Category: Finance, Real Estate.
In almost every seminar I ve ever attended, a lot of time has been devoted to teaching attendees how to find good deals.
In reviewing the 150 properties I ve bought or flipped over the last 5 years, I was surprised to find that many of the traditional sources of great deals haven t worked for me, while some less obvious methods have been great lead generators. Because deal- finding Is so crucial to one s investing success, I recently decided to look back and see which methods have generated the most deals and the best deals for me. I d like to share with you the results of my little inventory. The MLS is essentially a catalog of all the properties listed for sale by brokers. Good: The Multiple Listing Service. Needless to say, some of them are good deals for investors, and some aren t. I ve honed this skill through years of translating agent lingo like, Handyman s special looks bad, has at least, smells bad one major system that doesn t function needs TLC ugly, and everything works, but not smelly.
The trick is to ferret out which properties have motivated sellers without making offers on all of them. Why it works: Properties listed in the MLS are for sale. Properties in the MLS also have the advantage that all of the information about the property is pretty much laid out for you a major time saver. This may seem like an obvious statement, but some of the other methods touted as great ways to find deals involve locating owners, then finding out if they want to sell. And, computerized access available, with the sophisticated to your agent. Another reasons that the MLS has worked so well for me is that I am generally in the market for really ugly properties. It s a matter of a few keystrokes to view all of the properties that are handyman s specials, or in estate, or bank owned, or priced under a certain dollar figure whatever you d like to concentrate on.
Coincidentally, these are the same properties that most agents prefer not to spend a lot of time with. Bad: Direct mail to real estate agents. In many cases, they re downright cooperative particularly when I m offering all cash and a quick closing. In 1994, I had the brilliant idea that I might be able to find MLS- listed properties even faster if I simply let agents know what I was looking for. The theme of this campaign was this: if you, Ms. So I purchased 1, 200 agent names from the Board of Realtors and generated a 3- part mailing send to every agent in town. Agent, have a property listed that fits my criteria, I ll make an offer and you get to keep the entire commission.
All 7 of them. Out rolled my brilliant campaign all mailed first class, incidentally and in came the phone calls. That s right. We had already made offers on three of the properties. The week after the first letters went out, we got 7 calls. Two were out of our price range.
The next mailing generated even more results about 15 calls all basically in the same categories. And two were overpriced listings about to expire. The final mailing, received no notice, a postcard at all. What went wrong: I still think that this idea has some merit, but if I do it again, I ll make some major changes. Basically, I wasted about$ 1400 on a campaign that generated absolutely nothing. First, I ll target only the 200 or so agents who list the types of properties I buy.
Third, I ll make my campaign a continuous one throughout the year, testing different letters for response and mailing the best to the same agents over and over. Second, I ll do a better job of writing the letters, emphasizing how the agent and his seller would benefit from working with me. And lastly, I ll personalize the campaign by following up with a phone call to the 50 or so best prospects. Good: Ads in the Yellow Pages. Oh well, live and learn. For 8 years, I ve had an ad in the real estate section of the Yellow Pages. This ad only generates 3- 4 calls a month, but for some reason the quality of the calls is better than those that are generated by any other method I ve ever used.
Each year, the ad has had some variation of the wording, I buy houses all cash. The sellers tend to be motivated, and have unlisted, cooperative properties. While they re pricey up to$ 3500 per year the phone company will generally bill you monthly for the cost. Why it s worked for me: I love that you deal with these ads once a year, then forget them. In addition, as one of the very few ads in the phonebook that promise to buy houses, I haven t got much competition. Properties For Sale By Owner, a. k. a. Bad: Advertised FSBOs.
FSBOs, are a favorite for some real estate investors. I ve found several problems with trying to buy FSBOs. I, on the other hand, have never purchased a property from an owner who advertised his property for sale rather than calling me. The first is that some are not actually for sale. Other FSBO sellers are very motivated to sell, but don t list because they want to keep all of the money from the sale. Some FSBOs are just testing the market to see what kind of offer s he ll get.
They don t want to pay a commission but they don t want to take a lower price, either. If you are buying expensive homes creatively, these sellers are ripe for the kind of solution you offer. And sometimes a seller chooses to try to sell their property by themselves because they owe too much to pay a 5% -7% commission, even if he sells it at full price. My strategy is to buy ugly houses cheaply and for cash, and I just don t find this type of deal in advertised FSBOs. Last year, 000 double, I had 10- sided I buy houses flyers printed. Good: Flyers to Targeted Neighborhoods. I hired someone to put this flyer in the door of every one, or three family, two property they saw in my farm.
For a cost of less than$ 500, I made two deals that netted over$ 6, 00 Bad: Billboards in the same neighborhood. Every 3 weeks, 3, 000 of these flyers were delivered, and the response from qualified sellers was excellent. Here s a lesson in messing up a good thing: hot on the heels of my massively successful flyer campaign, I decided to spring for four large billboards in the same neighborhood. Still, I figured that the billboards would get more attention anyway, so I forked over the$ 1, 800 and got absolutely nothing. The problem was that my marketing budget is only so big, and buying the billboards meant stopping the flyers. Not one single phone call. Not even a wrong number.
Not even from an unqualified seller. Nothing. Good: Flapping my gums. Folks, just stick with what works and you ll be fine. Luckily, talking a lot is something I have little problem with. For instance, when my new hairdresser asked me what I did for a living, I responded that I buy and sell houses.
Laugh if you will, but my willingness to talk about what I do to anyone who will listen or even pretend to listen has made me a lot of money. His immediate reaction was, really? Long story short: I bought his unwanted junker house for$ 4, 000 and sold it for$ 7, 000 the same day. How pretty do they have to be? When my attorney wanted to know what type of assets I wanted to protect, I told him about my house- buying business. Bad: Using only one lead generator at a time.
Four months later, he referred a client to me who sold me a$ 35, 000 property for$ 12, 00You get the picture. In my experience, it s best to use at least 3 different ways of finding deals at the same time: preferably two you ve used before with some success, plus one that you re testing. Ugly: Not knowing which of your deal- finding strategies are working, and which aren t. Which brings us to. If you re going to spend money on flyers or ads or telephone pole signs or whatever, it s very important that you pay attention to which methods are generating good leads, and which are duds. If you aren t tracking your lead generators to discover which are working and which you should give up, you re wasting time and money that could be put to use making you deals.
In looking over my own deals was very surprised to discover how many great deals came from attorney referrals a strategy that I haven t pursued aggressively, but will in the future.
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