SMARTERLANDLORDING

ADVICE FROM EXPERIENCE

Finding and Analyzing Properties

Location – More Than Just Place and Position

by

Most are aware of the three most important factors in any real estate deal – location, location, location.  But, many are perhaps not aware of just how many intricacies that location can actually play.  Location means much more to a smarter real estate investor that just place and position.  Knowing these items can really help an investor when choosing where to buy properties.

When thinking about real estate location, most will immediately jump to the large scale positional factors affecting purchase price.  We are all aware that real estate prices are much higher in San Francisco than in Memphis, or in New York City versus Omaha, Nebraska.  Most also understand that the location within those areas can also affect the price.  Real estate fronting on central park will be a bit pricier than something located in Hoboken for example.

National Versus Local

Obviously, place and position, at both a national and local scale, is a major factor affecting the price of real estate.  There are however a number of other items that many may not be aware of which are also affected by location.  These locational items can also affect the numbers on a real estate deal and will therefore affect the price when buying or selling.  These items can be much more subtle and take some very local knowledge of the real estate market.

To highlight my point, there are several examples which exist here in my local market of Memphis, Tennessee.  These examples illustrate the differences between what are termed “sub-markets,” which always exist in the context of the larger real estate market.  How big is a sub-market?  They can range from the fairly large neighborhood or subdivision to the much smaller city block or condo building.  Sub-market size can vary greatly as can the situations found in them.

Sub-Market Differences

One sub-market difference here in Memphis relates to the provision of appliances.  I would be greatly relieved if I never had to supply another appliance in one of my properties again, but the sub-market I work in just will not permit me to do that.  I simply have to provide appliances if I want to have a quick turnaround with quality tenants.

Other Memphis sub-markets are the complete opposite.  In both higher and lower income sub-markets I know landlords who do not supply appliances and seem to do just fine.  Appliances are just not supplied in some sub-markets so tenants expect not to have them.  Or demand for available properties is so high that landlords have the luxury of not having to provide them.  Think of the repairs expenses that I would not have if I did not have to supply appliances!  But on the other hand, think of the difficulties that come with renting those properties and the tenant issues I might have in those sub-markets.  As one might begin to understand, local sub-market knowledge can really make a difference when choosing where to buy investment properties.

Another factor I have noticed relates to repairs.  In some higher end areas around town, I know landlords that require their tenants pay for repairs.  They simply insert a clause in their lease making tenant responsible for anything less that $100, and the tenants sign off on it!  Amazing.  Sounds like a great idea but it is just not something that I could do in my sub-market.  I would never get my units rented as most other landlords do not do make their tenants pay.

Lastly, there are utilities  One has to consider the name that will be on the utility bill.  Will it be the landlord’s or the tenant’s?  It will differ here in Memphis due to sub-market intricacies.  We require utilities to be placed in a tenant’s name so that they are the responsible party.  In other parts of town, that is near to impossible due to the tenant base.  

Understand Your Sub-Market

Location, location, location are the three most important factors in real estate for good reason.  Both large and small scale positional factors come into play in any real estate transaction.  While the large scale factors can be quite obvious, the small scale ones are more easily missed, but they are no less important.  Understanding the sub-market you are investing in is just as important as understanding the larger, area-wide market conditions.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

Subscribe to Smarterlandlording and receive a Free Report: 21 Tenant Screening Red Flags

The Effects of Rent Controls

by

I wrote about rent controls here a few months ago.  I closed that post with a quote from economist Assar Lindbeck.  “Next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities.”

Since writing that post, New York has enacted more rent controls and the destroying effects of rent controls are now beginning to appear.

From The Wall Street Journal:

Barely a month has gone since New York passed its new rent-control law, and the predictable problems are fast emerging. Blackstone Group , which owns the Manhattan developments of Stuyvesant Town and Peter Cooper Village, is putting renovations on hold, reports Crain’s New York Business.

“In light of the recent legislation, we are in the process of evaluating capital investments at Stuy Town,” a Blackstone spokeswoman said. Maintenance, such as fixing leaks, must legally continue. But Crain’s, citing an unnamed source, says “renovations to vacant units would stop, as would potentially larger construction projects.”

