Real Deal REInvestor Network

From one of my previous blog site:

What Is a Motivated Seller?

I am sure we all heard the phrase motivated seller one time or another.  He/She  is the real estate owner who is so anxious to sell that he/she’ll be very flexible with his/her price or terms–or both.  Success in real estate investment depends on finding motivated sellers and helping them
with their problems. The person who buys from motivated  sellers ends up paying too much for properties and at too high an interest rate, that’s certainly no way to make money in real estate investing business.  Motivated  sellers come in two varieties:  wholesale and retail.

A wholesale motivated seller is willing to discount his price substantially in order to sell his property quickly.  A retail motivated seller may not discount his price, but he is very flexible in the terms he will accept.  Both varieties of motivated sellers are good for the investor.  But it’s important to know which variety you’ve got on your hands because each requires different techniques and strategies.  To complicate things further, some motivated sellers are a combination of the two, being a little flexible on price and a little flexible on terms, but not too extreme in  either direction.

Real Estate investing is relationship business after all.  Too many people are focusing on techniques,  looking for certain type of properties, but I believe it is rather looking into the SITUATION to solve applying right method, rather than finding property itself, then ask yourself.  “What effect will this have on me, as a new buyer?”

You can see why it is vital to know what the seller’s motivation is and if it will have any effect on you as a new owner.  If it is a problem you will inherit, it is important to know, in advance, whether you can correct it, how to correct it, and how much it will cost.

Marketing that Stands Out to Those in Pre-foreclosure

People in pre-foreclosure get a lot of mail. You’re marketing needs to stand out to those in pre-foreclosure.  There is a lis pendens that gets filed and anybody and their mother can find out that these people are behind on their mortgage payments.   Much of this mail ends up piled up on their kitchen tables unopened, along with their mortgage and every other bill. If you’ve never really seen that happen and sat down with somebody who’s like an ostrich with their head stuck in the sand, then you’ve never dealt with most pre-foreclosure sellers.

Many of them are living in denial, thinking that God is going to sweep in and save them.  Although that can happen, it’s likely that any solution they find for their current financial difficulty that’s long-term and enables them to get on with their lives is going to come from their own efforts, because God helps those who help themselves. So put yourself in their shoes, they’re getting a lot of messages.  

They have a whole truckload of stuff they’ve received, some from vulture investors- that’s what I like to call them.  It basically says, “Hey! I heard your mother died…let me buy her house,” and that’s the kind of tone these people send in their marketing messages which is stupid.  

They’re also getting messages from people that are too corporate.  They’re like, “We buy houses out of Jacksonville, FL and have been serving the community for 42 years or ever since Moses came down from the bulrushes.”  That does work but it ain’t the best way to position your marketing in this market either.  

You need to connect with them as human beings first.  Show them that you care.  Stand out from the other marketing you know they’re receiving. 

   A good tip to find out the type of marketing they’re receiving is to sit down with a pre-foreclosure seller and after you close the deal to buy their house that you’re then going to flip and resell to someone else as a wholesaler or a subject-to buyer, just ask them. “You probably don’t need all that marketing material that you’ve received from everybody else trying to buy your house, would you mind if I take it and burn it for you?” 

They may laugh at you, but before you burn it, copy all of it and look at what your competitors are sending out into the marketplace.  Most of it is crap, and you want to make sure that you’re using marketing that stands out to those in pre-foreclosure.

With that being said, what do you do? You want to use what works for that market. The medium in the instance of direct mail letters is less important than the market, the person who’s receiving it.  They are human beings, and the message should clearly identify you as someone who believes in the things I just told you—that they are a person that deserves solutions. 

   How do you do that? What are some cool ways to do that? There are things people have tried, but let me tell you about something I’ve tried with success.  Include a scratch-off lottery ticket or card. Before you tell me that doesn’t sound like a good investment plan, I don’t play lottery.  

   I don’t buy lottery tickets, although my dad, God love him, is completely addicted to them and every once, in a while wins a few thousand dollars. He’s convinced that one day he’s going to win the multi-million dollar mega millions power ball jackpot…and he may but that’s not exactly a retirement plan. 

