Many beginning real estate investors make the mistake of starting out with foreclosures. Just about every new bird dog that I have trained asks me about foreclosures.com or some other foreclosure service.
Typically you pay a monthly fee to use these services and then you get a list of foreclosures in your area. The idea is that you will find a “foreclosure deal” and be able to make some money with it. This approach is how I and many other people started out in this business. When I first started out, I had subscribed to “Real Quest” which cost over $300 a month for Palm Beach County, Florida. I used to visit homeowners at their houses and talk to them about their foreclosure and how I could offer to help them. The most common scenario was a homeowner that wanted to avoid foreclosure and was willing to “walk away” from the property. The problem with this approach can be summarized by the following: Guide to Finding Wholesale Deals An often overlooked approach by beginners is to utilize the classified ads both online and offline. Search for words like “owner financing”, “owner will carry”, “must sell”, “make offer”, “any offer considered”, “handyman special”, “needs work”, “investor special” and so forth. You need to be looking for distressed sellers. When I first started looking at the classifieds it took less than one month of trying out this approach for me to find a wholesale deal. It was not one house but three houses which were located in Port St Lucie, Florida. All of these houses were for sale by a wholesaler that had signed a contract to purchase all three houses and wanted to “flip” the contract. The houses were worth around $140,000 but had sustained some roof damage from one of the hurricanes. I agreed to buy the houses for $95,000 a piece and after paying for the roof repair and some basic cleanup I figured there would be around $90,000 in equity. We still own those houses and they have been great rentals. You can also advertise your services to potential sellers by placing a classified ad in the newspaper. Simply place an ad that says “I BUY HOUSES FOR CASH” with your phone number. The phone will start ringing immediately and you might get as many as 3-5 calls per day. You might find that this soft sell approach will work better for you. The home owners will be calling you so psychologically you are in the drivers’ seat. They are calling you because they want your help. They want you to buy their house. It is up to you to decide if you want to or if it is even feasible. You can write down the address and pull up the “comps” (comparable sales). Then you can give them a ballpark idea of what you could probably offer for the house (usually around 65% of after repair value). At that point the homeowner would usually either tell you that they were not interested (no deal) or they would ask you to come and take a look at their house (deal). At that point, once you have the house under contract you can decide whether or not you want to keep the house yourself or assign the contract to another buyer for a fee. In addition to classified ads, I have found the following to be very useful: When you have sellers coming to you, you have all the control. You decide which deals are worth pursuing and which are not. You won’t be dealing with hostile homeowners, rather with people looking for your help. Be honest and sympathetic to their needs and let them know if you cannot help them. Don’t let them think that you will buy their home if you will not. You also need to make sure that you are aware of local new laws such as CS/HB 643 and CS/SB 992 which are now part of Florida law. If you buy a house from a homeowner in foreclosure and they claim after the fact that they didn’t know that they would lose their home then you will have a big problem. Make sure that you have an attorney prepare or review any documents that you intent to use. Taking some of the steps that I have mentioned above will mean spending some money on advertising and marketing. Distressed sellers will not find you if you don’t advertise. Most beginners don’t want to take this first step. That is the difference between finding a deal and not finding a deal. If you made $5,000 on an assignment fee that would pay for a few years worth of all of the above advertising. If you are serious about being a real estate investor then you should be prepared to spend some money advertising yourself and your services to sellers. By definition, a real estate investor puts up some money and “invests” it into real estate deals. As a real estate “entrepreneur,” I prefer to avoid tying up any of MY money in my investments. In fact, I prefer to collect some of my profits on the same day I buy a house. That way I don’t have to be in a hurry a sell. Then I have money to further my real estate education, pay my operating costs, invest in systems to grow my business… and write myself a paycheck! Now, I’m willing to wait for my profit on the back end. And I’ll even consider “investing” small amounts into a house like a small down payment plus money for holding and touching up the property. Ideally though, I’ll want to quickly get my money back out when the house once it’s occupied by a buyer or tenant buyer. There are many different approaches to real estate investing. And I certainly don’t have the perfect plan. Your approach will depend on your own personal desires and skill set. But to put my “collect cash when buying” strategies into context, I’ll briefly describe my real estate business…