Together the two properties cover roughly 24 city blocks. They include more than 11,000 apartments, some of which fall under the state’s rent regulations. Because the complex was originally built in the 1940s, sprucing up is necessary.

The old rules at least gave landlords some leeway to recoup costs. When an apartment became vacant, rent could rise 20%. If rent passed $2,774, the regulation ended, and the market rate could be applied. The new law axed those provisions, lowering the incentive to invest and update properties.

Stuy Town and Blackstone are making the news because they’re enormous, but the same logic applies to every building owner. Economists are more or less unanimous in calling rent control destructive. The only short-term winners are people who’ve already locked in.

The Stuy Town tenants association favored the new rent law. No wonder: Its president told another newspaper in 2016 that she moved in 35 years ago and was still paying less than $1,400 for a one-bedroom. You might call that the low price of stagnation, but wait until neighboring apartments deteriorate around her.

In Oregon, which implemented statewide rent controls recently, Karen Sale notes in a comment at this post that the law “dramatically affects Oregon landlords. Many are putting their long term rentals on the market for sale.”

H/T to economicpolicyjournal.com 

Get Off Your A$$ And Knock On Doors

by

It’s hard to stay focused on real estate all the time.  To give my brain a break, I like to read “page turners.”  One of my favorite sets of “page turners” is the Harry Bosch series.  If you have never heard of Harry Bosch, he is a fictional character from the mind of author Michael Connelly.  Bosch is a detective in LA.  He is good at what he does.  He always finds the killer.

In the book series, Bosch recalls what a senior detective once told him when he was just a rookie.  To catch the killer, you have to “Get off your a$$ and knock on doors.”  In other words, the killer will not be caught if you just sit at your desk.  You have to get out there and pound the pavement and track the killer down.  The phrase is repeated enough in the books that if you look close in the Amazon show “Bosch” you will see the phrase pinned up in Bosch’s cubicle.

Where Am I going with all of this?  While we landlords and real estate investors are not out there looking for killers, the phrase is still good advice for us.  Why?  Because we are not going to find new deals or solve certain problems unless we get off our a$$ and knock on doors.

Think about it.

There is a lot of competition out there these days searching for real estate deals.  Foreclosure auctions are dominated by hedge funds or other big money interests.  Anything remotely close to a deal that is listed on the MLS has multiple offers within hours.  I even get three or four random phone calls a week asking me if I want to sell.

But, despite all of this, if we get off or a$$ and go knock on doors, if we get out there and drive around, if we seek out the owner and start a conversation, the chances of landing a deal get much higher.  Knocking on doors is something that many people will just not do.  It is easier to sit behind a desk and it is safer to hide behind a voicemail.  Folks, in today’s hot real estate market, you just have to get out there.

Landlords also have to get out there and knock on doors, their own doors.  They need to do property inspections and keep up with what their tenants are doing.  Otherwise potential problems and issues will remain hidden.  Hidden problems fester and often turn into bigger ones later on.  By knocking on doors you can find problems before they fester too long.

Knocking on doors is not easy and can be intimidating.  Trust me, I understand that.  I have been yelled at and told to go away more times that I can count.  Nobody likes rejection.  We instead fear it.  But we have to get over that fear and get out there.  It is how things get accomplished and it is often how we keep moving forward.

Location, Location, Location – It’s All In The Details

by

Location, location, location.  Those are the three most important factors determining the value of a piece of real estate.  If you have never heard this saying before, please commit it to memory.  Smarter landlords and real estate investors know this adage well and apply it constantly when making decisions regarding real estate purchases.  They also realize that location, location, location is all in the details and can refer to many different attributes, some very broad and some very specific.

Smarter investors also know that property sellers will hype and promote the positive locational attributes of a property while downplaying the negative.  As investors we must learn to see through this hype and make sound investment decisions.  We have to use our locational knowledge to determine if the hype is justified or not.

Where Exactly?

We have all witnessed neighborhoods become the hot and trendy place to be.  When that happens, real estate prices in those neighborhoods can rise significantly as the demand for it increases.  Property sellers will naturally want to be associated with this trend.  As owners try to ride this neighborhood wave up, it is amazing to watch the boundaries of these hot neighborhoods expand farther and farther out, taking in more and more properties.  Smarter investors however do not fall for it and use their localized knowledge and know what the true neighborhood boundaries are.  They realize that crossing a boundary can change perceptions and thus values significantly.  They are cautious when properties are described as “near” or “in the area” when listed, knowing that the location may just be being hyped.

