Click on
Laurex Hot Deals
for pre-screened real estate opportunities
In almost every seminar
I've ever attended, a lot of time has been devoted to teaching attendees how
to find good deals. Because deal-finding IS so crucial to one’s investing
success, I recently decided to look back and see which methods have
generated the most deals and the best deals for me. In reviewing the 150
properties I've bought or flipped over the last 5 years, I was surprised to
find that many of the "traditional" sources of great deals haven't worked
for me, while some less obvious methods have been great lead generators. I’d
like to share with you the results of my little inventory.
Good: The Multiple Listing Service. The MLS is essentially a catalog of all
the properties listed for sale by brokers. Needless to say, some of them are
good deals for investors, and some aren’t. The trick is to ferret out which
properties have motivated sellers without making offers on all of them. I've
honed this skill through years of translating agent lingo like, "Handyman's
special" (looks bad, smells bad, has at least one major system that doesn’t
function), "needs TLC" (ugly, but not smelly, and everything works).
Click Here to
Pre-Qualify
for Commercial Financing
Why it works: Properties listed in the MLS are
for sale. This may seem like an obvious statement, but some of the other methods
touted as great ways to find deals involve locating owners, then finding out if
they want to sell. Properties in the MLS also have the advantage that all of the
information about the property is pretty much laid out for you - a major time
saver. And, with the sophisticated, computerized access available to your agent,
it's a matter of a few keystrokes to view all of the properties that are
handyman's specials, or bank-owned, or in estate, or priced under a certain
dollar figure - whatever you’d like to concentrate on.
Another reasons that the MLS has worked so well for me is that I am generally in
the market for really ugly properties. Coincidentally, these are the same
properties that most agents prefer not to spend a lot of time with. In many
cases, they're downright cooperative - particularly when I'm offering all cash
and a quick closing.
Bad: Direct mail to real estate agents. In 1994, I had the brilliant idea that I
might be able to find MLS-listed properties even faster if I simply let agents
know what I was looking for. So I purchased 1,200 agent names from the Board of
Realtors and generated a 3-part mailing send to every agent in town.
The theme of this campaign was this: if you, Ms. Agent, have a property listed
that fits my criteria, I’ll make an offer and you get to keep the entire
commission. Out rolled my brilliant campaign -all mailed first class,
incidentally - and in came the phone calls. All 7 of them. That’s right. The
week after the first letters went out, we got 7 calls. We had already made
offers on three of the properties; two were out of our price range; and two were
overpriced listings about to expire.
The next mailing generated even more results - about 15 calls - all basically in
the same categories. The final mailing, a postcard, received no notice at all.
Basically, I wasted about $1400 on a campaign that generated absolutely nothing.
What went wrong: I still think that this idea has some merit, but if I do it
again, I'll make some major changes. First, I'll target only the 200 or so
agents who list the types of properties I buy. Second, I'll do a better job of
writing the letters, emphasizing how the agent and his seller would benefit from
working with me. Third, I'll make my campaign a continuous one throughout the
year, testing different letters for response and mailing the best to the same
agents over and over. And lastly, I'll personalize the campaign by following up
with a phone call to the 50 or so best prospects. Oh well, live and learn.
Good: Ads in the Yellow Pages. For 8 years, I've had an ad in the "real estate"
section of the Yellow Pages. Each year, the ad has had some variation of the
wording, "I buy houses - all cash”. This ad only generates 3-4 calls a month,
but for some reason the quality of the calls is better than those that are
generated by any other method I've ever used. The sellers tend to be motivated,
cooperative, and have unlisted properties.
Why it's worked for me: I love that you deal with these ads once a year, then
forget ‘em. While they’re pricey - up to $3500 per year - the phone company will
generally bill you monthly for the cost. In addition, as one of the very few ads
in the phonebook that promise to buy houses, I haven’t got much competition.
Bad: Advertised FSBOs. Properties For Sale By Owner, a.k.a. FSBOs, are a
favorite for some real estate investors. I, on the other hand, have never
purchased a property from an owner who advertised his property for sale rather
than calling me.
I've found several problems with trying to buy FSBOs. The first is that some are
not actually for sale. Some FSBOs are just “testing the market to see what kind
of offer’s he’ll get. Other FSBO sellers are very motivated to sell, but don’t
list because they want to keep all of the money from the sale. They don't want
to pay a commission - but they don't want to take a lower price, either. And
sometimes a seller chooses to try to sell their property by themselves because
they owe too much to pay a 5%-7% commission, even if he sells it at full price.
If you are buying expensive homes creatively, these sellers are ripe for the
kind of solution you offer. My strategy is to buy ugly houses cheaply and for
cash, and I just don't find this type of deal in advertised FSBOs.
Good: Flyers to Targeted Neighborhoods. Last year, I had 10,000 double-sided "I
buy houses" flyers printed. I hired someone to put this flyer in the door of
every one, two, or three family property they saw in my “farm”. Every 3 weeks,
3,000 of these flyers were delivered, and the response from qualified sellers
was excellent. For a cost of less than $500, I made two deals that netted over
$6,000.
Bad: Billboards in the same neighborhood. Here's a lesson in messing up a good
thing: hot on the heels of my massively successful flyer campaign, I decided to
spring for four large billboards in the same neighborhood. The problem was that
my marketing budget is only so big, and buying the billboards meant stopping the
flyers. Still, I figured that the billboards would get more attention anyway, so
I forked over the $1,800 and got...
Absolutely nothing. Not one single phone call. Not even from an unqualified
seller. Not even a wrong number. Nothing.
The Moral? Stick with What works
.
Good: Flapping my gums. Luckily, talking - a lot - is something I have little
problem with. Laugh if you will, but my willingness to talk about what I do to
anyone who will listen - or even pretend to listen - has made me a lot of money.
For instance, when my new hairdresser asked me what I did for a living, I
responded that I buy and sell houses. His immediate reaction was, "really? How
pretty do they have to be?" Long story short: I bought his unwanted junker house
for $4,000 and sold it for $7,000 the same day. When my attorney wanted to know
what type of assets I wanted to protect, I told him about my house-buying
business. Four months later, he referred a client to me who sold me a $35,000
property for $12,000. You get the picture.
Bad: Using only one lead generator at a time. In my experience, it’s best to use
at least 3 different ways of finding deals at the same time: preferably two
you’ve used before with some success, plus one that you’re testing. Which brings
us to
Ugly: Not knowing which of your deal-finding strategies are working, and which
aren’t! If you’re going to spend money on flyers or ads or telephone pole signs
or whatever, it’s very important that you pay attention to which methods are
generating good leads, and which are duds. In looking over my own deals was very
surprised to discover how many great deals came from attorney referrals - a
strategy that I haven’t pursued aggressively, but will in the future. If you
aren’t tracking your lead generators to discover which are working and which you
should give up, you’re wasting time and money that could be put to use making
you deals.
