There are a lot of new real estate investors, I imagine, who have just hit the market.
They are hot and excited and want to go out and buy every house that they can.
One of the lessons they will quickly learn, and that I learned as a new investor, is that even if you are getting great leads responding to your mailer, or website, or to any form of marketing you are doing, you won’t be able to buy every one of them.
What is important, especially for the new investor, is don’t get discouraged. You won’t be able to buy every one of the houses from every lead you get. Every one of them will not fit your model. It may not make sense for you, or make sense for the seller, to make that deal.
But you can still solve seller problems with other strategies. Even if you do not get the right to outright buy the house for cash, buy it “as is,” and pay their closing costs, there are still other ways to go.
No. 1 – Solve the seller’s problem
I want to stress first and foremost, our role as investors is to solve those problems for motivated sellers in distressed situations.
We do that buying homes for cash, “as is,” paying their closing costs and moving quickly. And that is fundamental to what we do.
I encourage investors to ground themselves in those principles. That is what will ultimately drive your success. So do not lose sight of that as we discuss other alternatives and options.
One of Kevin’s houses where he solved a seller’s problem and got another lead in the process.
You are going to find yourself sitting across from motivated sellers but for whatever reason your offer may not solve the situation.
A common example is you do you math, calculate your repair costs, consider the market value of the property and you come up with an offer with a logical number for you.
However that might not be the right number for the seller who may have a mortgage on the property balance larger than your offer.
If your offer does not exceed their mortgage balance, they will not be in a position to accept your offer. They may not have extra money set aside to cover the difference. That may be a hurdle you cannot overcome.
A mortgage balance of $80,000 for the seller and your offer of $65,000 can leave you at a standstill. There is a $15,000 gap that needs to be closed and either you or the seller has to close it, and neither one of you may be able to do that.
First, do not walk away. Don’t go so quick.
There may still be an opportunity to solve their problem and for you to generate some income for your business.
No. 2 – Assign the lead
The first technique I use is the real estate assignment.
Perhaps you can give that seller a contract for the price he needs and put an option time on that contract that allows you to market that property legally to other investors. You can assign your contractual rights to that other investor who did not have access to that lead or that seller. That price may make perfect sense to another investor.
So you have solved two people’s problems and generated income for yourself in terms of an assignment fee.
You can tell the homeowner, “Hey I cannot buy your property for that price; it doesn’t work for my model, but I know others who can.”
You may have people in your network who may be motivated to buy that property.
It may not work for someone else. I do not want to oversimplify. But you may be able to find an investor who owns 3 or 4 rental homes in the same neighborhood who may be willing to pay more for a property if it is among other properties he may already own in the area he knows and likes.
He may have tenants waiting for a property in that neighborhood because his other properties are full. He may have maintenance crews already working in that neighborhood. He may be willing to pay more for that property for those reasons.
That is why it may work for another investor but not for you.
If that price is still too high to market to other investors, you will know that because you have local market intelligence. You may determine that, “Hey I cannot even market this as an assignment to other investors because it’s just not a deal.”
Don’t be tempted to push market properties that are not a “deal” to other investors. Be sure to only put in good quality deals to other investors that are suitable for them. Do not offer them over-priced properties because ultimately that will harm you.
No. 3 – Refer the lead
The assignment of the lead is for the wholesale market but the price may still be too high for the wholesale market. So you may want to turn to the retail market.
Perhaps you are a Realtor or you can refer that property to a Realtor and put the house on the retail market to get the price the seller needs.
If I give the seller a Realtor’s number, how do I make money? You can work with your local Realtor. You can discuss a finder’s fee or a referral fee.
You may not make what you would normally make if you were to buy and sell the house or buy and rent the house, but you always try to look at your leads and how to monetize them.
Even if it’s in the form of a small referral lead, you are still generating income for your business. There are plenty of Realtors, trust me, looking for leads who will answer you call. “I have a house for you that is ready and raring to be listed.”
Remember to build your network value
The key to making money on every lead is your network.
The common thread here is that real estate investing is not a job you do in an office from a desk.
You have to get out there and network, get access to your peers and colleagues. You have to develop resources so any one of these scenarios will work.
Be active in the community as a real estate investor and get your reputation out there as a problem solver.
Listen to Kevin’s full talk on this topic here on blogtalkradio.com
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