Overpriced Crappy Houses Cost You Money!

Overpriced Crappy Houses

I NEED DEALS!!

Every networking event I go to I see a bunch of new investors who are “wholesalers” and a bunch of experienced people who say “I NEED DEALS”.

There is a shortage of available properties out there and everyone is looking for a way to first make the most of the leads coming in and second find a way to generate more leads.

I want to speak first to making the most of the deals. Here in our office we generate a lot of leads and these come from our web presence, people go to the internet and search for home buyers or sell my home fast and they get our website.  But out of 30 or 40 calls, we might get 1 good deal, 3 marginal deals and then a bunch that we really don’t want.

I have seen several people that generate a lot of motivated seller leads go out and hire staff to field all those don’t want leads.  These are leads that might be in areas we don’t want to work, or they might be too high a priced and need to sit and cook a bit to come down in price or they might be a house that needs to be short saled or for what ever reason we just don’t want it.

I was at a training with Joe McCall and he called this his “no lead left behind” that system to track every lead and have the appropriate staff follow up with each.  He has team members that buy through his lease to own program.  He has a team member that buys the all cash cheap leads to wholesale to the landlord buyers in that area.

But what do you do when the lead, just is not a deal.  No matter what you do it’s very marginal and just does not make sense.

Here in our office we have defined exactly what we want in a property. Either a nice suburban house that would retail for $120,000 to maybe about $250,000 that we can buy with purchase and rehab at 65% to 70% of that resale value.  If we get houses that sort of fit the model, but we can’t quite get the 65 to 70% number, then we look at it and see if we can get the owner to carry us.  If we can get them to carry us and be our private lender in effect, we can pay a bit more than if we were paying all cash or getting a loan.

Our other type we buy would be a house that we could sell to the Turn Key Investors who are looking for renovated or at least in good shape houses that rents make sense.  The 65 to 70% model does not quite work, its more about cash flow and cap rate, so we crunch numbers that way.

If the lead is a short sale, or urban core our way outside of our area or way higher priced, then we don’t necessarily want the house, but it might work for someone else or it might be a good listing.  Here in our office we farm out some of those to our team in the urban core or that might be listings and we refer out the short sales and the higher end homes.

But what if the numbers just don’t work . . . I know I see many a wholesaler who tell me I get 8 out of 10 leads under contract for an option or to list or what ever it is they do to gain control of the house to then market.  But when I ask them how many of those 8 they actually sell, they are maybe selling one out of the 8 if they are lucky.

My question is, if you are spending all your time getting every single lead under contract, why would you want to do that?

If you get a house under contract that you are paying too much for or that absolutely no one would buy, you probably have at least a hour in looking at and evaluating the deal, then you have another hour minimum in getting the contract put together, then if you market the house you have marketing time invested.  In our office to market properly you have at least 2 hours if not more. So if you get 8 leads under contract just because you can, but can only sell one out of the 8 leads, you have just wasted 3 hours on each of the other 7 leads . . . that’s 21 hours of time shuffling paper and clicking on a computer that you can’t get back, that you are not going to paid for.

Then think about this, you send out marketing and  people then call or email and you have to respond to all those calls and emails and show the house and try to negotiate offers up to your price when they are not going to budge, this can add up to another 2 or 3 hours on each deal.  Take that 2 to 3 hours times your 7 unsellable deals, you have another wasted 14 to 21 hours. Not to mention as a person wholesaling houses, that if you spend time marketing overpriced crap, you get the reputation of the wholesaler who has overpriced crap  . . . . and everyone just starts to ignore your marketing and then you can sell your good deals as quickly because no one reads your emails.

So now, if you were to take those bad deals and put them into a database and on a call back system.  You have maybe 30 minutes on the phone, maybe a full hour if you go look at it.  But if you can’t come to an agreement on a decent price, put it in a database to call back in a few weeks, their price might come down to the right price and then you can get it under contract.

By only taking good, sellable deals to contract, you have more time on your hands to get the the contracts complete and to put out awesome marketing.  You only send out good deals.  You get the reputation of having a quality product that is priced correctly and your deals sell fast, to the first buyer that calls.  Instead of 3 to 4 hours trying to put together a deal on a crappy over priced house, you get a deal in one phone call and go to contract . . . time spent 1 hour.

To recap . . getting every  property you can under contract to sell 1 out of every 8 houses you get under contract is costing about 21 hours of wasted time getting from lead to marketing and then another 21 hours wasted trying to make it a deal.  Total time wasted is 42 hours.

Picking and choosing the 1 out of the 8 that you can actually put together you still spend about 8 hours talking and looking at all of them, another 1 hour putting the buy side together, 2 hours to market, and 1 hour to put together the sell side total time in the 1 house  . . . 13 hours including looking at the 7 houses you can’t sell.  Leaving you 35 hours of extra time to focus on what ever you want, or being able to talk to even more seller leads to get that next 1 out of 8 house that you can actually turn into a payday.

So, don’t leave any leads behind.  By all means track them in so you can follow up because sellers will change their price over time, you just need to be following up at the right time when they are ready to go lower.

Tomorrow we will look at aspect number two . . . generating the leads.