Another Example

Even the hottest neighborhoods can have their locational drawbacks.  Inherent locational factors will matter just as much as being in the “right” neighborhood does.  Location on a neighborhood boundary, on a busy street, on a corner lot or near power lines are just some of the minute locational factors that come into play.  Thus, while a seller is being completely truthful when advertising their property as being located in a hot neighborhood, they may not be telling you the whole story.  Properties located on major roads or near power lines are not going to generate as high a price as others.  Do your due diligence to understand these inherent locational factors.

One More Example

Associating a property with a major employment center or institution is another common ploy.  In my part of the world there are several institutions of higher learning nearby.  Obviously, being close to an institution of higher learning can be a good draw for tenants.  Many times those words “near” or “area” often come into play again.  It can be amazing how far out some “college areas” go and what some folks definition of “near” is.  Smarter landlords and investors are cautious and use their local knowledge to see past this attempted association.

Property owners who wish to sell will naturally try to create a buzz to get as many eyes as they can to look at it.  There is nothing wrong with that.   In doing so however the truth may be stretched and expanded a bit.  We investors need to be aware of this stretching and be ready for it.

Finding Property Owners

by

Finding property owners sometimes takes a bit of detective work and persistence.  Pablo Pererya in the last episode of the SmarterLandlording Podcast talked about doing so with his Greatest Difficult Deal.  Property owners can, willfully or not, make themselves scarce.  When they do, what are some tips to go about finding property owners?

One Of Our Many Hats

Finding and negotiating with the property owner often affords the real estate investor the best chance to acquire a property.  At first glance you might think that finding the owner would be easy, just look it up on the local property assessor’s website.  Most of the time, doing just that will work.  But what if it does not?

One of the many hats you will wear as a real estate investor is the Deerstalker.  You sometimes have to be a little like Sherlock Holmes in this business.   Sure, you can send letters to the address listed on the local property assessor’s website.  But your competing real estate investors are doing the same thing and often those letters are just stacking up in the mailbox or being returned.  To get a good deal, you have to be better than that.  You have to get ahead of your competition and be a detective.

So where to look?

Property Records

Public property records are the first place to start.  Sometimes property owners list the property address as their own, when they actually reside somewhere else.  Any letter you therefore send will just be delivered to a vacant property and not seen for perhaps weeks if ever at all.  If you find this to be the case, search public property records for the name of the owner and you just may find another property listed.  That may be the owner’s true residence.

Property Tax Collector

Property taxes are often somehow get paid.  Who is paying them?  Who is writing the check?  Go to your local tax collector’s office and ask to see the records.  Do not assume that the office that records addresses (the right hand) and the office that collects the taxes (the left hand) know what each other are doing.  When you investigate here, you might just get a lead.

Neighbors

Neighbors can be a great source of information.  Get out of the car and knock on doors.  Many neighbors will be happy to help you because they want to be rid of that eyesore next door.  It is amazing what neighbors, especially long term neighbors, can tell you.   At the very least, leave the neighbor a business card and ask them to pass along your info or call you if they learn more.  Many will do just that.

The Police

This was one of the sources Pablo discussed in the podcast interview.  I know you might be intimidated by the police, but get over it and go ask. They are not going to arrest you.  The worst they will do is scowl and tell you no.  On the other hand they might be very happy if you can help rid them of one of their problems.

Heirs

Heirs might not even know they own a property (yes, that happens!).  Many heirs will often be happy to work with you because they see you as a paycheck and they live far away.  One great source to locate heirs is findagrave.com.  Use this resource for sleuthing and to make connections to heirs.  Yes, it is a bit ghoulish but it works.  This site is also a fantastic genealogy resource.

Just Google

Don’t forget to just Google the name.  Pair your property owner’s name up with any other information you may have such as the address, date of birth or death, whatever.  Dig past the first few hits.  It is remarkable what is out there on the web.  You may find a clue that will lead you to the property owner.  Heck, you may even get their phone number.  Try Google and then give them a call.