I buy mostly single family homes. I rarely buy houses listed with real estate agents unless it’s an all cash deal. I prefer to be negotiating directly with the owner. I don’t use my good credit or banks to finance my purchases. Typically I acquire homes taking them “subject to” the existing mortgage using a land trust or agreement for deed. That means I get no bank qualifying owner financing. For cash deals, I use hard money lenders or private lenders. To buy directly from sellers, I use a number of low-cost marketing methods to get them to call me (see “How to Get Motivated Sellers Calling You”), getting them to ASK ME to buy their house. I prefer using marketing systems which are easy to implement and easy to repeat. I don’t call sellers. For each of the 7 to 15 calls I receive, I’ll find one seller who is flexible and motivated enough to allow me to buy creatively, or at a price and terms that works for both of us. You won’t get that type of closing ratio calling ads in the paper. Working 20 hours a week with a small staff, I buy and occupy 3 or 4 houses a month. If I cannot make at least $20,000 net profit, it’s just not a deal. If the seller has lots of equity, they typically take it back in a note due upon the “refinance” of the home. The refinancing occurs when my buyer or tenant buyer gets their new loan. That’s between one and 36 months down the road. Most common is 2 to 3 years. But some of the 57 properties I own today were bought over 5 years ago and have appreciated nicely. After I buy a house I put it on the market with a flexible seller financing. That includes doing “wraparound” owner financing or selling on a “rent-to-own.” I don’t list my homes with agents or rely on my buyer getting a bank loan to close. By offering terms, I make the home more desirable and more valuable. I get it occupied fast and under contract for top dollar, even in a slow market. I can also sell a house “as is” if it needs some work offering my “trade sweat for equity” program. Many buyers like that opportunity... and I can eliminate some of the frustration or costs that are common with dealing with contractors. I avoid dealing with renters and all the landlording challenges that come with that. Instead, the homes I still own are occupied by tenant buyers who have paid me a non-refundable “purchase deposit” to buy at a later date. They can earn a modest credit toward buying the home for each “on time” rental payment plus they agree to take care of all repairs and maintenance. Since they are planning to buy, they typically are interested in taking care of the property… even doing major improvements which are also non-refundable in the event they do not close. Think about it. If you don’t tie up your own money for very long when you buy, or you actually collect some cash when you buy, what’s the limit to the number of houses you can buy each month? And if you avoid landlording headaches by selling with owner financing or “rent until close” terms, what’s the hurry to cash out? Most of the homes I buy require little or no money down. I still find investors to this day who say that that is not possible. That amazes me. On my best deals, I actually get cash when buying. So here are my top 5 ways to put cash in your pocket when you buy a house... 1. Over Borrow with No Bank Qualifying when Paying All Cash Most of the houses I buy are “subject to” the existing mortgage. That’s because most sellers owe more than I’d be willing to pay cash. So I tell them, “You owe more on the house than I can pay cash as an investor. I get a high return on my cash. It wouldn’t make much sense to pull my cash out of other investments to buy your house at the price you say you need. The only way I could come close to your price would be to take over the existing loan and relieve you of the debt. Would you even consider that... if I can get you an acceptable price?” Other times they have enough equity. What if the seller insists on all cash? Most of the houses I buy all cash need a lot of repairs, or are owed by a bank, or both. That’s for my market. Prices here range from $50,000 to $300,000 with an average $165,000. When you buy in the very low price ranges, then you may be doing more cash deals. For me, only one out of 10 houses I buy require a lot of cash. I get my cash from hard money lenders and private lenders. You can listen instantly online to a free audio presentation I did on how to raise cash for your deal. In a nutshell, I pay 9 to 13% interest. And then I pay 0 to 10 points. I have credit lines that would cost me less, but they have limits. I like having unlimited funds to buy houses and keeping my credit or credit lines open for emergencies. I consider the cost of these funds when I construct my offers so I’ll make a huge profit regardless of the interest or points I pay. My “collateral” lenders don’t look at my credit report, only the value of the property being used as security. I can borrow 65%-70% of the property’s value with no qualifying. In fact, if I cannot borrow enough to buy and fix the house without qualifying, the it may not be a great buy… and there are better deals to out there. Example: So, a seller of a $100,000 house needs cash, I may offer $61,237 cash, an amount plucked out of the air (near 60% and looks like I really crunched the numbers). I then borrow $70,000 and pay 5 points, costing me $3,500 and netting $66,500 in cash to close. I walk away from the closing table with over $5,000 in my pocket on the day I buy the house. Recently, just so there’d be no confusion on a transaction, I called Beth (my closing agent at the title company) and let her know I’d be getting money at closing as the buyer. She responded, “Richard, that’s no surprise. It would be more unusual if you brought me a check to closing.” Can you find a ton of deals like this all the time which you can buy so cheap? No. But they are out there and you’ll find them now and then if you’re “in the game.” 2. Over Borrow with No Bank Qualifying when Buying with Owner Financing When I started my real estate business in 1996, I couldn’t find enough cash deals to keep me busy. I still can’t… cash deals that is. That’s why I developed a number of ways to buy all types of houses, using creative financing. And this is my favorite. When I find a motivated seller with lots of equity, there’s a good chance I’ll use this strategy to get them a higher price than an “all cash” offer. Case Study: I had a seller who agreed to sell a free and clear property for $107,000 if I gave him $30,000 down. He’d carry $77,000 at 7% interest, or about $700 a month for 15 years. It needed $20,000 in repairs and would resell for $169,500 with owner financing after it’s fixed up. I borrowed the $30,000 down plus $20,000 in repairs plus an extra $20,000 for a total of $70,000 from a private lender. My lender got a first lien and the seller got a second lien. The seller also agreed to subordinate (stay in second position) to any new first loan on the property in the future. The terms of the first were 13% and 5 points with a 