Motivated Sellers Secrests, Part 2: Will My Real Estate Business Last?

This is the second article in our extremely popular series dedicated entirely to pulling back the curtain on Motivated Seller marketing! Now that we have covered what exactly a motivated seller is,  I am now going to dive into why you should be including marketing to motivated sellers into your current business model. Making the choice to purchase properties directly from motivated homeowners is one of the best things you can do for your REI business, so grab a seat and get ready to learn some money making info!

The title of this post is one of those that has been on my mind for a while now….and honestly its the reason why I made the choice to take my business in a different direction than the masses of of other Real Estate Investors. Right now in the market there is a ton of foreclosure activity….auctions, short sales, REO’s, pre-foreclosures, ect….and I would say a good 90% of investors are focused almost exclusively on these types of leads since there is such an abundance of them. I started looking around at my market a couple years ago and I noticed that competition was beginning to increase fairly dramatically, and flipping houses was starting to become “En Vogue” again….this was mainly because word was starting to get out that people were once again making money flipping foreclosures. Most of the new competition¬† chasing these big pay days however were investors all fighting over the same low hanging foreclosure deals…..and the result of all this influx of competition was simply higher prices, smaller profit margins and more offers to get a deal. So this got me thinking:

“What is going to happen when foreclosure inventories actually start to decrease?”

Right now there are plenty of foreclosures to go around, and even a novice investor can look brilliant some days (and trust me I hear and see this a lot!), but eventually foreclosure inventory will decrease. When this happens the best case scenario would be that your deal flow would shrink by a substantial amount since there is going to be less low hanging fruit to go around. In addition you will likely be paying more for each foreclosure deal and in return your profit margins will decrease, which is never a good thing for an investors bottom lines. Both of these inevitable truths really got me thinking, and I decided that I was going to do whatever it took so that a decrease in foreclosure inventory wouldn’t affect my businesses bottom line in a negative way. Now just to be clear, I really don’t see a major decrease in foreclosure inventory coming for another 2+ years, but the the fact remains that it will arrive eventually. So now that I was looking ahead and wanting to ensure that my business will stand the test of time….what was I going to do about it?

The answer that I came up with was simple…..I was going to master the art of Motivated Seller marketing, so that way I could begin purchasing homes directly from homeowners! Believe it or not most investors are totally reliant on Realtors, auctions, wholesalers & RMLS in order to generate deals for there REI business, so by being able to source deals directly from Motivated Homeowners it will put you in a position that a good 90% of other investors are unable to do themselves. By being able to successfully market to Motivated Sellers it will allow you to generate deals that other investors don’t even know exist…..and by having this ability will move you to the top of the business food chain in your market. Once you are able to generate Motivated Seller deals at will to either wholesale or fill up your own fix and flip pipeline, you will have reached a point in your business where you will be in the top 10% of all real estate investors…..and your income will skyrocket!!

Now dont get me wrong, we have and continue to purchase a lot of houses in various stages of foreclosure. But we also buy a lot of houses that have nothing to do with foreclosure, and my plan is to focus our marketing almost entirely to non-foreclosure houses by the end of 2012. What is the reason for this you ask? Well I want to make sure that our marketing systems are so good by the time foreclosure inventories drop, that not having REO’s, auction properties or short sales to purchase will have ZERO impact on my business! In fact I am setting up my business to make even more money once this day comes, because we will likely be the only company in our market that has a constant deal flow of properties that have nothing to do with foreclosure! You see once investors are scrambling to find deals to fix & flip do you think they will happily pay more per deal than they would today?…..well I sure do!!

When times are good for finding deals (and they are very good right now), just about any “investor” with a bankroll behind them can get there hands on property at a price that will make them money. Foreclosures are what I like to refer to as the low hanging fruit of the real estate market, and because of that pretty much anyone that just takes action can get their hands on some. Its when the market starts to shift and foreclosure inventories decrease that great investors are much more obvious to there competition…..and at that same time the amount of money great investors make compared to their competition increases ten fold. Why is this you ask…..well its because the great investors control a large amount of the deal flow for their market! When you put yourself in a position to supply deals not only for your own fix & flips but also for other investors, you are at the top of the real estate food chain for your market…..and that comes with a large pocket book and longevity for your business.

So why is this topic so important? We all strive to be more profitable in the upcoming year than in the last, but in order to make sure our real estate business will experience this we have to be realistic about how we are going to make that happen. By just focusing on buying REO’s and going to the auction block you will have success in this market, but you may also look up in a year or two and realize that you have no idea how else to generate deals for your business. In addition your number of deals and revenue will likely decrease once that day comes, which means you will be much more reluctant to spend any money on marketing…..especialy when you have no real idea what you are doing. You see spending money to build your marketing systems is much easier to do when deals are plentiful and your income is increasing. Spending money on your business in order to improve it is much easier to do when times are good, but the problem is most people don’t feel they need to spend money or time on their business when deals are plentiful…..they generally figure what’s the point since I have all the deals I need.

