (self-actualization).

If we are in sales, we met our targets, if we are managing a project, we completed it on time within budget. Most importantly we feel appreciated by our leader, saying thank you is a massive motivation (gives us reassurance that we have achieved our goal) and drives us to achieve more. Money is not the massive motivator that some consider it to be. If you double an employee's salary will they work twice as hard? If they say pay me more and I will work harder, then they are cheating you already! If you pay an employee less than they deserve then this will de-motivate them, as it affects their security, feeling of achievement and self-actualization.

As a leader, if we create an environment of fear where employees are threatened with losing their job, we take away their security. As a result, they will move to somewhere new where they can find it. Create an environment of support and your employees will work better towards their goals and targets and be more motivated. Do it well and you will have their loyalty and they will stay with you, no matter how green the grass may look on the other side when other companies are trying to poach them.

A Leadership style model is covered by The Tannenbaum & Schmidt Management Continuum which in summary states that there are the following styles, these can be used in different situations:

a)  Tell – The leader makes the decision and announces it. The leader is unaware of or not interested in the group’s views. The team may not even have been aware of the problem.

b)  Sell- The leader makes the decision and explains it. Coaching is a type of selling: show them how and convince them that it is the best way to do it.

c)   Consults - The leader listens to suggestions and then makes the decision. The problem is still the leader to solve.

d)  Shares - The leader describes the problem, defines limits, and lets the group make the decision. The problem is owned jointly.

e)  Delegates - The leader allows subordinates to function within defined limits. Subordinates have ownership of the problem. The leader remains accountable for the result.

f)   Empowers. Trusts subordinates and does not check on them. The leader is available for support. The team can set their own objectives, within the overall vision. The leader remains accountable for the result.

g)  Abdicates - Leader does not maintain “grip”. The leader does not monitor progress or give support. The leader tries to avoid responsibility for failure.

We can all think back through our careers and note the good and bad leaders we have worked with and which category they may fall into and which one motivated us the most to complete our tasks and reach our targets. A good leader will develop their staff along the process as above, to empower.

The art of leadership is to understand the individuals who work for us and what they are motivated by and what leadership style they respond to, given the situation.

Our employees will fall into different psychological groups and again it is important that you understand this. Plenty of information on the internet and different theories. One I have used before is known SDI and groups people into segments of red, blue, green and a Hub (a mixture of the colours).

a)  Red – Concerned about task accomplishment, organisation of people, time, money, and resources to achieve the desired results. They like to achieve their targets and receive praise for doing so.

b)  Green – Concern that things are done properly and thought out. Like meaningful order being established and maintained. They think things through and are self-reliant.

c)    Blue – Concern is for the protection of growth and the welfare of others. Likes to help others make a difference in their lives. They want to engage with others and build rapport.

d)  Hub – Concern is for flexibility and adapting to other people. Focussed on the group to make sure everyone is included. They provide alternative viewpoints and considers multiple topics simultaneously.

In understanding this for example if you publicly praise a red, they will be motivated and happy to receive such praise. Do the same for a blue and they will find this uncomfortable and will de-motivate them. If you praise the team of a blue this will have a much better motivational effect on a blue.

This kind of model can apply to your clients too. A red knows what they want, it is exceedingly difficult to change their mind, they will not care to look at brochures or if they will upset you if they choose to go with another company. Green will want to see the brochure and compare it to others whilst a blue will generally go with the nicest agent, the one who takes the most interest in them and their family for instance. Understanding who you are dealing with will increase your chances of a sales.

To summarise the above, you will need to be the leader of your business, but this is not something that you should be worried about. It takes time to learn new skills but the information is out there and together with your intelligence you can absorb the knowledge of what you need to do as a leader and refine it over time with experience. Never be afraid to lead as your employees expect you to be a leader and look to you to set the culture of the business and the expectations.

Having a mentor to help you is also crucially important, someone with experience who can be there for advice and support. I was lucky to have my father help me who has set his own business up when I was growing up.

Recruiting for Success

Recruiting the right staff for your business is crucial to your success. I have found that there are 3 crucial factors in recruitment. Intelligence, character, and their willingness to learn. Intelligence is something that you cannot teach. Character is the will to succeed, tenacity and determination to achieve what they set out to. Willingness to learn is crucial because if you have a successful way to do things, they need to listen and take this on. Knowledge is what you can teach.

For example, recently in Real Estate here in Dubai, I have read that over 90% of the Real Estate agents are happy to make less than AED 10,000 per month. As they are commission-only they believe that they are self-employed and can start and finish work when they want. For many this is an easy life, make enough to live and take care of the people they have back home and for them, it is a better life than in their home countries. You need to avoid hiring this type of agent, you are looking for ones who want to make money, not just enough money. They will be in the office early and ready to get started on the day and make some commission.

You will see the most successful Real Estate businesses in Dubai have developed a highly focused recruitment strategy to attract the best agents as without these their businesses will not be successful.

One of the keys to your success is using social media platforms to promote your business. You are not only using it to attract clients but to attract potential employees/agents. Your business needs a human face and that is you. Build a good profile showing the culture of your business and how successful it is, and how successful your sales team is then this will get the interest of good agents who will want to come and join you.

You will need a recruitment process and procedure to make sure you really understand the candidates in front of you. Hiring the wrong person can be very costly and your business will only be as good as your worst employee. The right hires for your business are critical to your success matched with the right training and support.