3 year balloon. Payments worked out to about $760 a month. The total monthly with the first and second mortgages totaled $1,460. Market rent was $1,395. I’d have a small negative cash flow but I’d walk away from the closing with $36,500 in cash which included my rehab money of $20,000 (less a couple thousand for closing costs.) I put the house on the market for “$169,500 fixed up, make offer as is. Owner can finance.” After 2 weeks I did not have a buyer so I began fixing up and spent $5,000 before finding my buyer. They agreed to buy for $160,000 on an “agreement for deed” if they could do the rest of the work as their down payment before moving in. They agreed to pay $1,300 a month and refinance within 2 years. To me it was like getting $15,000 down because that’s what I would’ve paid to finish the house. Some “real estate investment educators” say don’t over borrow. But I only owe $147,000 and I am collecting on a $160,000 note. I still have $13,000 coming to me. 3.) Over Borrow with No Bank Qualifying, Buy with owner Financing and Substitute other Equity as Collateral Case Study: On a recent postcard campaign (see “The Ultimate Direct Mail System for Buying Houses”) I bought five houses in six weeks. On the 5th house, the seller only owed $18,000 on a nice $170,000 house. He did not need all his cash but he insisted on getting $63,000 at closing. The $18,000 he owed would be paid off out of that. He also insisted on 6% interest on the money he carried back in a note. And he insisted on a price no less than $153,000. He’s getting 90% of retail value. That’s quite a fair price, isn’t it? Here’s what I could’ve done. Borrow $70,000 at 11% and 8 points, 15 year amortization with 3 year balloon. Loan would cover cash to seller, lender points and closing costs. My payments would be about $800 a month, leaving enough extra positive cash flow from rental income to give the seller a monthly payment on his equity. At a price of $153,000, he would have a second mortgage for $90,000. I’d owe $160,000 on a house to be sold for $179,500 with terms. But here’s what I did instead. I borrowed $123,000 from my private lender. Payments are about market rent, or $1,400. I gave seller his $63,000 cash, but I walked away at closing with $60,000 less closing costs. The seller agreed to have his $90,000 secured with five different second mortgages on five different houses… the five houses I just bought from the postcard campaign... including his. If I only used his house in the deal, I’d owe $213,000 and be upside down. So I offered his price for $153,000 with $63,000 down. I gave him 5 second mortgages each with no payments and a five year balloon. I agreed to the 6% interest but it would accumulate for 5 years with no payments. His $90,000 would grow to $121,000 by the time I paid him off. In essence, I was able to tap into the profits I just created in these 5 houses... equity at the high-end of each house’s “loan-to-value”… plus I got it at 6% interest, no bank qualifying, minimal closing costs, no discounting of my equity and no payments and I had him grant me the right to substitute equal or better collateral in case I resold any of those homes over the next five years! What would you do with an extra $60,000 in cash? 4. Close Only when you Find your Buyer If you’ve noticed in slow down in your housing market, or found it’s taking longer to get your houses occupied, then be more cautious and buy better. In fact, you can buy with no risk when you find the right type of house and motivated seller... Example: “I appreciate the fact that you’ll sell me your house for what’s owed plus $1,000 in moving money, but with the way things have been going, I cannot commit to taking over your loan until I line up my occupant. Your house has too much owed against it. Now, I do have a program to help homebuyers get into a house when they need some time before getting a bank loan. And 60% of the general public is in that position. This gives me a strong marketing advantage when I buy houses. I can offer to finance my buyer myself or rent the home until they close later. Therefore, I’ll agree to buy your house if you can give me some time to find a buyer. Once I do, I’ll give you your $1,000 and start making the loan payments, getting that debt off your back.” When they agree, I advertise the house with “Owner financing” or “No bank qualifying” or “Rent-to-own.” We get at least 3-5% down from a tenant buyer as a non-refundable purchase deposit. This works the same as option consideration on a lease option. If I’m selling for $179,500 then I’ll get at least $5,000 plus the 1st month’s rent. Then I can complete my deal with the seller, and enjoy the difference ($4,000) immediately. Be careful to use this only if the seller doesn’t care what you sell it for, or when they have already vacated the home. Sometimes I’ll have the seller show the house for me! You can also use this strategy if the seller’s payments are in default, and use the buyer’s money to cure the default. 5. Require the Seller to Pay you when Buying the House An important lesson here. For years I did not do this. I think it’s critical to always tell the seller what you are willing to do, even if (in your mind) it’s unlikely they would ever accept your offer. You’ll never know all their underlying motivation, so don’t make decisions for them. When you’re not excited about the deal, consider what price or terms would get you excited. Case Study: I had a couple call of my marketing. They owed $147,000 and wanted to sell for what they owed. I did comps and determined it was worth $147,000 and I could sell for $157,000 with easy terms. At the time I needed a minimum $20,000 spread between my buy price and my sell price. These days it’s $30,000 or 10%. I told them they owed too much, and thanks for calling, but there was nothing I could do. They called me back one year later after listing it for $159,500. It didn’t sell because it was overpriced to be sold retail but priced to cover commissions and closing costs. When they called the second time it was still the same situation. But this time I said “The only way I can buy your house is to take over your loan and have you come up with $10,000 in cash at closing. Are you in a position to do that?” Apparently they were