If you want to build inventory for your flipping business, getting leads on motivated sellerS is only part of the battle.
I don’t ever get any good leads …”
“You can’t get deals like that where I live …”
These are just some of the statements I hear all the time from real estate investors who haven’t honed their lead-to-deal conversion ninja skills.
Mostly likely, the problem isn’t that they aren’t getting good leads or that those kinds of deals can’t be found where they are.
Rather, the problem is almost always that they just don’t know how to properly convert those leads into deals.
IT’S BAD BUSINESS TO NOT MAXIMIZE YOUR LEADS
Maybe you’ve heard that house flipping is all a numbers game. That’s true.
But some of the commonly cited numbers and formulas aren’t always accurate. Take the ratio of leads to deals, for example.
It’s said that it takes 100 calls to get 10 great leads that ultimately will result in one deal. I don’t like those numbers at all.
We can do better than that. Much better.
In my house flipping business, we regularly make offers on 33 percent to 50 percent of the calls and online submissions we get. That already is much better than the 10-to-1 leads-to-offers ratio for a typical house flipping business.
From those offers, we typically buy 20 percent to 30 percent of the houses. Again, that’s much better than the abysmal 10 percent that is commonplace.
Here’s how to improve your conversion rates with ease.
DESTROY YOUR COMPETITION
Competition is the reason so many real estate investors hover around the 1 percent range of calls to deals. (Remember: 100 calls, 10 offers, one deal). Other investors are snatching up those deals.
There are four specific things we do that much of our (and likely much of your) competition just doesn’t do consistently.
1. We Answer Our Phones Ourselves and Immediately
When our marketing generates a call from a seller, we immediately answer that call—no matter what we are doing. Even if we are at the dinner table, we will stop and answer the phone.
I’m constantly told by motivated sellers that they just started calling phone numbers for people who buy houses, and I was the first one to answer my phone out of the five to 10 they already called. Guess who’s more likely to get the deal?
Some investors use call centers to answer phone calls and get information from sellers. This is a decent solution if you do not have the ability to answer the phone. The problem I have with this method is that you completely lose all ability to create rapport with the seller.
Building rapport with a seller is more important, most of the time, than the offer you end up making. Do not discount this. This how you beat your competition every time.
2. We Exude Confidence on the Phone
This relates to the previous advice in that it’s about building good rapport. Most motivated sellers who call are unsure of what is involved with selling their house to a real estate investor.
You build great rapport by being confident on the phone (difficult in the beginning for most, so don’t worry if even thinking about answering calls from motivated sellers causes anxiety) and taking the time to explain the process of buying their house.
Being confident comes from being prepared to answer their questions. We cannot guess all the questions that will be asked, but we can be prepared for the typical ones, such as:
“How does this work?”
“How much can you give me for my house?”
“Will I have time to move?”
“There are tenants in the house. Is that a problem?”
3. We Immediately Set An Appointment
Think about the situation from a motivated seller’s perspective.
That person has a house that he or she wants to sell and is searching for someone to buy it. If you were in that seller’s shoes, you’d probably be a little nervous about the process and possibly embarrassed about the state of your house.
You probably would be happy talking to someone who answered the phone right away, was friendly and confident and sounded interested in buying your house.
As an investor, you let that seller know you are interested by immediately setting an appointment to see the house.
If you encountered someone who did all those things, you’d feel that you had done what you set out to do when you started looking for a buyer. This would likely prevent you from contacting any more investors. Competition eliminated.
4. We’re Prepared
We run our numbers and are ready to make an offer before we go to see the house.
We look up comps and determine a potential value for the house after it’s fixed up. We then use our formula to determine our maximum allowable offer (simply 70 percent of the after-repaired value, minus the cost to fix it up).
Obviously, we do not know exactly how much it will cost to fix up because we haven’t seen the house yet. But we have our number already in mind and can determine the fix-up cost while at the house.
After we walk through the house, we can tally up our estimated repair cost and subtract that from the number we already calculated and then make our offer.
As a new investor, there were times when I went back to my office to determine my offer. By the time I called back, the sellers had already accepted another offer. Don’t find yourself in that situation. Make your offer on the spot if you are able.
MAKE THEM AN OFFER THEY CAN’T REFUSE
Many investors think that the highest offer always wins. This simply isn’t true.
I’ll let you in on some of the reasons people sell to us, even when we offer less than our competitors.
1. We Understand Sellers
Study after study has shown that people buy from people they like. Though we are buying houses and sellers are selling them, it works the same way. We are actually selling our service, and they are buying it.
We show empathy when we meet with sellers. This goes a long way with them, as they are usually apprehensive about dealing with real estate investors who have enough money to buy houses for cash. That can be intimidating.
Many times sellers are facing situations about which they are embarrassed or stressed out. If you can genuinely show you understand what they are going through, they will more easily open up and feel comfortable with you.
If you cannot genuinely relate to sellers, do not try to. Doing that will be obvious and backfire.
Be who you are, and it will work out better for you than the guy that shows up and tries to be all-knowing and high-powered. Sellers most likely will not relate to that guy.
2. We Present An Actual Contract As Our Offer
There was a time when we would just make verbal offers to sellers while standing at their doorstep. It was way too easy for sellers to just tell me they’d think about it. I was not converting many of those leads into deals.
We then switched to using an actual contract to write out our offer and present to them while sitting down somewhere comfortable in the house. I think there is a little bit of an expectation that you would like a decision when you sit down and discuss the offer with them.
It’s guaranteed they will give you more time to discuss your offer and make sure they understand everything that is involved. This is very important because an offer and a process that people do not understand leaves too many unknowns, so they’re easily disregarded.
3. We Do Not Push Them
Don’t be pushy. Nobody likes a pushy salesperson.
If a seller asks how long before he or she has to make a decision, it’s best to say, “As much time as you need.” You could always add that, though the seller can take days to decide, you still will be looking at and making offers on other houses during that time. If you happen to put several under contract before this seller decides, it could affect your ability to buy the house.
4. We Make Everything Easy for Them
Make as much of the process as easy as possible for the sellers. Eliminate as much resistance as you can, and you will convert more leads into deals.
Clearly explain what happens if they accept your offer. Let them know exactly how things will go down and what they will need to do. (Usually not much, as the title company will do most of the work.)
Clearly explain the contract in terms they can easily understand. I highly recommend you have a real estate attorney create the simplest contract with the simplest language they can. You don’t want people hesitating to sign an agreement because they don’t understand it.
We also like to tell people they can leave behind whatever items they want at the house. This frees them from worrying about having to get rid of furniture and trash they’d rather not deal with.
DON’T TRY TO FIT ROUND PEGS INTO SQUARE HOLES
Why not have other ways of profiting from leads that don’t fit your investment criteria?
Do you buy rental properties but come across leads for houses that are too expensive for the rents they will fetch? Do you flip houses and come across leads where the seller owes too much?
You can bird-dog these leads and even put them under contract and wholesale them.
Unfortunately, I don’t have enough room in this article to cover these things in detail. But you can download a free copy of my “3 Most Effective Techniques to Turn 50% or More of Your Leads into Deals” guide right now at www.reimobile.com/moredeals.
The free guide describes several options for making money from leads that don’t fit your investment criteria. It also offers techniques for following up with sellers if they don’t immediately accept your offers.
Roughly 50 percent of our deals come with follow-up. Get the guide and find out how to double your lead-to-deal conversion rate.