Many beginning real estate investors make the mistake of starting out with foreclosures. Just about every new bird dog that I have trained asks me about some sort of foreclosure service. The idea is that you will find a "foreclosure deal" and be able to make some money with it. This approach is how I and many other people started out in this business. I used to visit homeowners at their houses and talk to them about their foreclosure and how I could offer to help them. The most common scenario was a seller that wanted to avoid foreclosure and was willing to just leave property.
The problem with this approach can be summarized by the following:
Too much competition - I was not the only one knocking on their door
Too slow - someone got to them before I did
Uncooperative and hostile homeowners - wouldn't you be if every one was banging on your door?
Hard sell - approaching homeowners in foreclosure is a very aggressive tactic
Home owners are often not home during the day since they work
An often overlooked approach by beginners is to utilize the classified ads both online and offline. Search for words like "owner financing", "owner will carry", "must sell", "make offer", "any offer considered", "handyman special", "needs work", "investor special" and so forth.
You need to be looking for distressed homeowners. When I first started looking at the classifieds it took less than one week of trying out this approach for me to find a wholesale deal. It was not one deal but 2 houses which were located in Cincinnati,Ohio. All of these houses were for sale by an investor that had signed a contract to buy both houses and wanted to wholesale the contract. The houses were worth around $140,000 but had sustained some roof damage. I agreed to buy the houses for $95,000 a piece and I found a buyer that purchased them for $110,000 after paying for some basic cleanup I figured there would be around $90,000 in equity.
You can also advertise your services to potential sellers by placing a classified ad in the newspaper. Simply place an ad that says "I BUY HOUSES FOR CASH" with your phone number. The phone will start ringing immediately and you might get as many as 3-5 calls per day.
You might find that this soft sell approach will work better for you. The property owners will be calling you so psychologically you are in control. They are calling you because they need you. They want you to buy their property. It is up to you to decide if you want to or if it makes sense. You can write down the address and pull up the comparable sales . Then you can give them a ballpark idea of what you could probably offer for the house usually around 65% of the after repair value. At that point the homeowner would usually either tell you that they were not interested or they would ask you to come and take a look at their house .
At that point, once you have the house under contract you can decide whether or not you want to keep the house yourself or assign the contract to another investor for a fee. If You are a newbie you should always wholesale starting out.
In addition to classified ads, I have found the following to be very useful:
Car signs - We Buy Houses For Cash and your phone number
Bandit Signs - We Buy Houses For Cash and your phone number
Postcards - mailed to your target area or zip code
Letters - mailed to your target area or zip code
Attorneys - contact local probate, foreclosure, bankruptcy and real estate attorneys
Network - Title companies, mortgage brokers, wholesalers, anyone related to real estate
REIA - go to meetings held by your local Real Estate Investment Club and network with buyers and wholesalers
Bird dogs - hire other people to do all of the above and pay them a percentage on the deal or pay them by the hour.
Typically you pay a monthly fee to use these services and then you get a list of foreclosures in yourWhen you have sellers coming to you, you have all the control. You decide which deals are worth pursuing and which are not. You won't be dealing with hostile homeowners, rather with people looking for your help.Be honest and sympathetic to their needs and let them know if you can not help them.
Taking some of the steps that I have mentioned will mean spending some cash on advertising and marketing. Distressed property owners will not find you if you don't advertise. Most beginners don't want to take this first step. That is the difference between finding a lead and not finding a lead. If you made 5K on an wholesale fee that would pay for a few years worth of all of the above advertising. If you are serious about being a real estate investor then you should be prepared to spend some money advertising yourself and your services to potential distressed sellers.
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