going to raise the cash anyway to get the house sold through another agent at a lower price. The house was now vacant and they were getting desperate. They got a signature loan not secured by the house and brought $10,000 to closing one week later. Three weeks later I found a buyer with $13,000 to put down. When occupied, I had already collected $23,000 of my $20,000 spread! I knew I’d have to bring some money to closing once my new buyer refinanced down the road. But that was OK. I could have paid down the mortgage by $3,000 but decided to keep the cash. 6. (Bonus Strategy!) Simultaneously Buy and Sell for Cash Need cash to get started in real estate investing... or pay some bills? Find a deal and sell it the same day you buy it. No cash needed, no holding costs and no landlording. This is called flipping and yes, it’s legal. There are several ways to do this. I use this strategy only when a seller must have all cash, but more cash than I can raise using a hard money or private lender. When you sell a house for cash or new loan for full value, this is called retailing. I hate retailing. I prefer to be offering a great price or great terms. I need a marketing advantage to resell. Otherwise I’m not interested in the deal. I can still offer terms to a buyer who is getting a new loan by taking up to all my profit in a second mortgage. I’d be willing to do this rather than lose the deal. Recently a seller called me. Sometimes I get so many leads I don’t have time to call back everyone, as in this case. He called several times which forced me to respond. This is a lazy way of prescreening leads... but to works! His house had gone to foreclosure. In my state, he had a couple months to redeem the house by coming up with the foreclosure sale price in cash. I agreed to buy his interest (get the deed) and then look for a new buyer. I made no guarantees. He had nothing to lose. If successful, I’d get the first $10,000 in profit and then we’d split any profit over that. He agreed. He was about to get nothing. I placed a sign in the yard, ran a classified ad and added the house to our website. I said “owner can finance” since I’d take my profit in a note. Bottom line: neighbor bought the house with a new loan, did not ask me to carry a note so we got cashed out. I made $18,000 and the seller got $8,000. My only risk was the cost of marketing and a little time. I also created the equity by getting the second lien holder to take a huge discount. The bank was happy to get $4,000 for their $40,000 mortgage because they were about to be wiped out after the redemption period. I forgot to ask the first mortgage holder to discount! Remember, there’s no limit to the number of houses you can "invest in" when you buy and get cash at the same time. Flipping real estate is a buzz term that has come screaming into mainstream media in the last few years. Its growing popularity is evident by the magazine articles, TV shows, and Average Joe teams trying to break into the business. Is it easy? What is it? How does it work?
Flipping real estate simply means purchasing or acquiring a property then reselling it quickly while attempting to turn a profit on the sale. Flipping can be handled several different ways and when done properly, each of them can be very profitable for a real estate investor. Buy it, Fix it, Flip it Likely the most common form is the tried and true "fix and flip". This involves a real estate investor picking up a property at a discounted rate, doing the necessary work to get the property up to acceptable standards, and then selling the home on the market – generally to someone who will live in the property. This type of fix and flip can get you anywhere from $15k to $50k on a closure depending on the market and of course how good the bargain was on the home when you bought it. You can set yourself up for failure if you underestimate the cost for remodeling and repairs or do not consider the cost of a real estate agent when listing the property for sale. The Wholesale Flip The fix and flip is a very popular method of doing business, and that means there are a large number of real estate investors looking for remodel properties. If you can get a property at a relatively good bargain, you can turn around and immediately sell the home to a real estate investor who is willing to put all the work in and take the project the rest of the way. You can make several thousand in this manner on each sale. While the number is small, you can quickly see how it would add up after quickly reselling multiple houses in this manner. Buy it & Flip it "As Is" Fix up work is not for everyone, and some real estate investors want to quickly move a house without sinking money into a professional contractor. If a house is in sellable condition and requires little immediate maintenance work then you can consider just selling it as is. Even if a home is in poor condition, you can make a quick sale if the real estate market is in good shape and the property is in a transitioning neighborhood. Buy It, Refinance & Lease Instead of tossing the property for all cash right away, you can try and sell for terms. Once the remodel and refinishing is completed, refinance the property. Provided you were able to punch the math up right, you should not have any money tied up in the deal (or very little at least). You can turn around and sell the real estate investment on a lease, with option to buy. Any rent payment that you make from your renter (buyer, hopefully) can be used to handle the mortgage payments. This way, when the tenant goes for the option to purchase you'll end up reaping a larger profit – mainly because you don't have to pay a broker fee. There Is More Than One Way to Flip a House I've identified the ways to flip a property for virtually every real estate investing scenario. These methods all work extremely well, so it is only a matter of determining what works best for your real estate investment strategy and your overall goal. If you ask most real estate professionals (investors, brokers & agents etc.) what their number one business asset is you'll get a variety of answers. Some answers may include their office, their listings, their deals, private lender contacts, social networks, their agents or their marketing materials etc.
