Many people who are looking to get involved in real estate investing often wonder how it is that they should go about finding the deals. Very often, when you are trying to do "creative" deals that require no money down or if you have credit problems, the issue of finding a homeowner willing to be flexible is essential. But how do you find these flexible homeowners? How can you find that "needle in the haystack", that seller who is truly motivated to sell and ready to listen to a creative offer?
A lot of new investors will start off by calling on classified ads in the newspaper. Obviously, if the person has a house for sale, they should be willing to listen to offers, right? Well, the truth is that the vast majority of the time, the people who place an ad in the paper for their house for sale are looking for an all cash, (meaning that you go to the bank and qualify for a new mortgage with a healthy sized down payment and good credit history) full market value sale of their house.
Obviously, as an investor, the sellers who expect all cash, full market value offers on their house for sale are not the type of people you need to be talking to. This, however, is the typical seller that you will run across when simply randomly calling ads in the newspaper. This is clearly not the most desired method to find flexible, motivated sellers who will be willing to consider "creative" or "no money down" types of deals.
Unfortunately, many of the new investors that I talk to have read in their investing courses that they should look out for certain "keywords" in classified ads. Many of them have been told that all they have to do is find someone who advertises "motivated seller" or "must sell". They are told that the best way to find deals is by calling on these ads.
I have also been told by some new investors that they have called on ads offering owner financing or a lease purchase. When they call these ads, they are shocked to learn that the sellers require a sizeable down payment and want to pull their credit! Soon, I get a phone call from this type of new investor telling me that I must be mistaken. They are now sure that they cannot do these "creative" deals that I talk about in their area.
In my mentoring business, I will sometimes make a call to a seller for a student of mine. I will conference in the student so that they can hear how I handle the conversation. Many times, a student of mine will call me up with a phone number and act very excited, stating that the seller is "very motivated".
After a couple of brief questions that I ask of the seller, I can quickly tell that they are in NO way truly "motivated" to sell. After some of these conversations I have asked my students where they got the sellerís number. I have been told too many times that the student got the number from an ad in the paper where it was advertised that the seller was "very motivated".
Hereís what happens when sellers add "very motivated", "must sell", "lease purchase", "seller financing", or anything else like that. They get a MILLION calls! Anything out of the ordinary, such as these phrases makes just about everyone take notice. How do I know this? When I advertise my own houses for sale this way, I usually get about 30 to 40 calls in about 2 or 3 days!
Hereís what else happens. The seller realizes that they can be picky. They realize that they can pick and choose through all the callers for the best one. They see that they can require a larger down payment because they are offering the house on creative terms. They decide to pull the credit of potential buyers so they can choose the most qualified one.
As you can see, this quickly becomes a situation that is very counter-productive to the real estate investor. Soon it becomes no different than any conventional deal where the buyer has to go through a qualification process, come up with a big down payment, and jump through hoops in order to buy the house. This is pointless for an investor who is trying to run a business buying and selling houses for a profit.
So how do the investors who are signing up deals every day find their deals? How are they able to generate a large enough volume of deals to be able to do it full time with no other income? One of the biggest keys to getting the deals is MARKETING. Marketing can often make or break a beginning investor.
Your marketing should be aimed at attracting the right type of seller to call you. This leads to a FAR greater chance that you will actually be able to work out some sort of creative deal with them. Generally speaking, sellers who call you will be far more motivated and eager to work out some sort of deal than the average seller who is simply running a classified ad. Many times, the sellers who run classified ads do so just to see if they get any nibbles and how likely it would be that they could sell the house when they do decide to sell. Obviously, it is a waste of time for an investor to spend time even talking to these types of sellers.
Marketing is what will make the phone ring with sellers who realize that they are dealing with an investor. Usually, this will make them realize that for them to expect an all cash, full retail value offer is unrealistic. For the most part, they will realize that an investor has to at least buy low and sell high to make a profit, or will need some sort of terms structured to make the deal profitable for them.
There are also the types of sellers who simply have a problem they need to have solved, and do not have a clue about terms, low cash offers, or anything real estate related, except for the fact that selling their house seems to be the answer to their problem. These are the types of sellers that you need to deal with. They simply want a solution to their problem.
Your solution for them could be a lease option, agreement for deed, seller financing, or some other creative deal. When you are dealing with this type of seller, you are not usually going to have to worry about having to come up with a big down payment. You are not going to have to worry about them wanting to see your credit report. They simply want you to solve their problem.
Another key point to be made is that often the more expensive advertising methods can often be the least effective. What is your reaction when you are riding in your car, listening to the radio, and a commercial comes on? Do you always leave your radio tuned to the same station? If you do, do you actually listen to the commercials? How about when you are watching TV? If you are like most people, when a commercial comes on, that is your cue to channel surf, take a restroom break, fix a snack, etc.
These are all key factors in determining what marketing methods to use. Now of course, as you grow your business, it may be a very good idea to add radio or TV marketing to your total marketing campaign. This can add reinforcement to your other advertising, as well as help you project the image of a large, successful company. However, as you can see, these methods are not very effective for someone who is just starting out, EVEN if they actually have the money to afford the more expensive marketing.
I use signs, business cards, flyers, billboards, letters, door hangers, expired MLS listings and many more methods in my marketing every day. Get your own marketing cranked up and soon your phone will be ringing off the hook with motivated sellers begging you to take their property!
Matt Bowman, www.reitoolbox.com, is a full time investor who started investing in 1997. After several attempts to get started in creative real estate investing, he found his niche in sandwich lease options.
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