While all new real estate investors start at the same place in terms of never having done a deal, not all start out with the same budget. Regardless of how large or small your budget is, in order to find motivated sellers, you do need to spend some money. In this 2-part article, I explain the best options for finding motivated sellers depending on how much money you are able to spend.
REIAs and Meetups
In 2003 when I first started in the business, I had just finished graduate school and had a negative $80,000 net worth. I was the sole bread winner of the family with three kids to support on a $60,000 a year salary. There wasn’t much money to allocate towards finding motivated sellers. So what did I do? I started by going to my local REIA to network and learning as much as I could about real estate investing.
At that time, I think it cost $20 to get in. Back then there were only a handful of REIAs. Today there are at least 10 different REIAs and Meetup groups in our area. Some, like our Meetup, are completely free and even provide food. 🙂 I strongly encourage all investors, new and old, to attend their local REIAs and real estate related Meetup groups. If you network properly and participate fully you can potentially find deals and sources of money.
The next suggestion is to join local online real estate investing communities and email list-serves to network with other investors virtually. I found my second deal ever from a yahoo list-serve group. An agent posted a client of hers was about to lose her home in Manassas and she may need help. I reached out to the agent, built a relationship and then kept in touch with her. Months later she called me and said her client was a few days away from foreclosure and asked if there was anything I could do. I ended up buying the home and made a nice profit. I guess I was the only one who followed up with her. Be that person who follows up with leads and you’ll be amazed at what happens!
Both of those types of networking opportunities are virtually free, so you have no excuse for not using them.
Door hangers is another low cost tactic for finding motivated sellers. I think I bought door hangers for a few hundred dollars. I’d go to neighborhoods where I thought distressed buyers lived and pass them out. While this is a super cheap form of marketing, it does take quite a bit of time and I don’t recall ever getting any deals. I’ve heard stories of other people having success with this tactic. Maybe I wasn’t canvassing the right communities.
Nursing homes and retirement communities
Because of their age, most people moving into a nursing home or retirement community are homeowners. Oftentimes, their house becomes a burden to them or their families and it may also be a barrier to their entering the retirement facility. When health issues escalate, the homeowner or family may need to sell their house fast in order to move them into the facility quickly.
Managers or administrators of these facilities want to gain new residents. In order to help prospective residents sell their houses and free up their money, they tend to be receptive to the services that investors provide. Establishing trustworthy relationships with these people could be a great, very low cost way to find motivated sellers.
Start by compiling a list of nursing homes, assisted living and retirement communities in your area. Contact each to find out the name of the person with whom you should speak. And then put together a one-page sheet of basic information to share with them via email or snail mail about how you can help.
When I first started in real estate investing, my sister and I would hand address hundreds and hundreds of letters to absentee owners. I got a call from a landlord in Charlottesville, Virginia. She said, “I wasn’t planning on selling my rental, but after getting my 6th letter from you, I’ve decided to sell.” Victory dance!
Direct mail can be done as cheaply as the cost of a stamp, envelope and letter. Back then, I wasn’t familiar with Listsource and other data providers that provide tons of options to buy lists based on demographics. We were just using a shotgun approach and not targeting enough. Today, we buy lists from data companies that are far more selective. We target different groups, but all of them have equity. Our goal is to find sellers with equity because we’re not focused on listing homes or doing short sales.
Hand addressing envelopes to absentee owners is a good method if you have less than $1,000 per month to spend on marketing and don’t want to spend the money on a list. I would suggest mailing only to absentee owners who have owned their property for more than 10 years and thus have had a chance to build up equity in their property.
If you do have the money to buy a list, your possibilities are endless. You can focus on probate properties (where the owner of the home has died), divorces, properties in foreclosure, absentee owners, or houses with equity. You can choose a list based on the age of house, age of occupant, the options go on and on and on. Whatever your monthly budget is for direct mail, make sure you budget enough to mail to the same person at least four times – if not, you’re wasting your money. Four times and more is when the direct mail option gets the best results.
The costs for direct mail can be as little as a few hundred dollars per month, or less, and increase into the tens of thousands.
Driving for Dollars
This is a popular technique used by thousands of investors with success across the U.S. Essentially, you drive or walk neighborhoods you feel would be good communities in which to invest. As you’re canvassing these neighborhoods, you’re looking for homes that appear abandoned, vacant or run down. You’re much more likely to find the owner of these types of properties open to your offer to buy than the owner of a pretty, well maintained home. Poorly maintained homes could indicate the owner doesn’t have the time or money to care for the home. That person may want to sell it fast to a cash buyer or investor.
Posting fliers on telephone poles was another one of my favorite low cost ways to get my phone ringing with people interested in selling their home. My business partner and I would go out late at night – during the weeks of the D.C. area sniper shootings at that – and pound the bandit signs on telephone poles and place them on wire stands in the road medians. You can get signs printed for a dollar or two a piece. They’re fairly inexpensive and they do work. There are some cities and neighborhoods with strict sign ordinances, so certainly be very careful about following the laws.
A variation of the bandit sign concept where you never have to worry about getting tickets is the bandit signs on wheels model. You put a “We Buy Houses” sticker and phone number on the back of your car. Or you can put one on someone else’s car (with their permission, of course!) and pay them if you get a deal from it. We’re currently using bandit signs on wheels in the D.C. Metro area and paying the drivers whose vehicles send us deals that close.
Auctions were super popular from 2009-2013 when the real estate market crashed and banks were trying to move properties. Today there a far fewer properties selling at auction than there were five years ago. When someone stops paying their mortgage, most states require the bank to hold a public auction to sell the house. While the auction volume is much less these days, there are many investors around the country who still enjoy plenty of success from buying at auctions. Our experience in the DMV is that the price of most of the properties are way too high to make sense for us.
So there you have a good array of low-cost marketing choices for finding motivated sellers. In next week’s part 2 of Marketing on a Beer or a Champagne Budget, we’ll get into the higher ticket marketing tools.
Have you signed up to attend the DMV’s first wholesalers meetup yet? Meet other wholesalers and aspiring wholesalers and join the discussion of how to find and close more deals. See details at http://www.meetup.com/Express-Homebuyers-Wholesaling-Real-Estate-Meetup/