Please help me avoid angry yellow letter callers

[Kay H.]

ok. So. I sent out about 700 yellow letters this month. I feel like I need a better script. I say to people do you have a house to sell? I don't really like asking for names and addresses up front because people usually get angry thinking you should know their name and address already.

Anyway once I determine that the caller has a renovated house and it looking for retail value. I say oh I'm sorry we are more so looking for houses that may need repairs. Then I say can you tell me your address so I can take your name off my list? I get a NO.

Sometimes people say things like....aww you're looking for houses for nothing...well I guess some people have to do that for a job....

And I kind of feel bad after those calls. Can someone help me. Is this normal ?

[Todd Plambeck]

A couple of things I've learned over my first six months that may help you. First, find yourself a real estate agent to add to your "team". They can pull comps for you and feed you deals on properties that they can't list. In return, when the person in the original post calls and you determine they want full retail you pass that lead off to the agent. I say something like, "That sounds like a great house but it really doesn't fit my criteria. However, I've got a great agent in that area that I can have give you a call if you'd like". You are trying to solve their problem. Same thing with a disgruntled landlord who wants to sell their rental for full retail or get a PM company you can send leads to; "That doesn't really meet my criteria but if you'd like, I've got a great property management company that may be able to help you out". If they do decide to sell at a discount, who are they going to call? The person who tried to help them out, you.

Also, I found it very helpful to go out and see these type of sellers. See what the property looks like and what it eventually sells for, work on your rapport building skills - pet the dog, let the cat rub on you, admire their family pictures, etc. This will help build your skills and also help you learn what the properties look like in your farm area. Then if it's not a deal for you, farm it out to you agent or if you have some buyers on your buyers list who buy long term holds, maybe you can give them the property info if it fits their needs.

[Brian Gibbons]

Originally posted by @Mike S.:

@Brian Gibbons

The letter looks like it would do a good job cutting out the time wasters and people looking for a free appraisal, have you tried this in L.A. or just in the other markets you deal with?

I like cheaper markets as Rent to Value is important.

$2000 rent to $400K houses and less in non LA is easier than $2800 rent to $800K plus value where I live in LA. See for yourself

[Brian Gibbons]

Originally posted by @Mike S.:

@Brian Gibbons

The letter looks like it would do a good job cutting out the time wasters and people looking for a free appraisal, have you tried this in L.A. or just in the other markets you deal with?

This letter works great in markets where "Rent to PITI" is close to each other.

Like $1000 a month Rent to $1000 PITI. For a Lease Option Assignment or Sub2.

But in LA I look at MLO in small mom and pop apartments, because a 1500 sqft modest home here in my section of LA costs $800K, mortg at 80% is around $4500 a month, rent about $2800 a month. Not a good deal in Rent to PITI.

[Mike S.]

@Brian Gibbons

I liked how the letter was direct and filtered out time wasters, I am well aware buying on "terms" is unrealistic given the market dynamics in our area.

[Brian Gibbons]

Originally posted by @Mike S.:

@Brian Gibbons
I liked how the letter was direct and filtered out time wasters, I am well aware buying on "terms" is unrealistic given the market dynamics in our area.

An intriguing idea in LA is to look for a motivated seller in a great home, they have a rehab done poorly, are broke, and do a JV with the seller.

They want to sell and are strapped. They have a rehab done poorly and need help.

You as a pro in rehabbing JV with the Seller.

Say ARV is $800K, needs $25K has a loan of $400K.

We Buy houses folks will buy it for 65% of ARV less all costs. So whats the net for the seller? Not good.

So how do you make money by JV'ing with the seller?

Say you borrow the $25K from an REIA member and give them 20% annual interest which is 1.66% each month. You use the money for 4 months.

That's an interest paid to the private lender of 6.66 or $1650.00

Then you do the rehab, get paid upfront with $25,000, and have a fee to do the JV of $15,000 (all negotiable).

The net to the seller is MORE than the We buy Houses guys' offer. Why?

You just place your $25K plus 1650 interest plus $15K JV fee in a note and a mortgage or DOT. YOU DO NOT DO A A - B transaction, you do a Note and a mortgage (or DOT). You do not convey title or have an acquisition. You get paid on resale.

Now there could be a mess with the sellers if they fight you on details, like do not want to sell after the work is done, or complains that the sales price is not good enough. So you need to spell out in the JV Agreement terms of listing the house at 95% of comps, paying sales commissions, etc).

The focus here is to solve the problem for the seller and stop the bleeding.

Do you like the JV with the Seller vs the We Buy Houses Model? I think for the right house and the right seller, its works great!

[Mike S.]

@Brian Gibbons its an interesting concept it would be very important to run this by a good Real Estate attorney to make sure the risks are understood. Most of the time the owner of a property with an ARV of 800k can just list it in as is condition and just sell it so there are other options available other than the 65%ARV offer from a we buy houses type of person.

[Brian Gibbons]

Originally posted by @Mike S.:

@Brian Gibbons its an interesting concept it would be very important to run this by a good Real Estate attorney to make sure the risks are understood. Most of the time the owner of a property with an ARV of 800k can just list it in as is condition and just sell it so there are other options available other than the 65%ARV offer from a we buy houses type of person.

Yes Mike, its a legal partnership, some people hate agents, are cheap as per the commission, etc.

Nothing is perfect in REI Negotiation, but if the sellers can profit more on the minor rehab JV than the 65% of ARV formula, dont you think its worth the trouble to present the solution?

Especially if they got a quote from a We Buy Houses guy and hated the low offer?