All Forum Posts by: Tom Scott

I've officially gotten 1 month of my direct mail marketing campaign under my belt. I've gotten around 55 potential sellers to call me and I've done pricing on every one and I think I'm really starting to get a handle on my local market and I can almost tell you off the top of my head the ARV of a property based on where it is on the map. I have one lead on 1/2 of a duplex I think will cash flow well enough, though it's not in an ideal area but it's not a war zone either.

Meanwhile I am also watching the MLS in the area and I am amazed at the prices being paid for rental properties, mostly small SFR's, given the rents they produce. As best I can tell it looks like people are not even meeting the 1% rule. How is this possible? These properties are not in a class that will appreciate any reasonable amount in the foreseeable future. Being a college town, the rental market here is super strong but at the same time the glut of open rental properties tends to keep rents down. The market seems to be at equilibrium for the most part and seems to have been that way for a long time. I just don't get it. Is anyone else facing this same issue? How are you overcoming the increased prices without loosing your butt?

Tom

Wow, this got out of hand quickly. Too all those who are offering advice on the original topic, thank you. I will file these dead leads into my follow up line and start contacting them every few months in some way. 

@Account Closed

I do a ton of work before I ever contact a seller, I know pretty well what I need to pay to get their house and still make money. I am not sure where you get the idea that I do not do any of this. I was actually referring to Richard C. as a troll because he was displaying troll like tendencies. He popped into a thread and added nothing productive to it other than a smarmy comment. I get the feeling you thought I was calling sellers with high initial offers a troll. This is not the case. As I stated in one of my above posts, I have no issues with high initial numbers other than the fact that they seem to indicate a seller is not motivated to sell. This is all good, as I will just filter them back through the list to follow up with at a later date.

To the rest who made it clear, the need for a thick skin is imperative. I'd like to clarify that my feelings were not hurt and I could care less what most folks think. I handle my business in a professional manner and am pretty polite and cordial to pretty much everyone I talk to. I do take exception to negative comments in this forum that give no real value other than to incite threads like this one. I was hoping to get some valuable conversation out of this thread but instead I have spent my time defending myself. I'm not sure why Richard C. decided to chime in with a negative comment, or why the rest decided to pile on assuming that I am in some way rude to potential sellers. It would seem that perhaps my next question should be posted int he pro forum to help eliminate some of this crap in the future.

Tom

As much as I would love to beat up on the troll, I would rather keep the thread on topic and discuss the strategies for dealing with unmotivated buyers. 

Tom

I let this post slide down the list but I would like to give it a bump to see if anyone else has any thoughts. 

Tom

@Richard C.

All trolling aside, I am quite cordial to everyone I speak with and have yet to question a sellers asking price over the phone other than asking if that's the best they can do. They have the right to throw any number at me they wish, but in general most of these folks know the market for their house and are purposely asking for well over this amount in an attempt to see if I will pay it. I sent them a letter so it was completely voluntary that they call me and leave me a voice mail asking me to call them back. Also, I don't typically insist they throw out the first number though most will when asked what they want for the property. If pressed on the issue I will happily make an offer on the phone, but in my limited experience, once you've gotten that far it would seem a lost cause. I'm going to assume, by the condescending tone of your post, that you are not a fan of direct mail, and that is fine. I am not trying to swindle anyone, I just want folks to call me so we can talk about their property. If they want to sell, they will make a reasonable offer and we will proceed. If they don't want to sell I will say good day and be on my way with no ill will at all. Maybe instead of posting a snarky remark, next time you could just hit the back button and go about your day not having crapped on someones post. 

Tom

My first direct mail campaign is now beginning its' second month. As expected, most of the calls that come in are folks that just want to know what I am up to. They throw out huge numbers for their properties and hope I'm dumb enough to take the bait. So my question is, other than that first phone interaction where you find out if they are serious, is there really any use in doing any real research and following up with these people (i.e. making a formal offer)? 

I think it's generally pretty easy to tell they aren't seriously motivated within a few minutes on the phone and then when they throw out that number that is 40% higher than market, or refuse to give you a number at all, it would seem a forgone conclusion that no deal is to be made with that particular individual and that I should just cut bait and run. Thoughts? 

Tom

@David McEwan

I'm looking at apartment complexes that would not qualify for FHA loans. Additionally, I would not be an occupant owner.

Tom

@Chris Adams

You are correct in that they really don't "repair" the sinkhole. In general they fill it with a grout that "should" flow into all the voids and stabilize the cave in. This particular area is full of subterranean caverns that tend to move in times of drought and heavy rain. I too would say that it is never really fixed. The possibility of a recurrence is always there.

@Tom Reynolds

I haven't looked into insurance, but that was my major concern.

@Bob E.

The statistical probability of someone getting hurt due to a sinkhole is astronomically low. They seldom collapse all at once and are more typically a very slow settling type event that can take years. I'd say the major hazard would be to the house itself. 

After all my research I am fairly certain it's not worth my effort to pursue this deal. I would not be concerned about tenant safety at all but more worried about reduced rents and the stigma associated with a sinkhole making the house hard to sell in the future. Additionally, the repair cost associated with another sinkhole repair would probably make the house a money pit unless you could get it super cheap and in my market I really doubt I could get it that cheap. 

Tom

I think I know the answer to this but I'll ask anyways. Is there any practical way to finance 100% of a multifamily. I've been looking at multifamily units locally and I just don't have the cash for a 25% down payment. I have enough cash to make repairs should the need arise, but not enough for a down payment on some of the larger units I am looking at.

Could you get a commercial loan for 75% and a hard money loan or a private loan for the 25% down payment? Obviously this would hamper cash flow but I'm thinking you could sacrifice personal cash flow for a short period and throw cash at the 25% loan to pay it off quickly. Obviously real world numbers will make each case different, but in general is it practical? 

Tom

@Matt Swearingen

That's a good question, I am not sure if you would have to disclose the sinkhole repair to a renter. I wouldn't think so, but stranger things have happened. 

Tom