It has never been easier to find property owners that it is now.  What used to take a trek downtown to government offices and hours going through reams of paper can now be down with a few clicks from your home office.  A little legwork with neighbors or the local police department can also yield results.  I find wearing this hat as a real estate investor to be one of the most fun, interesting and profitable.  With a little practice, you might as well.

Have you used any unique sources to find property owners?  Please share your experiences with a comment.

How Rehab Costs Affect Cashflow

by

Accurately estimating the costs of a potential rehab is a vital part of a real estate investor’s job.   Not being able to do so will affect your cashflow and your bottom line.  This is because most real estate investors, myself included, generally need to borrow rehab funds along with those needed to purchase.  Since we have to pay those funds back, the increased payments affect your bottom line for years to come.  An example of how rehab costs affect cashflow will help to demonstrate my point.

Before I get started, I am assuming you know what cashflow is and how it is calculated.  If not or if you need a refresher, I discussed cashflow and how to determine it here.

The Best Deals Need Rehab

Many of the properties that you will purchase as a real estate investor will need significant amounts of rehab.  Yes, every once in a while you may find a cream puff that is in almost perfect condition, but these cream puffs are few and far between.  More often, we investors find properties that are outdated, functionally obsolete or just plain run down.  It is with these types of properties that we often make the best deals

Accurately estimating how much it is going to take to get these properties functional is thus a big part of our job (see here and here for tips on estimating a rehab).  Underestimating the costs will likely lead you to pay too much, while over estimating the costs will cause you to potentially lose out on the deal since another investor will offer the seller a better offer.  Messing up the rehab amounts will either cost you money or cost you potential deals.

How Cashflow Is Affected

You find a listing for a four-plex offered at $200,000.  In our example here, let’s assume each of the four units rent for $650 per month or a total of $2,600.  Let’s further assume that property taxes average $300 per month, while insurance costs $100 per month.  Finally, let’s assume further that 90% of the purchase price can be borrowed at a fixed rate of 6% and aromtized over 30 years (Google “mortgage calculator” to find and play with the payment amount).

Let’s put all of that together and look at the initial cash flow numbers.

 

Monthly Income                                                  $2,600

Monthly Expenses

Principal and Interest Payment                       $1,079

Property Taxes                                                     $300

Insurance                                                              $100

Repairs and Maintenance                                  $260

Vacancy Credit                                                     $260

Reserves                                                                $260

Total Monthly Expenses                                   $2,259

Monthly Cash Flow                                            $341

 

Not a bad but not a great cashflow either.  There is a potential deal here with a bit of negotiation.  However, this example assumes that there is no rehab needed and no rehab costs are included.  While such a scenario is possible, the more likely scenario is that there is a significant amount of rehab needed.  In fact, it is often the case that some of the units may be vacant due to lack of repairs.

Adding In Rehab Costs

So let’s re-examine our example and assume there is $50,000 in rehab needed.  $50,000 you say!  That seems like a lot.  Well, it is not really.  Sprucing up kitchens and bathrooms, painting walls and installing new flooring does not come cheap.  It is easy to spend $10,000 to $15,000 when rehabbing a dwelling unit (I have not even gotten into systems like HVAC and electrical).   These numbers are entirely plausible.  So let’s add these rehab costs to the amount you need to borrow.  You will note that the principal and interest payment has increased.

 

Monthly Income                                                 $2,600

Monthly Expenses

Principal and Interest Payment                       $1,349

Property Taxes                                                     $300

Insurance                                                              $100

Repairs and Maintenance                                 $260

Vacancy Credit                                                    $260

Reserves                                                               $260

Total Monthly Expenses                                   $2,529

Monthly Cash Flow                                            $71

 

There is still positive cash flow, but it significantly reduced due to the increased amount financed.  To me, the cashflow is just not enough to take on the deal.  There has to be more cashflow as the margin is just too tight.

Reduce The Price

The best way to increase the amount of cashflow is to reduce the principle and interest payment.  There are a number of ways to do that, including seller financing or putting more money down.  But, the logical step however is to negotiate with the seller and reduce the price you pay.  A $20,000 reduction in price and the amount financed will increase the cashflow over $100 per month.

New real estate investors have to learn how to calculate cashflow and estimate rehab costs.  This example demonstrates why it is so important to do so.  It all directly affects our bottom line.