All of these are good answers but in this humble real estate entrepreneurs opinion - they would all be WRONG! It is my strong belief that an active buyers list is by the most valuable asset to have for your real estate business (when you think about it this probably holds true for any business). In fact, I believe a buyers list is the closest thing to a money machine as there is in the game of real estate. Let me give you a couple of examples illustrating my point. #1 Real Estate Business Asset - A Buyers List Earlier this week I had a former client call and tell me that he had a rehab property to sell. I had sold several of his properties for him in the past and so I was the first person he called. We came to terms and the very first thing I did, before even getting the property on the MLS or Craigslist, was I sent it to my own in-house buyers list. Here are the results:
Do you think having a strong and active buyers list could make a difference in a listing or investor presentation to a seller? You better believe it. How many other investors in your market do you think would be able to make that same claim? Not many I can assure you. This immediately makes it a no brainer for that seller to work for you. Here is another illustration of how valuable this asset can be to your business:
Absolutely there are! Find something that is a fit for your list and offer it out to them. In fact with this strategy you can make money with your list without selling them a home. Of course you need to take into account any rules, stipulations or disclosures you must make, but this is a great way to add revenue streams to your business and make money from an asset that you have already built. Some examples would be home warranties, lawn care, pest removal, radon, contractor services, credit repair services, property management,etc. If you aren't building a buyers list, what are you waiting for? Start building one today. If you have one keep building your list and your relationship with the list as well as trying to add some revenue streams. Q: I live in a market that's so hot that houses go on the market and get a close-to-full-price offer in less than a week. I can't buy properties here for less than full value, and no one is willing to carry terms, since there are thousands of qualified buyers looking for houses. Do I just wait for the market to slow down, or what? S.R, Philadelphia
A: We all live in the market you describe, and have for a long time. The National Association of Realtors has been reporting record-setting sales for three years; mortgage money is plentiful; anyone who wants to work is fully employed in the tightest labor market this century. These factors add up to enormous competition among potential homeowners for properties in nearly every price range. Competition drives up prices, and a "seller's market" results. Yet, at the same time, real estate investors are buying properties for pennies on the dollar, negotiating low money-down seller financing, and generally prospering along with everybody else. Why are others making deals when you aren't? I'd like to suggest that a large part of the reason might be that you're looking at the wrong properties, and don't have enough strategies in play for finding the right ones. Obviously, a seller who has a nice-looking house in a decent neighborhood and months to sell is not going to agree to your 70% offer or carry sweet financing terms. Why should they? Your competition for this type of property—the homeowner wannabe—is ALWAYS going to outbid you, because they buy for different reasons (school system, aesthetics, love of the zip code) than you do. These sellers are always the most readily identifiable, since they generally list with agents, or at least put a "For Sale by Owner" sign in the yard. However, the obvious sellers are not the ones that the professional real estate investor in this type of market looks to deal with. Despite the good economic times, and despite the fact that many properties are selling for 100% or more of asking price within 30 days, there are still sellers out there with problems that make it impossible to sell quickly (or at least quickly enough to meet the seller's needs!) or for full price. It's these sellers that you need to work with, because, in solving their problems, you will be able to make a profit from their properties. Don't expect to find these folks through the multiple listing service. While the MLS is still my favorite way to find junker properties to flip, anything in half-decent shape is being aggressively marketed by agents to homeowner and investor clients. Instead, run ads. Distribute flyers. Write letters to people who have estate properties. Find ways to reach these sellers and let them know that you can help them. My last 4 deals involved 2 estates, a divorce, and a frustrated landlord, and were purchased via a loan assumption, a land contract, and two cash offers at 60% of value. Three of the 4 came from calls on an ad in the paper; the fourth was a referral from another investor. Investors in my market— even those with years of experience—have complained to me about the same situation you describe. Yet they're still making deals. So maybe it's a little tougher to find cooperative sellers than it was 10 years ago; as in every business, you just adapt your methods to the market. And by the way, things are slowing down. Interest rates are up, mortgage brokers are laying off salespeople, foreclosure rates are accelerating, and every major lender is opening a "short sale" department to negotiate lower payoffs on defaulted mortgages. There—that's all the hint I'm giving you. Now get out there and make some deals! Do you have any mutual fund in your portfolio giving you a 1000% return on your investment? I didn't mistakenly enter the wrong figure. That is one-thousand percent and in addition what I'm talking about is for ONE month so annualized that's... well, I'll let all the bean counters figure that out. It is very attainable for that 10:1 return on your investment with prudent selection of where to place those marketing dollars that end results in truly great deals coming your way.
