“The path to success is to take massive, determined action.” Tony Robbins
Back in 2008 when began my full-time real estate investing career the number one obstacle standing in front of me was knowing how to find deals but knowing how to find deals I could quickly flip was a solution I needed in my investing toolkit immediately. I needed cash now as I had $5 to my name, living off weekly unemployment checks, and my first-born son was a few short months away from being born.
Here’s what I did to find the deals that could be flipped quickly to a small list of cash buyers I had waiting for properties from me. The cool thing about this property finding strategy is it’s still highly effective in today’s market. You’ll find I like to use some old and new school strategies a lot of them can work in tandem with each other to create a massive pipeline of properties.
One of the very first things I did was going after houses from investors that didn’t have an existing cash buyer’s database like I had. Although my list of investors was small, I had still had serious buyers looking to gobble up anything I threw their way. My goal for connecting with these investors was through one of the following sources; bandit signs, craigslist, investor meetings, referrals, Facebook and real estate agents.
Whenever I saw a sign on the sign of the road that stated, “We Buy Houses” and contained a phone number I called it. Here’s exactly what I said, “Hey my name is Jason Lucchesi, I’m a real estate investor here in the Indianapolis area, and I came across your sign on the side of the road. I was wondering if you had any available properties I could review?” The majority of these investors who hung the signs had deals already under contract and just needed an end buyer who could execute quickly (aka “Pull The Trigger”). I had the buyer for these investor properties. It worked out extremely well for the “bandit sign investor” and myself. We simply used a Joint Venture agreement which stated the both of us would receive 50/50 of the net profits from closing. The great thing is my investor with the cash never met the “bandit sign investor.” I didn’t have to worry about any circumvention. We just had a closing, and the both of us collected our checks.
The cool thing after the closing ended with this new partner of mine was the repeat business that would follow. It’s like we almost worked with each other hand in hand. They would have the deals from doing direct mail campaigns (that I didn’t have the money for), and I would have the cash buyers ready, willing and able. These types of relationships can work well if both partners on the same and not be bumping heads with each other. Keep in mind this person isn’t a partner on your business entity. I wouldn’t recommend doing that unless you discuss with your legal counsel. I’m not fond of business partners. You can work really with each other by not complicating things by forming a business entity or adding someone to an existing entity.
The next recommendation I have up is using referrals from other professionals such as insurance brokers in this example. I’ve been working insurance reps for a very long time going all the way back to my mortgage days. There’s a ton of great synergy that can benefit one another as each person can refer future business to each other.
Just think about it, when somebody has a claim for say hail damage who do you think they’ll be contacting first? Bingo. They’ll be contacting the insurance agent to help them. Some of the folks that do call with damages to their property may want to sell in some cases. I’ve seen folks want to sell when their facing situations as fire damage, mold damage, bankruptcy, divorce and loss of a loved one. I would always let my agent know I’m interested in purchasing properties in these scenarios.
If a policy goes unpaid for a month that policy is no longer valid with coverage, and who do you think receives a notification that premiums aren’t being paid? Bingo, again. The insurance agent receives notification. The agency typically calls their client to find out what is going on, and they may happen to discover the clients must sell the house due to unforeseen financial hardship. If they want to sell the subject property, the insurance rep lets them they have an investor (me) that would be interested in purchasing. This happens more times than you think. I put my name out there as a lot of these homeowners don’t want to do with a real estate agent. They just want to sell and move on as quickly as possible.
The great thing about having an insurance agent refer you business the easier it is with getting the property under contract. Receiving a third-party endorsement from someone the homeowner’s trust makes them much more comfortable when deciding on who they should work with. Keep in mind on how much potential business just one insurance agency can rain upon your business. Start reaching out to agencies you can work with.
The final recommendation is working directly with investor-friendly real estate agents. There’s quite the difference between retail agents that just simply want to list and show properties versus agents that still do the traditional side of real estate but also understand the needs of investors. The agent that knows what we’re looking for will help us tremendously.
The MLS can be a goldmine of deals if you know what you’re looking for. Here’s what I have my agents give me a hand with as far as locating deals I can put under contract that makes me money. I want to look at estate sale properties as I know the list price can be bought at a nice discount. The next thing I’ll review is short sales. With short sales, most of the properties haven’t been approved with a predetermined amount from the bank which is a great thing. You can do review these properties, see if they fit your buying criteria, and put in an offer. The cool thing with short sales the earnest money deposit isn’t due until the short sale has been approved. I wouldn’t make a ton of offers on properties you don’t intend closing on.
A couple of other sources most investors don’t go after are properties with fixer-upper being a keyword used commonly through the MLS, and properties that have been listed on the market for longer than 300+ days.
The fixer-upper properties can be homes needing a little TLC to fire-damaged houses. You can strike gold when you find mold and fire damaged properties. I say move forward with these homes just if there aren’t any structural damages beyond your scope. If you have foundation trouble, I tend to stay clear as the property more than likely needs to be demolished and rebuilt. I rarely come across major home structure issues that have me move on. A lot of investors don’t take the time to dig for these properties. I say grab a shovel and start digging as gold isn’t far away. Keep in mind the agent will do most of the heavy lifting as far as finding the gems you can look at it.
With the properties listed on the market over 300 days, I would approach these as for why have they been on the market so long? Most time investors are just submitting offers without finding the “why” from the listing agent. For example, I called a listing agent to know the “why ” and she happily told me the owner is not in a rush to sell. I went to view the property. I called the agent to let them know I was interested but that I was wondering what if they would come off the list price. The listing agent found the information out that I needed and stated the homeowner was willing to come down but that I had to make an offer. I went to review the property again to give the information an idea for my interest level in the house. A day later I contacted the listing agent and stated I’m an investor looking to buy this property, fix it up, and sell it to a lovely family, but that my number be somewhat low. I advised the agent that I didn’t want to upset anyone but that this would be my offer. The agent went back to tell the owner of record my offer, and they countered, but only by $10,000. The house had an after-repair value of $200,000. The list price was $150,000. I picked it up for $73,500. The home needed $30,000 in rehab. I wholesaled the property to my end buyer for $95,000. All parties were pleased with the results.
The moral of the above case study is to ask questions, find out the “why” and make sure to give your “why” for buying the property. The owner of this property just wanted to know the property would go to a lovely family and not turned into some rental property. They just wanted some peace of mind before selling. All it took was a couple of simple phone conversations.
You can use the above methods immediately for putting properties under contract and making money quickly. Set the goal of 15 offers every week on new houses to flip. This will get you to 60 offers per month which will result in 2-5 closed transactions. You have the power to be great. Go out there and make it happen.