 

Subscribe to Smarterlandlording and receive a Free Report: 21 Tenant Screening Red Flags

Quickly Estimate Three Major Rehab Components

by

Rehabbing is a big part of a real estate investor’s business. After all, run down properties often offer profit potential. Accurately and quickly estimating rehab costs is an essential tool. In this post I want to go over how to quickly estimate three major rehab components, roofing, HVAC and electrical panel upgrades.

Rehabs Contain Many Components

Every major rehab will contain several major components and many smaller ones.  Some of these components can be estimated fairly quickly because there are established, industry wide standards.   Moving quickly with a rehab estimate towards making an offer is important because there is often another investor right behind you.

For the purposes of this post, I focus on the basic standards and materials used for single family and smaller multi-family properties on three major components.  In future posts, I will add to this component list and bring the components together.

Roofing

Every property needs a solid roof, but weather and time take their toll.  A new roof is often one of the more costly components of a rehab budget.  Estimating the cost of a new roof is not too difficult however.

The standard measurement to remember that is used in the roofing trade is the square.  A square is 100 square feet.  The cost to replace a square of roofing with average materials and labor is fairly standard.  You can of course get up on a roof and measure the actual square footage of the roof and then divide by 100 to find out the number of squares. But there is an easier way.

A quick rule of thumb for roofing is to budget about $2 for every square foot of interior space on the house.  Square footage can usually be looked up quickly on the internet.  Thus, if a house is 1,500 square feet, you can budget about $3,000 to replace the roof.  Of course there is usually some rotten wood and decking that needs to be replaced.  So adding on an extra $500 or so is not a bad idea.

As I said, this is only a quick rule of thumb.  Other factors such as pitch (or angle), height, the number of old shingle layers that need to be removed and the amounts of rotten wood can add to the cost.  But for a typical single-family family house the formula works fairly well.

HVAC

Most buyers and tenants today want modern conveniences.  One of those conveniences is central air conditioning.  Budgeting for the addition of a central heating and cooling unit is also fairly straightforward as there is a standard measurement that is used.  This measurement is the ton.

A ton of HVAC will usually cool about 600 square feet of space.  Each ton costs approximately $1,500 to install.  Again, using our 1,500 square foot house as an example, a 3 ton HVAC unit should adequately heat and cool the house.  Cost for complete installation, including all ductwork, vents, etc., is around $4,500.

Again, this is a general rule of thumb and connections to electricity and gas or ease of accessibility can affect the cost.

Electric Panel Upgrades

Many older homes were built before modern circuit breaker panels were used.  Fuse boxes were the norm and can still be found on many older homes.  Today it is often best to upgrade these fuse boxes to modern circuit breaker panels.  Modern appliances such as clothes dryers and central cooling demand it.

Upgrading a fuse panel to a circuit breaker panel is not very difficult or time consuming for the trained electrician, but it is a little costly.  Expect to pay around $1,500 for a new panel.  Keep in mind that the $1,500 applies to each panel.   So if you are looking at a duplex property where each unit has its own separate electric meter and panel, budget $3,000 to replace both.

The Big Three

These three items are some of the most common big ticket rehab items that can be fairly easily estimated.  Your local market may vary a bit and these prices are not from the folks you see advertised on the billboards all around town.  If you see something out of the ordinary or are not sure, get a trusted contractor to take a look.

Artificial Boundaries Affect Real Estate Values

by

The other day I was out looking at a property.  It was a decent property with plenty of nice features but the value was just not there.  If only this property was just a few blocks the other way I thought to myself, values would be very different.  I went back to my office and got to wondering why values were so different.  Why did a few blocks matter so much?  Artificial boundaries seem to be part of the answer.

The Setting

The property I was looking at was a grand old house built at the turn of the last century.  It lies in a neighborhood that is surrounded by other grand old houses, many of them now cut up from single-family to multi-family units.  Many of these homes show their age.  They look a bit tired and worn.

Less than two blocks away across a major boulevard, sit very similar properties.  The street names are the same.  The lots are the same.  The homes are of the same style.  Yet values are much higher.