So many people are flocking to real estate seeking higher returns on their investments in recent years and especially since '00. Why? Well, the big fat 401K's have turned into 201K's and many people realized that really what people had banked on being there financially became all of a sudden money evaporating with every downturn of the stock market. So, where are people now putting their money for investments? Real estate! Real estate has been a time-tested vehicle for short and long-term wealth and income and that was LONG before the .com and tech stock busts. Ok, probably nothing you don't know and haven't heard of right? So, now that we probably all know the actual and potential income for the average "Joe" through real estate the question is always "how do I get there?". There are so many, many ways to profit in real estate and I'm never surprised from all those I meet at my speaking engagements as well as online students who make BIG money in real estate. I personally take notes on about successful characteristics of some that I would like to share with you:
With some of the general traits I've shared with you for fellow full-time real estate investors along with the absolute need for you to take control of your financial destiny means I've saved the biggest trait for last. Probably for many of you this may not be earth-shattering but the truth is that they all have a bona-fide marketing program fit to their budget, experience, short-term and long-term goals in real estate, coinciding with their profit-centered techniques. Many stockbrokers make their living in speculating on undervalued stock and buying them in bulk. Corporate purchasing department executives will have their income tied into being able to make large gross profit buys on items their company may retail. Its all called the art of a deal and it simply doesn't matter which industry one is focused in when you're talking about moving a commodity its about being able to buy (and/or control) at the lowest price and sell at highest price possible. Difference in the middle is called a profit and is our motto in real estate: FIND A GREAT DEAL!!! You may know 1002 creative ways to purchase and/or control properties but if its not a truly great deal to begin with then you only have a burden. So in having a system that locates truly motivated sellers to contact you on a consistent basis is what our whole business is about. It all starts with marketing and an investment that you feel comfortable with. If you're not satisfied with the returns on your investment and you're in real estate or considering to be aggressive in real estate, then divert those funds into launching your own marketing IPO! Being able to control your own financial destiny if you're a competent real estate investor will result in what many of us already know….marketing is the best return on your investment!! Good hunting as luck has absolutely nothing to do with it. You may have jumped into real estate investing with one eye on your dreams and the other on your potential to become fabulously wealthy in a very short time. While it's true that it's possible to become the richest person you know, the reality is that it will probably take time to happen. Another reality you may not have considered is that as a real estate investor, you also wear another hat: professional marketer. If you can't devise a winning online and offline marketing effort, your dreams will be largely unrealized and your destiny will be held hostage by unfulfilled potential.
Offline Marketing There are a number of offline marketing strategies you can employ to encourage possible buyers and sellers of residential real estate to contact you.Some of the most common ones are: Bandit signs Radio & television ads Brochures, flyers, and billboard signs However, to turn the corner with your marketing, you can really ramp up your offline marketing strategies by establishing yourself as a noted real estate expert within your local community. There are three great strategies for doing this: Local Media Interviews – The best way of getting your name in front of News Directors and Program Directors is by issuing pertinent press releases. They need to be well-written and they need to discuss newsworthy issues of importance to their viewers. Once you've begun to establish yourself as an expert in your field your phone will ring more regularly. These media appearances can increase your exposure and improve your name recognition which can result in increased investing deals because of your perceived status as an expert. Many people with whom you'll be trying to buy properties from or sell properties to will know your name – and be more willing to trust you – as a result of your prominence within your local community. Seminars – Giving free seminars in a real estate-related niche can increase the size of your portfolio. As a residential real estate investor, you could give a free seminar about topics as wide-ranging as "How to Sell Your House for Your Price in a Down Market" to "How to Buy a House with Bad Credit." The key here isn’t to directly market yourself. Your goal is to come across much like a financial planner. Show your clients what you know – and how you can help them – and they'll gladly show you their money later on. Public Speaking – This may not seem like a natural offline marketing strategy, but it has potential you may not have considered. Most people aren't natural public speakers; if this identifies you, don't despair. Join your local Toastmasters club and learn the fine art of public speaking. While you're learning, you'll be exposed to business and community leaders (many with cash) who would be prime candidates as potential investing partners or sources of private cash for long term investments or down payment and rehab funds. Online Marketing Online marketing strategies are like gifts that keep on giving because the overall costs are reduced. This allows you to cast a wider net and increase the area in which you invest. In addition, you'll be able to build buyers lists and prequalify prospects without an investment of time, which is one of your most precious commodities. Effectively reaching potential clients with online strategies increasingly demands that you have a website of your own, in order to prescreen prospects, build buyers lists, and to gather other vital information. None of these efforts mean a thing if you can't figure out how to drive Internet traffic to your website. Your online efforts will generally revolve around two basic strategies: PPC – Pay Per Click campaigns are a good way of getting visitors to your real estate investing website. However, if you don't carefully analyze your target demographic and get crystal clear about which words and phrases you wish to bid on, your expenses could explode and