Great response to direct mailers, nothing is cash-flowing!

[Mike Street]

So I've sent out two rounds of direct mail totaling around 1,000 letters. I've got a 1% response rate. I've made 6 offers. All of those offers were below market value and only cash flowed $100 per door (all duplexes) and had a mere 3-4% cash on cash return. I'm using the BiggerPockets calculators. It appears all the duplexes sold on the MLS are not making sense as investments. How do I get these off-market sellers to sell to me when the market is on fire? I'm in New Hampshire on the seacoast. I only market to 2-4 unit properties.

[Deanna O.]

Mike

So just to tease you a bit, you are asking "Why oh why won't anyone sell me their property for a fraction of what they can get by selling it on the open market in a weekend?"

Which is sort of your answer. The current market is so wildly overheated that even the worst dog of a property can trigger a bidding war, with offers that come in over asking, over appraisal, and no contingencies. Shockingly, the owners that respond to postcards want to sell for prices that simply don't crunch as rentals.

I can tell you that from the other side of those brightly-colored post cards (the one the I tossed out today was bright green), that property owners are being flooded with postcards from all over the country (green was an outfit in FLA). Out of curiosity I called a couple. They all seem to be just kind of desperately hoping that I'll be willing to sell at 2017 prices. Now you have to understand that every week my mailbox is full of over-colored, oversized post cards from local Realtors telling me how much my neighbor's houses have sold for in a matter of a few days. Why would I be willing to sell to some random guy in Florida at 70% of FMV, when I can get 110% by next week with a local Realtor?

Be realistic,  be patient, and be creative. Think out of the normal boxes.  Possibly you can figure out unconventional terms that will fit the needs of some of potential sellers, such as being willing to do below-market rent-backs to owners.  

You might also just have to sit out the market for a bit while until things cool off a bit. This market won't go on it's current trajectory forever (though whether it's a rerun of '06 or '71 remains to be seen).