Approaching a seller effectively is very crucial to your success as a real estate investor. You need to persuade the seller, get the terms under contract in order to get 100% hard money loans.
You can get a list of properties and potential deals that you might be able to make offers on and eventually purchase. The next step is how you approach the sellers and what to say to them. There are books that have been written on the subject of approaching and contacting sellers. If you don’t master this skill, you won’t succeed as a real estate investor because you won’t land 100% hard money loans for financing.
The most popular ways are through mail, through telephone, and through stop bys. I have a mentor who would find great deals by knocking on doors. He would drive through neighborhoods that he was interested in. Neighborhoods that he thought were the right price range; the neighborhood that he thought might have the right resale capability.
He would look for the ugliest, most beat-up houses in those neighborhoods. Then he would stop and knock on the doors, and he’d ask them if they had any interest in selling their house. He would also knock on the doors next to the ugly beat up homes and ask the neighbors if they knew who lived next door and if they had their phone number, or if they knew anybody else that might be interested in selling their property because he was interested in buying. He had a great smile, he was personable, and he loved to talk to people, and they enjoyed talking to him. That’s how he’d find properties and ensure that he got 100% hard money loans.
I can also tell you about a girl who would rollerblade around in neighborhoods like this, talking to people, and making her presence known. I think her short shorts or Daisy Dukes didn’t hurt her any, because her assets definitely helped that, and she used them to her advantage. But she made herself known in neighborhoods.
This is also known as “farming.” She would knock on the doors, drop off flyers and let people know that she bought houses. She would typically buy houses that were in distress because the sellers could not sell them to anybody else. But everybody knew who she was: the chick on rollerblades with great legs. So that is the “stop by” strategy. The stop by strategy was extremely effective for this girl because she got everything under contract and got 100% hard money loans approval from hard money lenders.
The other strategy you may want to use is sending mailers. Post cards are one of the most popular kinds of mailers because they are easy to see in a stack of mail. You can use small post cards and large post cards. Again, there are books written on the subject of mailing.
You might find it useful to know that there are actually some computer programs that can reproduce your exact handwriting. You just hand write all of the letters of the alphabet and scan them into the program, and they can actually produce authentic-looking computer-generated handwriting. It’s a lot of fun and a great way to get attention.
Another technique is to actually write out your message, scan it, and then print it onto yellow paper from a legal pad. When printed directly to that yellow legal pad paper, it looks like someone really took the time to write it out. You have to be careful to line up the scan image to fit directly on the lined paper. It takes some time, but once set up you can print a lot of them.
Typically, they will do half sheets that look like they are torn, and then they will put one of those on every single house they stop by. It looks like some one really personally wrote out something special just for them. So, that is another idea for stop bys, or you can even mail them out.
The other approach is to contact them by phone. Contacting by phone, I think, is going to be one of the most tempting but one of the hardest methods to use successfully. People are not generally excited to answer a phone call from somebody they do not know, and call screening happens all the time these days. But if you are skilled enough at cold calling prospects, you will be able to succeed as a real estate investor in no time. You can even persuade your hard money lender to give you 100% hard money loans.
A lot of people live just off cell phones rather than having home phones, and that makes them more difficult to find. There are some people that have hired private investigators to do skip traces for certain properties when they are trying to find who the owners are so they can try and make a deal happen before a property gets foreclosed on. You’ve got to realize there could be between $10K and $30K, or more profit; you’ve got to spend a little money to make a little money.
I want to talk about working with banks. You can work with asset managers, and the foreclosure list service we talked about will help you get in touch with some of these types of banks and asset managers. You can also get in touch with local banks and local credit unions. Talk to them and tell them you buy real estate. Additionally, you want to contact national managers, which you will be able to find through the foreclosure list service. If you do all of this prep work, you won’t have trouble getting 100% hard money loans.
The next thing we want to talk about is working with real estate agents and how they can help you find good deals as well. We are going to devote a whole section to that coming up next. But what I want to talk to you about now is why someone will be willing to sell you their property, and the reason is simple.
People will sell you their property because they can’t sell it to anybody else. The majority of the time you are not going to be able to buy properties that are in great condition and move-in ready; because you can’t add value to a property like that—and they can sell a cherry property to anybody.
Now, occasionally you will be able to buy a property that is move-in ready if the volatility of their needs is compatible with the value you can offer them. Perhaps you can close within 5 to 10 days, and they don’t have the time to spend 90 days on the market because of a job change or pending foreclosure. They may be delighted to exchange a great deal on their property for your fast money. If they can have this headache gone and never have to think about it again, they will be willing to take less money. That’s why it is crucial that you do the necessary things to get 100% hard money loans from your lender.
So, “headache for money” is the value exchange. They will take less money because — they don’t have to fly back and miss their family, they don’t have to have a second liability, or they can go buy the new house they are ready to move into. They can’t buy a new home until their present house is sold, and they might be moving across the country. They will take less money if you get the monkey off their back so they don’t have to deal with it anymore.
The other thing that is important to realize is most properties are going to need work, and that is where your value comes from. If a person owns a house that is in disrepair, no one can buy it unless they are buying with cash or hard money. They can’t get a bank loan on it. But you can always get 100% hard money loans from a lender that you consistently use.
A new homeowner can’t come in and buy the property. If the property does not have carpet, if the property has some disrepair, if it is missing a kitchen sink, if the toilet is missing, or whatever the case may be, nobody can get a loan on it. Frankly, if a property has peeling paint, they can’t get a loan on that. So a lot of people look at the property.
Remember, they put it with a real estate agent; they try and sell the property, and the property does not sell because it is in such disrepair that, even if somebody wanted to buy the property, they could not; that is important to realize. Even if someone wanted to buy the property, they could not because no lender is going to give them money to buy a property they cannot move into right away, and that is where “fix and flip” real estate investing comes in.
You are actually taking something that is not marketable because nobody can buy it, unless they have cash. You are turning that unmarketable thing into something that has marketable value, and that is what you are getting paid for. You are getting paid for buying something and turning it into something of value. And for that, you are likely to get financing from hard money lenders everywhere. However, you need to be extremely good with your contract in order to get 100% hard money loans.
Let’s say that you made widgets. You would buy raw steel and stamp it into some type of widget, and then you would sell it to somebody. The same is true when it comes to real estate investing. You are buying a property that is raw material, just like the metal for your widgets.
Then you clean the property up. You paint it. You carpet it. You do all manner of repairs and upgrades, and then you turn around and sell that property to reap the profits of your efforts. You get paid because you took on risk.
Very often banks will sell you properties as a risk transfer. If the bank has a property, they may know that they can sell it for more money, but it will probably take six months to sell. That’s where you need to tap in and give the bank cash immediately. You can do that by getting loans from your hard money lender. If you have everything properly in contract, you will get 100% hard money loans from the lender.
So, if the bank could get cash today, they may prefer to take less cash now and have it over with, rather than have it on their books, cramping their loaning ability and carrying the property taxes and upkeep. Sometimes the property is in good shape, and sometimes it needs work. But at the end of the day, real estate investment, from the selling bank’s perspective, is a transfer of risk.
You are not taking advantage of anybody. You are actually helping people solve their problems. You are exchanging value for value. If you are not giving equally to what you are getting, they will not sell you the property. You should actually think of yourself as a real estate problem solver.
You should tell people, “I solve real estate problems. If you have a real estate problem, I have the solution for you,” and then you work on finding those solutions for people, customized especially for their particular problem. You are taking a problem, and you are turning it into an asset for the community, neighborhood, the seller, and for everyone else involved. As long as you can find hot property, you can get 100% hard money loans for the investment.
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