I’ve been hunting bargain properties for decades. Just like everything else in life, the process has evolved. In a lot of cases, what used to work doesn’t work anymore, and what works today wasn’t even on the radar last year. If you want to be competitive in today’s market, you are going to have to get creative in order to sneak one by the hundreds of other investors all looking for those diamonds in the rough.
A Bit of Nostalgia
In the good ol’ days, which is to say the 1990s, it was all about the classified ads. Do you recall an anomaly called the newspaper? It’s no wonder it went all but extinct. They don’t cover the news these days, and who uses paper anymore? Back in the 1990s, on any given day I could snag a copy of the daily paper, open it up to the classifieds, and search out the sections that listed homes for sale and homes for sale by owner. It was pure heaven: simple, quick, and easy.
There, in those sections of the paper, was where sellers would post their properties for sale – by the dozens! I’d start mulling over the ads and calling sellers. I didn’t know it then but the gurus of the day referred to this as “Dialing for Dollars,” and it worked! By the end of the day I’d always have a contract on a house. A real winner too! A lot of days I’d end up with two or more of them and I felt like I had barely even been trying.
By 1999, I had such a smooth process in place that I was buying, selling, and holding between 50 and 100 homes in inventory each year. It was fantastic, and I felt pretty good for a guy with no silver spoon or formal degree. Don’t worry, though. I’m not getting smug. I’m just telling you where I started.
The Century Changed, and so did the Housing Market
In 2000, finding houses was still a snap, but I was beginning to notice others jumping into the game. It seemed like there was a real estate investing guru on every late-night commercial and a different guru holding a seminar in my town every other week. Investment clubs started popping up and hundreds attended their monthly meetings. I started having to compete for houses. While classifieds still worked for finding deals and buying houses they were the most obvious place to go, so everyone went there. Same for the foreclosure auctions and the pre-foreclosure lists; everyone was knocking on those doors. I recognized right away I’d have to get off the beaten path to find the really good deals.
I got off that beaten path, literally, and started posting the tried-and-true investor special: bandit signs. You’ve almost certainly seen bandit signs on nearly every high-traffic corner you drive by on a weekend, and they are relatively little work, cost relatively little, and also come with low risk despite being, well, discouraged by most municipal codes. One year, we put out 600 bandit signs and bought 32 houses in the following six months. This lead generation option is still a good one, but I personally feel like it has lost its edge as more and more investors have started using them. Some cities even have “sign police” who work on the weekends now removing signs and issuing citations. Some investors still swear by it, however, and put their bandit signs out religiously on Friday night before pulling them back down on Sunday.
The Dawn of the Analysts
In the wake of the housing crash, a new wave of house hunters began to emerge. These bargain buyers had stats, graphs, and charts. They knew all the demographics, could tap county courthouse records via computer, and started mining for houses in areas previously untapped. They began targeted mailings, with postcards and letters that look like any other but were very sophisticated in how they were worded. The results of every mailing were measured and evaluated and the term “cost per acquisition,” which told them precisely how much it cost them to generate a lead that eventually became a deal, became part of the lexicon. These statisticians and analysts created a hybrid real estate investor group who had a keen eye for economic trends, a delicate touch with sales copy, and serious real estate investing savvy. This new breed of investor initiated the process of lead targeting, which enables investors to identify their perfect audience and their ideal motivated seller, then send postcards and other correspondence to the populations most likely to be motivated to sell at a discount.
How to be an Analyst Starting Today
Sound like a good strategy to you? Take a look at how targeting works to see if it might be a good avenue to bargain properties for you. First ask yourself: Who is most likely to be a motivated seller? As more and more of these analysts popped up, the industry started homing in on certain types of people and properties more likely than most to be motivated to sell their house fast, cheap, or both.
This group includes:
- People who own abandoned houses
- Absentee owners (houses the owner didn’t live in)
- Owners delinquent on their property taxes
- Owners who have been assessed a fine for code violations (grass too tall, or unsafe properties, etc.)
- Properties assigned a Substitute Trustee (The precursor to foreclosure) Then, the statisticians begin to push harder.
They started looking for information about:
- People who recently died
- People who recently filed for divorce
- People being sued for past due property taxes
- Documents in the courthouse deed records that contained the words “The Estate Of”
Wondering what all of these searches are about? Well, the premise for seeking these specific bits of information is actually quite simple: A lot of homeowners are not where they appear to be based on public record. That means that when you send your marketing letters or postcards, they are not getting them because they’ve moved and the records are not accurate. Find them, and you have beaten your competition hands down because most people do not realize that a postcard marked “return to sender” is one of the best leads you can get. Most investors do not realize a postcard marked “return to sender” is one of the best leads you can get.
Should You “Go Pro?
The real lead generation professionals employ sophisticated skip search software: the kind of technology used by attorneys, law enforcement, and even the CIA and the DEA. You can run but you can’t hide! That same sophisticated skip trace technology is used to find the relatives and heirs to properties left behind.
Believe me when I tell you this is where the real deals are found. Long after everyone else has thrown away those “Return to Sender” postcards and letters, the professional house finder is just getting started.
Don’t want to invest in your own skip-tracing software license? There are many other options. You can purchase a list of addresses from a company that generates such lists. You can also access the public record in a number of creative ways using the Freedom of Information Act (FOIA) to get the data you desire. You can even network at events where your target population of those relatives might also be in attendance or purchase advertising in media venues that heirs to estates, for example, might view regularly. The key is to identify what type of motivated seller you hope to reach, then figure out where that seller is likely to be found. And, of course, keep evolving. You can be quite sure that your competition will.
This article appeared in the December 2017 Think Realty Magazine.