you'll have nothing to show for it. Google and Yahoo have helpful analytic tools that can help you determine what words and phrases make the most sense for driving paid traffic to your website. In addition, they also offer the ability to target traffic based upon geographic location of potential clients, so your ads would only be seen by those most likely to be good targets. Organic Placement – This form of marketing won't cost you a penny, but the competition for top ranking can be fierce. The key to achieving top ranking is by having content on your website that is relevant to the needs of your site's visitors. While SEO can play a role in your search engine rankings, you'll have greater success by ensuring that your website has great content. Resources related to real estate investing – articles and ebooks about wholesaling, short sales, rent to own, or whatever areas in which you concentrate, can gain you improved ranking by the search engines. Concentrate on relevant, high quality written content and you'll be rewarded with traffic. The increased volume of traffic will mean you'll gain more prospects, which will generally translate into more buyers and sellers for your residential properties. While your online and offline marketing efforts will differ, in many cases you can tie them together for maximum effect. For instance, any offline marketing materials will have physical contact information. If you can include a catchy and memorable web address, you’ll increase your exposure to potential clients while reducing the legwork necessary to pre-sell them on doing business with you. Marketing your real estate investing business may seem like a waste of time and effort, but by paying close attention to these efforts you can win over potential clients, increase the size of your portfolio, and move yourself closer to realizing your dreams. If you’re not familiar with the marketing strategies you want to employ or you’re at all uncomfortable with your knowledge of specific real estate investing techniques, you should consider finding a good mentor that specializes in the type of investing in which you’re most interested. Their experience and guidance can set your mind at ease and their wise counsel can help get you on your way. There are no magic bullets in marketing, but I have developed a system which comes pretty darn close. I reported in the last issue of this eLetter about my new postcard campaign. Here's an update:
I mailed 10,000 oversized postcards to one zip code. I saturated every home with my message. The total cost was less than $3,000. We received about 35 calls, only .35% response. But I bought 5 houses out of 35 leads on the first mailing! The response rate should remain the same or improve as I remail to the same neighborhoods, allowing them to see my message multiple times, giving my self increased credibility. Plus some the postcards will be saved, and I'll get more calls from this initial mailing down the road. I bought one out of 7 houses for sell. I usually buy one out of 10 to 15. The increase in closing ratio, I believe, was a result of targeting the right neighborhoods and getting my entire sales message (my famous "advertorial") in their hand... and my new headline. These sellers were much more prescreened than if that called on a sign, classified ad or a regular smaller size postcard. ** $145,400 IN CASH AND EQUITY IN ONLY 6 WEEKS FOR $3,000 ** Here are the actual results: House #1: This house valued at $134,900 fixed up. It needs carpet, paint and some trim items. Seller owed $89,000 plus $6,000 in back payments. I purchased for amount owed (subject to) plus $500, or $95,500. We have it under contract with a tenant/buyer for $132,000 "as is". We got our buyer in with the first month's rent, $3,500 non-refundable purchase plus some repairs to be done prior to occupancy. We have a positive cash flow. Equity gained: $35,500 House #2: Seller owed $106,000 plus several back payments. I bought for what the seller owed (subject to), about $109,000 with $3,000 down. The seller used the money down to get the loan current. House needed carpet, paint, sod in front yard, roof (unexpected.oops!) and some misc. repairs. The house did not sell quickly "as is" so we are fixing it up. It is offered for sale for $144,500 fixed up. The repair costs are $12,000. Because of roof, this is a tight deal on a fixer upper. Equity gained: $23,900 House #3: Seller owed $94,000 on a first, $10,000 on a second and $6,000 in arrears. We purchase for the $110,000 owed subject to. After repaired value is $159,500. It needs $15,000 in repairs. Currently being offered at the after fixed up price, "accepting offers as is". We made up the back payments and paid off second with cash generated from buying house #5 below. Has not sold as is yet so we are about to rehab. Equity gained: $34,500 House #4: This house is in great shape and valued at $157,500 with terms. We took over a nice $110,000 first mortgage subject to, put $2,000 down and the owner carried back $20,000 with no payments or interest, due in 5 years. We held a "round robin" open house for one hour and found a tenant buyer with $5,000 down plus the first month's rent. We had it cleaned and the carpet stretched. We also spent $500 fixing up the front yard. Because of the $20,000 (deferred down payment," we have a nice positive cash flow. Equity gained: $25,000 House #5: Valued at $165,000-$170,000. It is on the market for $179,500 with terms. My office may have sold it yesterday for $10,000 down to a tenant/buyer. House is in great shape, nice neighborhood. Owner bought for daughter and it had been vacant for 4 months without being marketed. He owed $18,000 on a first mortgage. I offered him $63,000 cash and $90,000 in 5 second mortgages secured by 5 different properties including his house, 3 of the houses above, and one of my "keeper" rental properties. Terms on his equity is 6% accumulated interest, no payments, 5 year call and the right to substitute collateral. He is a retired military officer and did not need income but wanted interest on his equity. I got a new hard money loan for $123,000 at 11% and walked away from the closing table with $60,000 cash(!) less closing costs. Equity gained: $26,500 Total equity gained on 5 houses: $145,400 Cost of mailing: $3,000 (Better than the stock market?) The cost per deal for marketing is $600 per house, higher than my average $350. But I spoke to less sellers, saw less houses and can EASILY repeat as often as I want, anywhere in the country! How much thought do you really put into the creation of your business cards? I'll admit when I first started in this business I didn't know diddly squat about marketing and I created boring business cards like everyone else. I had my company name, phone, address, email and website--that was it.