   I use this tactic, not to tell people they should play the lottery to get out of their problems, but what you’re telling them in your message is something like this: “Dear Home owner, it’s come to my attention that you may have a financial difficulty in your family and I wanted to do something to let you know I care, I want to help and I have solutions for you. But, in case you don’t get a chance to call me, I’ve included a lottery ticket for you that will perhaps win you a million dollars. 

   You can say in your message, “Hopefully, this lottery ticket and the potential winnings solves your financial problems, but if it doesn’t I’d still like to buy your house.”

Why does this work and stand out as a marketing tactic when approaching pre-foreclosure sellers? It’s very simple, very clean, showing them that you care about them as a person, that you understand they have a financial difficulty, that you are looking also to show them solutions and that you’re a human being.  If that isn’t marketing that stands out to those in pre-foreclosure, I don’t know what is.

Quite honestly, who else ever sent them a gift? Most companies don’t think to send you a gift and certainly, not something as funny as a lottery ticket. So, if no one in your local area is sending out lottery tickets to pre-foreclosure sellers who all get the same list from the local courthouse, then you’ll stand out by doing something unique like that. 

Are there other ways you can do it for that market with that medium?  Sure, and maybe I’ll write about some more of the later, but the important thing is to use to not get lost in the pile.  Don’t blend in.  Use marketing that stands out to those in pre-foreclosure or whoever your target market may be, and you stand a chance of getting the call back…and thus, getting the business from your competitors.

We are in the process of adding a new tool to our business--mortgage assignments. A great way to do deals in a win-win result for unsellable sellers to unbuyable buyers.
We have been learning various aspects of this strategy from Phill Grove and his team.
Truly a very exciting opportunity.
Love to hear your experience in this area or any comments you might have.

Wholesaling houses is the easiest and quickest way to make quick cash and start your real estate investing career.  If you've been on the moon the past 5 years while this strategy has gained popularity, wholesaling involves finding a motivated seller, negotiating a rock bottom price with them, signing a contract, and then (before closing on the property) assigning that contract to another investor (a rehabber or landlord) for a fee, typically anywhere from $2k to $20k or more depending on how good the deal is.  You don't need any money to do this (aside from marketing).  I had $1.50 in my bank account the day i signed my first contract.

Keys to wholesaling houses:

1) You need a steady stream of motivated sellers contacting you.

2) You need to build a buyers list of Cash or Well Qualified investors who want to buy your deals.

3) Get Paid.

It's pretty simple, but there are definitely steps you need to take, people you need to network and connect with, certain contracts to use and things to avoid. 

Getting Motivated Sellers to Contact You:

Here are some ways to get your phone ringing...

• bandit signs (18" x 24" yellow or white corrugated plastic) - hand write them - have them say "I'll Buy Your House Right Now! CASH! and your phone number or 800 number - put them up on fridays in high traffic areas of your city at a stop sign or light - you can opt to use stakes or staple them high on telephone poles - some suggest you pick them back up on sunday, others suggest to let them ride....your call.  www.signwarehouse.com

• absentee owner post cards - send these out to absentee owners who might be looking to sell (maybe they have bad tenants or need some quick cash - you never know).  you can get any type of list your looking for at www.listsource.com or www.realquest.com.  - the postcard should say something like 'Hey, i noticed you don't live at "property address".  I'm contacting you to see if you'd be interested in selling.  I have cash and can close in 2 weeks.  give me call"

• probate mailers (my personal favorite) - an estate enters probate when someone has died and an executor is appointed to disperse any assets held in the estate or mandated by the will.   You can go to the probate office at your county courthouse and ask to see current probate cases (before you waste your gas, check to see if your county's probate records are available online).   In these cases you'll be looking for this pertinent information:  decedent, property address of decedent, executor/administrator/personal rep and their address, attorney (if there is one) and their address.  Send a respectful letter to the executor expressing your condolences and letting them know you can take the decedents property (which they probably don't want anyway) off their hands and get them cash for it in order to settle the estate.  You may also want to send a letter to the attorney who has been assigned to the case.  Let them know who you are, what you do and how you can benefit their clients, because you want to GIVE first, then receive.  If you'd like more information on probate investing go to www.probatesbypreston.com

• Expired MLS listings - You can obtain Expired MLS listings from your realtor.  Don't have one?  Just start calling local brokers until you find one that is 'investor friendly' and narrow down a top dog you'd like to be friends with....it's even better if they handle a lot of REO's too.  Maintain a partnership with them, referring business back and forth (that way you both grow, learn and make money)  and soon it will become second nature to ask them for expired listings.

