Wet Feet - Online Marketing and Real Estate Investing Blog

You did great job marketing and now have an avalanche of leads coming your way. You need an efficient way to prescreen them. How would you know which deals to pursue and which ones you should avoid.

It all boils down to 3 key indicators, at least for me:

1. location
2. situation
3. deadline

Like you already know the 3 key factors determining the price of any piece of real estate are: location, location, location. So first we look at the location of the home. Is this home in the good area of town? Is it even in the area we do business in? If the main source of your leads is from direct mail, leads should be in the right area of town. Signs, on the other hand, bring leads that are in other states. So check the location first. If it falls into your business area, take it, otherwise pass and go to the next one.

BTW, you have chosen the area you will do business in, haven’t you? Do not spread yourself too thin. We chose to do business primarily in the North east quarter of Atlanta. If I would do business in the whole metro area I can have a drive of more then 2 hours between the houses in the south and north suburbs. Imagine that you have to manage the renovation for 2 houses at the same time which are 2 hour drive apart.

Anyway, back to prescreening. The second thing we will look at is the situation. We want to work with motivated sellers. Not someone who is thinking about selling the house, but with someone who NEEDS to sell. And to determine that we need to know the situation. The situation can be: divorce, job loss, illness, job transfer, can not maintain house anymore, can not afford payments anymore, etc. We need to see a situation where they really need to sell. If the sellers say “I want to….”, pass this deal. You will spend weeks spinning your wheels and in the end come up with nothing.

The third and last thing we are looking for is the timeline. When the sellers need to move? Is it next week, next month, or some time in the future? This is important. If you hear the seller saying “I really need to sell this home in 2 weeks, because I have been transferred to another state and have to start working there from next month.” you have the situation and deadline. If you hear “I wan to sell in next couple months. I would really like to move to this state to be closer to my grand children.” pass this deal. There is no situation or deadline. The key phrase here was - “want to”.

So we have checked the location, the situation and the timeline. All are good we play, one of them missing we pass, or put it on follow up if the deadline is not there yet. If we play we go to the next step - negotiate and sign the contract.

The very first step in the process of flipping a house is to attract sellers. Without sellers calling you, you will not be able to buy a house, renovate it, sell it and make a profit. So, in my personal oppinion, you must do at least 3 things to attract sellers. Here they are in order of importance:

1. Direct mail
2. Referrals
3. Signs

Dirtect mail : the most cost effective and predictable source of leads. 80% of our leads at the moment of writing this come from direct mail. A lot of people I meet say that direct mail does not work. It does not if you do it wrong. For direct mail to work you must have 3 things right: the list, the message and repetition.

First of all you need a list of people to market to - a targeted segment of people. What would be a good target to mail to? People who really need to sell their home? People behind on their mortgage payments? Someone who has recently been divorced? I think all of them are perfect candidates to receive a letter from someone offering to buy their house.

Second you must write to your list about their problem. They are not interested in how big your company is or how long you have been in business. All they care is how they can get rid of their problem. So write to the people who are behind on payment about their situation and how they can benefit by calling you.

Third thing you have to mail them multiple times. Sending one postcard to 1000 people will not do the trick. You must, I repeat, you must mail them at least 4 times. Would you like to convince 1000 people 25% of they way or 250 people 100% of the way? The choice is yours.

Referrals : do not be afraid to open your mouth and tell other people what you do. The longer you are in business the more people will know what you do and refer othes to you. Do not be afraid to ask the sellers to refer others who need to sell their house to you. This does not cost you a dime, but brings great results with time.

Signs : the best way to get a quick inflow of leads. Follow county and city ordinances -you do not want to pay fines for illegal signs. Signs work great for a very short time. Put out 20 “we buy houses” signs and you will get 20 to 100 calls depending on the weather and where your signs are. The only catch is that the leads are unpredictable: your sign may be on the north side of town and the lead will come in for a house on the south side, more then 1 hour away, or better in a different city or even state.

If you do these 3 things and do them right your phone will ring day and night with motivated sellers calling you with houses they are ready to get rid off.

So what are you doing now to attract sellers? Is it working? Are you ready to try something that does?

I wan to start with a little rant. How much do you think it costs to run a classified ad in a major newspaper like AJC? The ones we run set us back about $200 for two weekends. From such ads we get quite a number of “investors” calling us, wanting a free house…. Go and read my old post I want houses with 0 down and take over payments. Someone would think that a desperate homeowner would spend $200 to say to all metro Atlanta: “TAKE MY HOME”. Get real!

Ok. I am done ranting. Now really think, would a desperate person spend $200 to place a classified ad in the newspaper to give away their house? I do not think so. Here we have the very first mistake that most of real estate investors make - calling on classified ads in a newspaper where you need to pay for classified ads.

Second most common mistake I think is placing an ad “We buy houses” in the local newspaper. Have you looked how many these type of ads you see there. Last time I checked, I counted 13 “We buy houses” and 19 others with a different wording, but meaning exactly the same. Stop following the herd. Do something different.

Third most common mistake I see beginner real estate investors making is wrong approach to direct mail marketing. They either

1. select a very small area and mail them constantly
2. they mail the whole city one time.

In the first case investor would mail only to 1000 homes in a subdivision where about 10 homes get sold every month and they will continue mailing these same homeowners every month. This approach can not produce enough leads to have a deal to recoup marketing expenses.

In second case the area is too big and repetition too small. You need to mail at least 3 times to the same person to produce results.

So my advise would be select a big enough area and target your prospect sellers. Targeting means that you are looking for something specific. It can be landlords who just evicted their tenant, homeowners who can not make their mortgage payments or someone who listed their home 3 times and could not sell it. There are ways to get your hands on the list of such homes, you just have to spend some time or cash.

Be creative!