Luckily I hung around some pretty smart fellows and quickly learned the correct way to use business cards. First, I recommend having two different types of business cards. The first one is going to be a very professional card that you can hand out to sellers. This card is going to be the closest thing you have to a "boring" business card but there are still a few ways you're going to make it stand out. Professional Cards On the front of the card put some type of catchy slogan so that sellers know that you're a real estate investor. Such as "we provide real estate solutions" or "we will buy your house in 30 days or less". And then on the back of the card I would give the sellers a reason to pick up the phone and call you. What reason should you give them? The most reliable reason there is: The Free Special Report. Here's what I would do: On the back have it say "Call 555-555-5555 today to get a FREE copy of our amazing Special Report "How To Sell Your House in 11 Days Or Less No Matter Your Current Financial Situation". And then I would go on to say. "And if you happen to own rental property, make sure to ask for our FREE Special Report "The Five Little-Known Ways to Eliminate Tenant Hassles Forever. Call 555-555-5555 to get both of these reports today with no-obligation whatsoever." Right there you have a turnkey "professional" business card. All you have to do is "cut and paste" the above information and you will have a better and more unique card than 99% of real estate investors. Off the Wall Marketing Cards Now, on to the second business card you're going to have. This is where you can get crazy and let your imagination run wild. This card can be ugly and doesn't have to look professional at all. You will want to make this card bright pink, bright orange or bright yellow. You can use big lettering to let the world know that "WE BUY HOUSES AND CHARGE NO FEES". Of course, on this card you will still want to offer free reports on the back. And don't forget, these cards are for leaving at the gas station, dry cleaners and tacking up on bulletin boards. Do anything you can to have these cards attract attention. What I want you to do is pull out your current business card(s). How does it look? Does it offer any reason to give you a call? Does it suck? Or is it awesome and you don't need to change a thing. If your card needs a few changes go to vistaprint.com and make up some new cards. Business cards don't cost much, so don't be cheap about this. In fact, business cards can be one of the best investments you make if you get a $10,000 deal off a 5 cent card. And to increase your chances of getting that deal, you should play the "business card game" with yourself. Every day, you should promise yourself to hand out five business cards or tack up five business cards---and you can't come home until you do. Getting 25 cards a week into other people's hands (100 per month) will put you on the fast track to deals, money and less time spent working for "THE MAN". With certain verified reports of click through rates being down on ads, or older generations clicking more frequently than younger more mobile ones…it could appear that agents may just be wasting their time.
Yet, with a Facebook network of over 800 million active people worldwide, wouldn't it only make sense that despite these negative statistics, there is still a ton of opportunity for real estate professionals to have a positive ROI on both time and money when ideas are executed properly? Our experience says so. I stumbled across this article regarding Facebook real estate marketing by Inman News, which went into some fine details about how real estate agents and investors can effectively start to follow up with those "likes", in order to build rapport, gain exposure, and future business. And truthfully, regardless of whether you attract "likes" or leads, the biggest variable to your success is in how you choose to follow up. Now, I would like to point out that anytime marketers begin to place too much emphasis on any one strategy, they are destined for failure. This doesn't only refer to using actual platforms such as Facebook, YouTube, or Twitter, but also the methods they implement in order to generate those leads. So instead of choosing to utilize a "one size fits all" plan for your Facebook real estate marketing, take time to test various strategies in order to find processes that produce the greatest results. 4 Powerful Techniques to Produce More “Likes” & Leads The disappearing "like" gate: Here's our first example of a tactic you can use to draw in more "likes" for your page. One template will display about 40 or so video tutorials that quickly fade away from view. If the user wants to access more of the content, they need to first "like" it. Send traffic directly to a squeeze page: This is pretty clear cut. Very simply, direct all leads that are produced from your Facebook real estate marketing ads straight to one of your landing pages that you host. Find the copy and makeup that works best for you to ensure higher conversion rates. Property search: We have mainly tested this in the foreclosure niche, and it has worked incredibly well. When a visitor lands on your Facebook page, they will be instructed to "like" your content in order to see the most recent foreclosure results. Facebook hosted squeeze: Another idea you can try is known as the Facebook squeeze. In other words, offer a high quality report, training tutorials, discounted future services (such as a free inspection, deduction on closing costs, and so on), etc. on your landing tab with an integrated opt in form. Of course, this is not an exhaustive list, but it gives you some ideas that you can start to use for your Facebook real estate marketing. Each niche and local market will be a little different, so be sure to continually test and tweak. As you can see from the above examples, there are various ways to produce either "likes" or leads with Facebook. However, in order to ensure that you convert these into future business opportunities, follow up is the most important ingredient. |
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February 2017
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