Why then the big difference in values when so much is the same?  With a little investigation, I found two artificially created boundaries.  These are zoning district and school district boundaries.  These artificial boundaries have had a large impact on these two areas.

Some History

The areas I’m talking about were developed at a time before zoning was very common.  Back then, neighborhoods tended to develop a bit more organically as opposed to the more rigid “planned” manner they are today.  Land uses such as single family homes and four-plex apartments were often mixed together.  This mixing of land uses worked to prevent concentrations of apartments or rental properties, making it difficult for any one land use to have a huge effect on values.

After World War II, things changed.  Zoning took hold.   Zoning by its nature is very rigid.  Land uses were separated, with single family being located in one area and multi-family being located in another.  The boundary between these two types of land uses was the major boulevard I mentioned.  Why there?  Who knows?  But the effect is evident.  By concentrating allowable multi-family uses in one area, the old homes were slowly converted over time.  There are a few single-family homes still located in the area but their value has been reduced.  After all, why would a homeowner want to live in an area surrounded by apartments when they could go two blocks the other way and not be?  These homes were effectively removed from the single family market but the demand never lessened.  Thus, prices for those in single family only zones rose.

Schools

The school zone is the other boundary I discovered.  The major boulevard is also the dividing line between school zones.  On one side, the school district is perceived to be much better, not so much one the other.  I really do not know about the actual performance of either school, but I do know that perception is often reality.  People will pay to be located in what is perceived to be a better school district.  They will not pay for what is perceived (rightly or not) to be a lesser quality school district.

These artificial and arbitrary boundaries matter.  They matter greatly.  As such, they are items that a real estate investor should investigate as they are examining properties.  Today, with most information easily available on the internet, it is fairly easy to do so.  I would even suggest taking some time and examining the zoning and school district boundaries for your particular market.  Get to know them and know how they affect values.  Knowledge is power and location, location, location are the three most important words in real estate.  Knowing the location of these two artificial boundaries may just give you that extra step you need to keep ahead of your completion or out of a bad deal.

Inspecting Properties Before You Even Leave Your Car

by

Adding properties to your portfolio is an obvious goal of real estate investing.  Adding those properties however means due diligence on the part of the investor and part of that due diligence is often a property inspection.  Property inspections can be very basic or very thorough and each investor will have their own inspection style.  For me, I at least visually inspect every property I plan to buy.  That begins when I drive up to the property.  You can easily begin inspecting properties before you even leave your car.

When you drive up to your next potential deal, stop, look around and take note of the following items.

The Adjacent Properties –Taking a look at around a property’s surroundings is important for three reasons.  These reasons are the three most important factors affecting the value of any piece of real estate.  They are location, location, location.  What is the setting of the property?  Are the adjacent properties similar?  Do you notice problems with adjacent properties such as disrepair, trash, junked vehicles, people hanging out, etc?  These are potential issues that can and will also affect your property.   Plus, they are not issues that can be easily fixed by you so you want to notice them before you buy.  Take a good look around and see what the location, location, location of the property is.

The Front Yard – Here where I invest, most sewer and water lines run from the property towards the street.  Those systems can be very expansive to repair and replace so I always look at the front yard for tell tale signs of problems.  Are there puddles when it should be dry?  Is there water running into the street?  Do you see any depressions in the yard or freshly dug dirt?  These could all be signs of trouble that you should check further.

The Roof – The roof of any property is usually best seen from afar.  You cannot really tell anything about it if you are up too close and below.  Because of this, when driving up to a property the roof is often one of the first things I look at.  Do you see missing shingles?  What about depressions?  Depressions can mean a lot of rotten wood.  Look closely.  In fact, carrying a pair of binoculars is not a bad idea for a quick inspection when you cannot get up close.

The Property Itself – Take a broad, whole look at the property itself, this simple act can alert you a lot of deeper issues.  Does the property look clean and well kept?  Is there trash or accumulated clutter everywhere?  Are the needed repairs obvious and many?  Do things seem out of line and out of place?  Can you see haphazard repairs made over the years?  If you see of lot of the above, you can expect more of the same on the inside and in paces you may not get to see.  Plus, these items can tell you a little bit about who may be living in the property and the accompanying issues you may have to deal with if you take this property on.