There is plenty of information on the internet, the 3D interview model is one that my company employs and includes psychometric tests. If your budget allows then consider working with a recruitment agency but selecting the right one can be difficult as after all it’s in their interest to place candidates and you need to work with one that wants to place the right candidates and not just make a commission.

As the leader of your business, you will need to establish the culture and environment that leads to success. An environment of support with training and mentoring will help you retain your best employees.

Training needs to be ongoing. There are so many businesses that have no training or do it infrequently which is ineffective or has a limited short-term effect. The best trainers in the world are the Armed forces. They must train their personnel for situations they may never be in, but they need to ready in an instance if needed. The key to the success of their training is to make it often and make sure you give feedback. Feedback is key to make sure changes in behaviour can be identified and implemented as quickly as possible to improve the performance.

It will also quickly identify those who are not performing, not achieving and will not take advice and the support on offer. These employees you need to remove as your business is only as good as your worst employee and your worst employee will only disrupt the best.

Training is a constant reminder to your staff of what your company’s systems and procedures are, the key to success, keep following them diligently and they will be successful and therefore your business will be. Remember they need to be willing to learn.

Remember your employees are looking to you as the leader and to deal with these situations, they will not be scared for their jobs thinking they will be next, more worried that the company will not perform to the best and this will put them at risk. After all they have seen and know the support you give, and they will see it as unfair if you do not deal with difficult situations and let employees go.

Hiring the right team will lead to revenue for your business. This is not just the best sales team but the best support team behind them. Every member of your team needs to understand that the key business driver is revenue, without this, there is no business.

It is not just down to the sales team, they can bring in clients, but it will not work if they have a bad experience with the support team. Every employee needs to understand the key to delivering a customer experience that exceeds their expectation and leaves them with a wholly positive experience of your company. They will come back in the future; they will write good reviews and they will tell their friends.

Managing your Company Data and Decomposition

One of the most important things you need to know is the science behind your business as understanding this information will help you improve your decisions in the future. In Real Estate it is very surprising that too many Brokerage companies do not do this. They continue to spend money on marketing activities with no real understanding if they produce results. Decisions end up being based on gut feel or because everyone else does it, so we must do it too.

One place to learn lessons from is the Supermarket Industry. From the moment you walk in the store, they are collecting data on you. Where you go, what you buy and from which shelves. Many have loyalty schemes and through this, they collect all the information on your habits. They know when you visit the store, and when you did not. This is used to market products to you and entice you with discounts on the products you always buy, sell an alternative or special promotions to you if you have not visited the store in a while. If you react to one of the promotions, then they know it was a success and they will keep on doing it.

Importantly they use this to negotiate with suppliers. They will offer the supplier a position on the shelves that they can prove will sell more of their product if the supplier will offer a discount to secure the space.

They use all this data to maximize the return of their investment. One of the biggest growth areas in employment in the world right now is for data analysts. Banks are analysing your spending on your cards and accounts so they can target products at you. Visit a DIY store a few times and you might find the bank will try to sell you a home improvement loan.

Real Estate is no different to other industries, and the successful ones know the detailed analysis, or as I call it “The science behind your business”

You will need to invest in a top CRM (Customer Relationship Management System) Why?

You will create your marketing plan and budget to generate leads and its success will be critical to the success of your business. You have made your investment and created your plan and have a revenue target you need to reach to cover your costs and start paying your investment back.

Your marketing plan will include industry portals, digital and social media and perhaps events for networking or roadshows where you take your service to interested parties locally or overseas.

You need to able to see what is working, what is not and what you need to fine-tune. You need to understand where you get the most benefit from your marketing spend. You need to make sure you generate enough good leads to satisfy your agents and meet your revenue and profit targets.

You need to able to track the leads and conversion rates for each agent so that you can support them to improve. Maybe it is about their qualification or closing skills. Knowing their numbers will assist you to improve their performance and retain them.

You should have the cost per lead and the cost per deal for each marketing activity. This should be at the company level and for each agent, market segment, sales, leasing, and commercial for example.

Having this information will help you recruit. If you have a good agent sat across from you in an interview you can imagine the confidence you can provide in having this information, the hard facts on what you can do for them, the number of leads, average deals and so on.

Agents need to be focused on activity, not just numbers. For example, it generally works like this; To get 50k in leasing income, they need 10 deals at an average of 5k each, to get 10 deals they need to get 50 viewings, to get 50 viewings they need to get 200 leads, to get 200 leads they need enough quality listings and action to drive leads from the listings and marketing. The activity can be to get the owners to review the pricing, do some upgrade based on the evidence the agent presents. Focus on leads, and from this, you already know the statistics and can monitor the likely income in commission, and you can monitor the progress on a daily, weekly, and monthly basis. Monitoring it will allow you to step in should the results not be as expected and put in place corrective actions to get back on track.

Here at my company, we have a dashboard on our CRM, real-time that shows the analysis of the leads and deals and it can drill down by marketing activity, by area and agent performance.

The more detail and statistics you have, the better you will be able to control your business and make better decisions. For example, if you know one of your agents has good conversion rates with certain nationalities then push these leads to them, and likewise with other agents.

If you can sit in a meeting with one of the big developers and show them the analysis of the roadshow you did, the leads generated and deals closed then you will have a better chance with them to fund some of the marketing for your next event.

This will also, as I have mentioned help with the retention of your agents. If you can see where they need help and where to feed them more specific leads for success, then they will increase their performance and stay with your company.

It is important not to underestimate the cost of recruitment, one company has recently stated it costs around AED 50,000 to recruit if you consider the ones you take on who are not successful.