All Forum Posts by: Eric NA

Today I got a semi-angry/disgruntled voicemail from a property owner who requested to be taken off my mailing list. She said,

"I've talked to investment groups like yours in the past and they just want to come in here and steal the property from me and not pay me what's it's worth. I want you to know I'm coming to Tulsa this summer to fix my property and sell it myself"

So that got me thinking, how do you respond to someone like this when you're actually in a conversation. Obviously when they have that attitude the odds of it working out to a deal are probably minimal, but how can I at least help this person understand where investors are coming from when they make the offers they do. So I thought of an anology I could provide that would go something like this:

"Ma'am, that's very true, we do make offers that are below market value, but let's pretend for a second you are in the market to buy a car. You come across a seller who has a car that is worth $10,000. It's got a great paint job and a great interior, but it unfortunately needs an engine rebuild that's going to set you back $1,500. So the gracious seller has offered to sell you the car for $1,500 off and give it to you for just $8,500. Does this seem like a fair deal to you? (rhetorical) Obviously the answer is no because now you are taking over their problem of having to get the car fixed. What happens if it turns out to cost more to repair than estimated? What happens if the mechanic finds other problems that require additional cash? What about the inconvenience you'll endure by not having the car while it's being repaired and you're making payments on it?"

It's the same exact thing in real estate. Only they don't just need an engine rebuild, they need an engine rebuild, a paint job, and a new interior. Food for thought.

If anyone else has some responses that have worked for them in the past, I'd be interested to hear them.

To be more comfortable on the phone, I want to make sure I can provide any seller with at least a one sentence "this is what I would look into" type response. Obviously there are a ton of potential seller situations and combination of situations, but here are a few as an example. How would you respond to these?

-Overpaid for property

If they are NOT in a short sale situation, and they just want to sell but there's just no deal because they over paid for the property, what do you tell them?

-Asking too much money

How do you gently tell them, their price is too high. Obviously you would point back to the fact that their house has major repairs necessary and they're asking top dollar, but have you found an effective question to ask or way to approach this situation?

-Own multiple properties

On more than a couple occasions I get calls from people who have 5+ properties. Typically this is the same as overpaid (from what calls I have so far) but what would be the best solution for getting rid of multiple properties where you've over paid.

-No equity

What options are available here?

Obviously there's no deal in most of these situations, but I want to go into every phone call knowing that I may not have all the exact answers, but I can at least point someone in the right direction to help them out if I'm not the solution.

When you say I may not even get a deal, do you mean I may not even get a deal this month, this year?

My goal is to do 3 deals this year. If I can market to just 500 home owners, and also incorporate some of the other suggestions you have, is that reasonable?

I'm currently sending letters out (handwritten). I realize the expense is much greater this way but I feel like the response is also a lot better as well compared to post cards. What are your thoughts on this?

I need help deciding how to spend my marketing dollars. I've been sending letters to out of state owners. I'm going to begin marketing to absentee owners (that live in state) and already have half the work done for that.

My question is, I want to balance frequency vs. reach. Right now I have $200 per month for marketing. I can hit one zip code in my area for out of state owners one month, then hit absentee owners the next month based on my budget and the number of leads in the zip. Do I try and stretch out the time between contacts to 120 days so I can work on another zip code, or do I put all my focus on this one zip code and hit them more often?

I'm playing around with Melissa data trying to pull in an absentee owner list. I'm hesitant to make a purchase because when I'm putting in my constraints for the list, the "Records count" is updating with what appears to be a random number.

For example, if I tell it to show me ALL for corporate owners it will say 1,000 but then I switch it to ONLY corporate owners and it shows 250 but then I say NO corporate owners and it goes back to 1,000. I won't give 15 examples but I have had similar results for a number of constraints. Naturally I'm hesitant to purchase now.

Does this simply mean melissa data doesn't have data for some of the constraints I'm changing?

I want to understand the rules and fundamentals of investing so that I know how to value each deal. If I can learn to spot a good investment property without relying on the assumption of appreciation, I believe I will have learned how to truly be an investor and spot value. This will help me immediately when trying to wholesale and over the long term as I transition to long term investments myself.

Sorry for beating a dead horse here, but you guys are really helping me out and helping me think through things and I greatly appreciate it.

My first round of marketing went well, over 5% response rate, but I felt like I didn't attack my leads and thoroughly vet them like I should. I'm trying to look at things from every possible angle on my second time around. Here's a quick example:

Seller with 6 properties, located literally all over town (all in rental type neighborhoods). I can see how much he paid for each. When I do a quick calculation on a couple of them, using the 50% rule for expenses, what I believe to be a reasonable rent number, and accounting for $100 in cash flow per month, I come up with a maximum offer that's 25K less than the 58K he originally paid for the property in 2005. This doesn't even take into account any repairs that would be necessary upon purchase.

So my gut tells me, he over paid and there is simply no deal to be done here. However, the logical side of me is screaming that I'm missing something because this is the 3rd person I've been contacted by who has had 5+ properties and they have ALL been this way.

I feel like everyone who's a landlord knows the 50% rule, pays attention to their monthly cash flow, and a made a sound investment from start. Obviously this isn't the case, but I feel like I'm not trying my hardest to come up with a creative solution when I can't make it work.

I know that 90% of leads lead no where, but I expect landlords to be somewhat savvy investors and to own properties where the numbers are at least close. Am I likely making a calculation mistake or is it more likely that people really do over pay for properties this frequently?

Ryan- So should I be focusing on one or the other when starting out? I feel like throwing away rental property leads is a waste. Are wholesale deals primarily done with flippers as opposed to land lords?

Here are some other questions:

How do I verify the rents for a property? The seller is using a property management company, is it reasonable for me to ask him for 12 months of payment history?

If I do a drive by of the property, and then confirm the rents and confirm it will cash flow, do I want to see the inside of the property BEFORE putting it under contract or should I go ahead and put it under contract and then get out under my inspection contingency if something turns out different than expected?

If I have literally no one on my buyers list for the area the rental is located in, should I pass on the deal now and wait until I have a buyers list in place or get it at a good price and then aggressively market the property?

Andrew,

I have personally read through "Vena Jones-Cox" Wholesaling & Advanced wholesaling courses. The courses include Audio on CD which basically is a reinforcement of the information in the book. She charges around $600 for the course on her website, but you can pick it up on Ebay for a cheaper price. I picked up a copy for $200 on Ebay, read through it all and then sold it back on Ebay and essentially broke even.

I HIGHLY recommend her material, even at the full $600 price it would be worth it. She gave me exactly what you were saying you needed, an ABC guide for how to wholesale. It won't include 100% of everything, but you can fill in the gaps using bigger pockets.

What's the difference between getting a property under contract with the intent to market to flippers vs landlords?

Obviously if the price is right, both will be interested. Should I stick with my formula (ARV * .70 - repair costs (including fudge factor) - my profit) to come up with what I want to get the property under contract for at all times or should I run it from a landlords perspective as well?

When marketing the property, should I market it as what the potential flipper can make and let the landlord figure out the numbers for himself, or should I market it was both perspectives?