Property inspections are a necessary part of purchasing any investment.  They can be as detailed as you want or need them to be.  You can always tell a lot about a property by just looking through your car window.   Be sure to keep that in mind as you pull up to your next potential deal.

Is Mass Marketing Worth The Hassle?

by

There must be a new real estate guru out there selling a new mass marketing system.  I say this because I have received too many calls in the past few weeks all repeating the same script asking if I want to sell for it to all be a coincidence.  Someone, somewhere just put on a seminar and sold a “system.”  Marketing is something we all have to do.  I just wonder, is mass marketing worth the hassle it generates?

I have not seen whatever this system is, read it or watched it.  But I have been down this road before and I have a pretty good idea of what the system entails.

Some entrepreneur has managed to put phone records and real estate records together.  It had to happen sooner or later.  Then, they wrote a course describing how one can get rich quick with real estate.  It lays out an “easy script” that anyone can use to quickly buy properties.  Buyers are told that people will be banging on your door in no time.  All they have to do is buy the list, record their message, broadcast it and then wait for the money to come rolling in.

These systems, usually in letter formats, get peddled every so often.  I know every time another real estate seminar has come to town because I start receiving tons of letters asking to buy my properties.  The phone call aspect is just an updated version of this mass marketing technique, and I have to say it leaves me with feelings of annoyance and trickery.

Why?

For one thing, you called me on my phone.  Phones today are basically computers.  I am always looking something up or doing some other kind of business on my phone.  Your phone call interrupts that, instantly blocking whatever I was doing.  It is not like getting letters in the mail, where I choose the timing of the interruption.  You have instead inserted yourself into my time.  It is annoying, no one likes it and it honestly starts you off on the wrong foot.

Secondly, most of these calls are hidden behind an unknown number.  Sometimes, the phone does not even ring.  Instead it chirps and vibrates, shows the phone screen and just goes to voicemail.  Thing is, about the only person who leaves voicemail anymore is my 82 year old mother.  Many folks I know do not even check it or delete them outright (Perhaps because of techniques such as this).

Why hide behind the “unknown” number?   If you really are interested in my property, why use such a trick?  It conveys an impression of shysterism.

So why even use such a system?  The answer people are sold is that the system will increase response rates.  That may be true, but no matter what mass marketing system you use you will get responses.  But they will likely not be the responses you want and here is where the hassle comes in.

Most people who will return your call fall in one of three positions.  They are either tire kickers just testing the waters.  They are upside down in terms of taxes, liens, loans or repairs.  Or they are experienced investors like me.  None of these three are going to give you a deal.

Motivation is the key to any real estate deal.  Tire kickers are not motivated.  They may want to sell, but they do not need to sell.  They will often then get angry with you because you promised a “fair” offer in your message that does not sound very fair to them.  People who are upside down may be motivated but they are of little value because there is often no way a deal can be made.  The bank, the lien holder or the taxing authority have to take the hit first.  Again, people are going to get mad at you because you will not take over their problems.  Plus you likely just had to sit and listen to a long sob story.  Finally, people like me are not going to play by your script and are angry at you for interrupting them.  We have heard your script many times before.

That is a lot of anger directed at you.  Do you really want that?

I answered one of these calls the other day just out of curiosity.  You could instantly hear the timidity in the person’s voice.  I am nearly positive that timidity came from not knowing what they are doing and not realizing the deluge they were in for.

The call went something like this.

Caller: “Would you like to sell your property?”

Me: “Sure, everything is always for sale (it is too!).  Make me an offer.”

Caller:  “Uhh.  Umm.  Well…what will you take?”

Me:  “No, no, no.  You see you called and interrupted me, so you make the offer.”

Caller:  “Click.”

Was I too harsh?  Maybe, but I am already annoyed at the interruption.

Is any of the above really a good use of your time?  I learned quickly when I tried these systems that it was not.  I got tired of being yelled at and I do not think I ever got a deal out of it, even with follow ups.

Today, I am much more specialized and zeroed in with my marketing techniques and get much better results.  Sure mass mailings and phone calls can generate a response, but everyone else is doing it and the mess you have to wade through is just not worth the hassle to me.

I got into real estate to work and be yelled at less, not more.

Anyone else getting these calls lately?  What are your thoughts on these mass marketing techniques?  Please let me know with your comments.