• Local Newspapers  and Craigslist - don't forget about that old dinosaur, your local newspaper...yes people still put their houses in there....look for the FSBO's or Investment properties.  www.Craigslist.org is also a great way to find seller leads.  Just reply to the for sale by owner postings in the real estate section.

These are just a few quality ways to get leads coming in like a flood.  REMEMBER, consistency is the key...so whatever you decide to do....STICK TO IT.  Don't just send out 30 letters or postcards and wait....Keep doing it over and over again, only then will you get good results.

Next  Time I will discuss getting motivated buyers to contact you...

Be Free.

-Adam Walker
Millionaire in Training
www.MMMChallenge.com
www.TheKingofTheCity.com
www.RealDealLouisville.com

I think we've all heard stories of shady investors who take home sellers for a ride and leave the sellers worse off than they were before.  

One time, I got a call from a former homeowner in Colorado Springs who had signed the deed of his house to an investor and let the investor take over the payments on his mortgage.  All seemed well until the market started tanking and the investor stopped making payments on the gentleman's mortgage, even though he was still collecting rent from the tenant.  Then, the first investor "sold" the house to another investor.  The second investor also refused to make payments on the gentleman's mortgage, though he was collecting rent.  To make matters worse, the tenants  had trashed the property, going so far as to smash in the garage door.  Because the homeowner had signed over the deed to his property, he felt as if he had no recourse.  Oh!  I forgot to tell you that the second investor told the old man that he was going to wait until the bank took the house in foreclosure and buy it on the courthouse steps.  Nothing like adding insult to injury.  

There wasn't much I could do for the gentleman, besides listening to his story and offering this advice:  The people who had purchased his house, collected rent from tenants and not paid the rent to the mortgage company were committing something called Equity Skimming.  In the State of Colorado, Equity Skimming is a crime -- not just a misdemeanor either, it's a felony.  I suggested that he go to the D.A.s office and try to get the bank's attorneys to do the same thing.  

That unethical and unkind investor deserved to have charges filed against him.  No one should do business like that.  Not only does it give a bad name to all the ethical investors out there, it's flat out wrong.

And here is some advice that I can offer you if you need to sell your house, but can't do it through traditional channels.  
1.  It's okay to let an investor take over payments of your house if you have the right protections in place.
2.  Make sure that the deed to your house is placed in escrow and that if the investor defaults on the mortgage, the deed reverts back to you, the homeowner.
3.  Rather than letting someone take over your mortgage, do a lease with the option for them to purchase the house. 
4.  If the investor insists that you sign over the deed to your house without any real protection in place, show that person the door.  

Now that I've told you the bad side, let me share why letting an ethical investor take over your mortgage can be a very good thing.  
1.  It is a great relief financially and allows you to move on with your life.
2.  The ethical investor will ensure that your mortgage is paid in a timely manner.
3.  The house will be well-maintained because the right investor will have processes in place to ensure that it is.
4.  It will help your credit report to have the mortgage paid in a timely manner.
5.  Someone who loves and can afford your old house will be living there.
6.  Letting the investor take over your mortgage payments saves all sorts of closing costs, allowing the investor to pay you more for your house than they could if they had to pay all cash.

The ethical investor has a big stake in making sure that your mortgage payments are made and that the house is well maintained.  After all the house they just purchased from you is an investment in their future.  

I hope this article helps you to protect yourself as well as to help you understand why you can and should work with ethical real estate investors to sell your house.

Christy Mellott
www.mmmchallenge.com
www.realdealcolorado.com 

What is the best way to handle seller's calls from your marketing campaign?

