The number one thing that makes an Investor successful is finding, buying and selling properties from a Motivated Seller. As I have stated in previous articles, the only thing that makes Investors money is a Motivated Seller. So … how do you find motivated Sellers when it’s a Seller’s market? There are several ways to become successful and as an Investor the key to your success is having a marketing machine running all the time. A Seller’s market means that when a property is listed on the Multiple Listing Service, the Sellers receive multiple offers from Investors, homeowners and landlords. Obviously a homeowner is willing to pay list price or more for the house since they are going to live in the property and there is a personal attachment. Landlords will pay up to 75% to 80% of the market value and Investors pay 60% to 65% of market value. Yes, the repairs come into consideration for the Landlord and the Investor, however, the homeowner is more accepting of repairs needed to the home, as they are planning on making changes anyway. Therefore, submitting offers on the Multiple Listing Service is very time consuming for an Investor and the rate of acceptance is much lower than for a homeowner.
The first thing that I would recommend to all Investors is that you need to find a List Source that is accurate and updated every 30 days, at minimum, so that we could mail to them and/or door knock. Recently I have been mentoring a group of students and we were all using the same list provider and we decided that since we were not getting as many calls as I truly believed we should have received, we started comparing this List with another List Source. What we found out is that the List source that we had been using was more than 1 year outdated, meaning that when the property was sold to another individual, the old Seller’s name was still on this list, wasting all of our marketing dollars. I know that Investors get disappointed easily as many people sell the sizzle of investing in real estate and not the meat and potatoes of what is required to get your business up, going and successful.
Every Investor should have 1-2 List Sources to use for marketing. They should also review their leads and make sure that the information that the List Source is providing is correct information. I am not saying go through all your leads, I am just saying go through the first three to four leads to determine if your List Source has the correct information.
What I have also found, as a Mentor, many Investors will spend most of their money on training and not leave a marketing budget to implement the training and allow you to become successful. Yes, there are several cheap ways to market such as business cards, bandit signs, flyers, social media and websites; however, to be successful in real estate you will need to do 5 different types of marketing. During my 1 Year Mentor Program, I help get you properly “business” structured, build a team, set a marketing budget and teach you how to find Sellers in several ways other than just making offers on the Multiple Listing Service. I truly do believe that Investors should do what their pocket book allows, meaning if you have to write, print and mail your own letters then let’s do it. However, when I Mentor individuals, I find out that life gets in their way, stopping them from mailing out letters, handing out business cards, putting up bandit signs, handing out flyers, and even marketing on social media. Therefore, I am recommending to my Students and everyone that is reading this article it is time for a SHIFT. You need to hire a company that specializes in sending out marketing letters and have them send out at least 500 letters for you to start your marketing machine. I know what you are thinking . . . I can’t afford it. Well, I am telling you that you can’t afford not too! Take the time to find a company that will write, print, stuff and mail your letters immediately. Trust me, you will start seeing a big increase in your deals!
I suggested this to one of my Mentor students from Michigan and on his first mailing, he got at least 7 Seller leads. He went and met with a Seller that is willing to sell her house to him well below market value. Your leads are ‘hot leads’ which means when a Seller calls you about their house, you should have an appointment set within 24 hrs to go look at their house even though you may not know for sure that it is a deal. Honestly, I can tell you that most Sellers will advise you that the house is in perfect shape and needs no repairs. That could be true for a house built in 1969, however, if we are buying that house to rehab and then competing to sell that house in this market, I will need to update the house to today’s standards to get top dollar when I sell.
Prior to going out to the house, you should have done research on the property so that you can see the values of the property (Zillow, RealtyTrac, Trulia) no more than .5 miles away and specifically in the same subdivision. If you are going to buy and then resell to a new homeowner, you will need to know what your market is bearing. Comparables need to be houses that have sold no more than 3 to 6 months ago. I also look at what is pending and active with contract, as they will also have an effect on the value of my home when I sell it.
You also need to do research on public websites to see who the owners are on the property, what they bought it for and all liens on the properties. Obviously, we can ask the Sellers these questions, however, sometimes that will not tell you the truth and/or they will believe that the second loan on the house is not owed because maybe it was taken out by their deceased spouse, sister etc. Every question that I have on my Seller Information Sheet is vital and needs an answer from the Seller, as there are several ways to purchase a home. Subject to, Cash, Installment for Contract, Option, Lease Option or a combination of things.
When you go to the house, make sure you take pictures of every room as if you were going to market the house. Also, in every room of the house, take pictures of all the bad things that need repairs and/or questions you may have. You should be at a house for at least 30 minutes or more in order to take your time and build rapport with the Seller. You should also have a purchase contract ready to be signed on the property the day you go or within 24 hours after seeing the house. You should fill out a Property Inspection Report (provided in my System) that will help you determine what you think needs to be done to the house, versus trying to remember everything.
Many Investors are afraid that if they make an offer on the property and it is too high, that they will lose money on the deal. You all need to get over this! A Purchase Contract has a minimum of 15 days inspection period so during that time, you can have contractors, inspectors and/or Mentors/Partners come out and review the condition of the home. If the price is too high on your offer, you can counter the Sellers and if they won’t accept the offer, then back out of the contract. Stop thinking about it, just go get a deal and make a mess! If you have a good Mentor, then she will clean up your mess! That is what I tell all my Student/Partners!
I am going to summarize this Article to break it down and make it so simple for you.
1) Obtain a List Source,
2) Pay to have a minimum of 500 letters mailed out for you,
3) Fill out Seller Information Sheets and set an appointment with the Seller 24 hours from the time of their call,
4) Do research on the property such as values, deeds, mortgages or any other liens,
5) Have a Purchase Contract ready to sign when you go to the house,
6) Take pictures of the house good and ugly, fill out the Property Inspection Report to determine the possible costs for repairs (Take a guess if you don’t know and then learn costs for future deals,
7) Fill in the amount of the Purchase Contract whether it is terms or cash,
8) Have an inspection with your contractors, mentors/partners or maybe even possible buyers,
9) Counter the Seller if the numbers don’t make sense,
10) Close the deal and make MONEY!!!
I hope that this article has helped you all move past the FEAR of failure, as in any deal, there is an escape clause and Buyers always can walk away from deals without losing money.
Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!
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