All leads are not equal, and all phone calls are not leads.

Once you have your marketing campaign going,  there is no doubt that your phone will start ringing.
This can be overwhelming sometimes, even to experienced investors. You have to manage to pre-screen each and every seller that calls. If you miss some, you may miss the one that could bring you a good deal.

Here are a few options.

Take the Calls Yourself

For some people this is the only option, specially when you are starting your business and/or you are on a tight budget and can't afford to outsource this task to professional answering service. You must be prepared to answer each call, and gather all necessary information that will help you make the decision to move forward or not with that lead.

Use a Professional Answering Service

This is the most expensive of the choices. When your marketing efforts start to giving you the return you desire (getting the sellers to call), you can easily expect to receive a great number of calls.  And again you will have to be ready to answer and pre-screen the sellers . If you can, outsource this task to a professional answering service. They will handle all the calls and forward all of the leads to your email inbox. You can handle them from there.

Use a Pre-Recorded Message

A pre-recorded message that will tell the seller about you, what you do for a living and a presentation of some of the benefits you  offer when they choose to work with you. They get pre-sold on working with you before they talk to you. You can explain a little about the process and them give another number to speak with you directly and/or your website address.
Doing this they have pre-screened themselves and will get the non-deals sellers to filter THEMSELVES out before we ever need to talk to them.

I'm a wholesaler so I  need to buy houses very inexpensively so my buyers get a great deal.  I am in a real estate market where the MLS is very competitive.  Not only are investors bidding against each other, so are landlords and retail buyers.  Many well-priced listings will have 20 offers on them the day they hit the street.

In this market you have to have a way to find sellers that not everyone uses, so you don't have to worry about competition.  I have tried bus benches.  I had a dozen of them for a year on very busy streets in areas that I wanted to invest in, but they don't even get me one call a month.  That didn't work.  I tried pre-printed bandit signs and got a few calls, but there were no good leads that came of it.  One was close.  I tried magnets on my cars.  That didn't really work out very well either, though I did get one good call once.

So far, the best responses I have gotten have been from doing mailings and from direct referrals.   When I do a postcard mailing to absentee owners, I can expect to get between 1 and 2% of the people who I send it to to raise their hands and leave a message with my answering service to let me know they want to talk about selling their property.

I use a very simple white postcard with copy on both sides.  My first mailing was to 517 people and I got one deal out of it.  My next mailing was to 1045 people and I am still calling back the people who want to sell.  I will only do deals that are a win for everyone.  Luckily, there are so many different ways to structure a deal that I can offer many ways for the sellers to win.

Direct referrals come from talking about what you do and being excited about it.  I have 3 houses under contract this year because of direct referrals.   These are all short sales -- basically deals where you can name your own price!  They take longer and have more moving parts, but can be very lucrative and again, are a win for all involved.

Now, go get some seller to raise their hands and buy a house!

Christy Mellott
Millionaire in Training, MMMChallenge.com
www.realdealcolorado.com 

The most  important aspect of marketing is letting potential customers know who you are.
In order to buy from you(your product or service) potential customers need to know you exist.
For us, Real Estate Investors, we are talking about genarating Seller Leads. And most specifically MOTIVATED Seller Leads.

Real Estate Investors need to communicate efficiently to the public and to motivated sellers. You(Investor) need to be clear on what you do and how it will benefit them(sellers).
When creating your marketing materials (business cards, “we buy houses” signs, direct mail...) make sure that, what you are going to say will attract motivated sellers and be clear on what’s in it for them.

You want to show your customers(sellers) that your business is different than your competitors. You must tell the public how you stand out above the others.
Even if you are offering the same product, you have to find other ways to stand out from the competition, like offering extra options and solutions for their problem.

You have many options when it comes to motivated seller lead generation marketing. You should start by writing a real estate marketing strategy, or Marketing Plan. Ideas that will generate leads, what types of marketing you will be using, when it will be to put into action, a tracking system, a follow up plan, how often it will be done again.
Take time to study and understand your market and how you will contact the sellers that will need your help.

Real estate lead marketing doesn't have to be expensive; it just has to be efficient and work.

Here  are a few techniques

Lead Generation Service

For most investors, it is a great idea to use a real estate lead generation service. They usually charge a monthly fee and it will get you quality leads in your area wich will be emailed to you in a regular basis. This is a very effective marketing solution and allows the investor more time to focus on closing deals.

Advertisements

One of the most basic ways to get people to call you when they need to sell their properties. Classified ads in the newspaper, large newspaper display ads, flyers, bandit signs...

Advertise Online

Online ads are great for attracting the attention of motivated sellers. Other then your web site, you can advertise in many places like : craigslist.com, backpage.com, kijiji.com, postlets.com, and many others.

Other Opportunities

Referrals by your clients. Word of mouth is the cheapest way to advertise your real estate business. When you take care of your customers with  professionalism, offer real solutions for their problems and most important, resolve their needs, they will tell others. A positive feedback and a referral with your contact information will have more people calling you when they are motivated to sell.
Always have your business cards with you. Hand out at every opportunity and  introduce yourself to new people as a Real Estate Investor.

Again. You don't have to spend a ton of money in marketing to make money, it only has to be effective. Make a plan, study your market and choose wisely the option that fits your goals.

Financing Equity (Sellers as Partners)
The reason a seller will stay in your deal is because this is a deal that they already know and like—it’s a deal they already bought. They own it already; so they know it’s a good deal and you don’t have to convince them of that. Treating Capital Gain If a seller who currently owns the property has to be convinced that this is a good deal, then you missed something.
It helps to reduce or even eliminate capital gain when the seller stays in the deal because when you contribute equity to a partnership, that entity will own a piece of real estate.
That’s a nontaxable event—not a swap or a 1031. It’s allowed by a Section 541, IRS code, and it says, “When you make a contribution of a property to a partnership in return for an interest in that partnership, that is a non taxable event.”
You literally pay no tax on the money in the deal. If you take cash out of the equity contribution, that cash is taxable. For instance, if the ‘Me and You’ LLC is going to own some property together, so you contribute half your equity to the partnership. The other half you are receiving in cash is considered by the IRS as taxable capital gains.
Even though this is not an installment sale, the tax is figured on your half exactly the same way as it’s figured on an installment. The first payment you receive from an installment sale is taxable, but the dividends you receive from that point on are not. They are ordinary income or dividend income. Then sometime later, when you sell this property again, you will accrue another capital gain for that half of the deal.
So, you’ll receive a large portion now and more income over the years, while acquiring the remainder later. However, when you initially contribute your equity to that partnership, it’s not as if you sold the deal and paid half of it back. The half you are leaving in the deal is not taxable.

When negotiating a price, weather you’re buying or selling, it is important to understand what the other person really wants as well as what they really need. You need to hear their story. I believe this is key to negotiating. Usually what happens is they tell you one thing but in reality they mean another. I’m not saying they’re lying. They may be just calling your bluff. For example, they may say my absolute bottom line is $190K when in reality they will settle for less. Sometimes they don’t even realize what they want. They may want that 190k but what they really want even more is to close by a certain date to avoid carrying two mortgages. In a case like this the seller is more likely to accept an offer below 190k if you can close before they have to carry both mortgages. That’s why it’s important to hear their story before you discuss an offer. One important rule of negotiations is never mention a price first. The saying goes the first person to mention a price loses. If the seller of that property was asking 190k and you thought it would work for you at 150k and offered them the 150k and they accepted, you think you got a great deal, right? Well maybe you did, but what if you asked the seller what their absolute bottom line was and they said 140k? You just made another 10 grand without doing much of anything. It may take a few times before they came down to 140k but you still wait for them to give you their FINAL price before you counter again or walk away. The best negotiations are when both sides achieve what they want. Maybe in this scenario the seller didn’t get all the money he wanted but he did get the closing date he wanted and avoided carrying two mortgages. You may not always be able to make a deal work for you financially if you give the other party what they want but if you understand and give them what they need you have the opportunity for a win-win deal.