Now that we have identified the issue of will my real estate business last….how do we make sure that it will? The answer is very simple…..marketing, marketing and some more marketing. My suggestion is to learn everything that you can about direct response¬† and online marketing now, and don’t fall victim to waiting until you don’t have any deals. If you can master the art of using direct mail coupled with online marketing for your area, you will have more leads and ultimately more deals than you could ever handle, and most of them will have nothing to do with foreclosure. When I finally decided to commit to finding success in marketing for my own deals, it was the best decision I ever made for my business. And at this point in my business I am in the process of perfecting our marking systems and material, so that we can continue to get better at generating the types of deals that will stay consistent no matter what the economy & real estate market is doing.

If you are interested in learning more about how to generate deals from your own marketing keep an eye open for out upcoming Mentor Program & Podcast! In our “Real Dealz” Podcast that will begin airing later this month, we will be going through real motivated seller deals that we are currently doing within our own business. In addition we will be giving away all of our secrets about how find the deals, how we make money with them, and everything in between…..which is a lot of highly entertaining material! Then later this year we will be taking a select group of investors and teaching them everything we know about how to generate motivated seller deals through direct mail & online marketing. The information you will receive is going to be priceless to you and your business…..so trust me when I say it will be a life changer for everyone who is fortunate enough to join the program.

Now get out there and start learning how to market for deals!!!!!

Motivated Seller Secrets, Part 1: What Causes a Seller to Become Motivated?

I have decided to write a multi part blog series on motivated sellers and how you can incorporate them into your Real Estate Investing business in order to explode your profits for 2012! This is probably the most important topic in real estate investing and one that many Gurus claim to be experts in….but the reality I don’t think even most of them know much about present day motivated seller lead generation. Why would I make this claim? Well I make a point to review just about every bit of information that gets put out there by the “so called Gurus” in order to see if they are providing valuable information on this topic, but I can honestly say that most of it is over complicated systems that almost guarantee failure, or its just a whole lot of fluff that doesn’t give you any real world applications to get results…..The reality is generating motivated seller leads is relatively easy when you learn the basics of it, but the difficult part is taking action and actually putting in the time learning how to do it properly. So in this series I am going to expose this part of the business that everyone is so fascinated with, but very few people really know much about.

So what are “motivated sellers” and do they really exist? Or is it just something that Guru’s have made up in order to sell informational products that sounds great in theory, but have no place in reality? Well I can tell you for certain that “motivated sellers” do exists and they are simply people who” need to sell” their real estate as apposed to “want to sell”. However in order to find these sellers you have to know exactly what it is that you are looking for….and the only way to know exactly what you are looking for is to fully understand what real factors create the kind of motivation that will pressure a seller into giving you their house for pennies on the dollar. So now that we understand there are real tangible factors behind seller motivation, what are they and how do they create this large amounts of motivation? Well honestly there are a ton of these factors if you really wanted to dig, but for the purpose of this article we are only going to focus on the BIG 3 Motivating Factors (of which you could easily build an extremely successful REI business around).

1. The first motivating factor and my personal favorite is what I like to call Greed & the “un-earned equity phenomenon”. This mean the seller you are dealing with owns a property with a large amount of equity, and they are not the person who built the equity that’s in the home. So in other words they likely inherited the property and all of the equity that came with it. When this happens its almost like winning the lottery for a lot of people, and that feeling can be very conducive to trading that asset for money quickly. This means people will often times give up money (or equity in this case) in order to speed up the timeline in which they can convert the inherited property into cash.

2. The 2nd motivating factor and also one of my overall favorites is “Deferred maintenance”. This means the property is in need of work before it could be sold to a retail buyer. Very rarely are you going to get a large discount on a home that is totally livable in its current condition. Generally the more deferred maintenance a property has the larger discount you are going to be able get when purchasing it. If you can find a property that needs a large amount of repairs it may not even be financeable, which would be the best possible scenario because they would then need to sell to a cash buyer/investor like yourself. If you can couple with this factor with either #1 or #3 on this list then you have a great opportunity to purchase a property for pennies on the dollar!

3. The 3rd motivating factor and one of the most powerful is when sellers are having Financial Issues and ultimately are in need of cash. If you have ever been in a tough financial situation where you need cash quickly, then you would absolutely understand this feeling of needing to sell ASAP. There are a variety of reasons why a seller would need cash now vs. later, but if you can find a seller who needs cash and has also inherited a property (#1 on this list), then you will find some of the greatest leads there are in real estate investing.

These motivating factors have been around for a long time and they will continue to be around for as long as any of us want to invest in real estate. So this means if you can learn how to find these motivated sellers, you can essentially create a paycheck for yourself on demand…..which is an extremely powerful and freeing feeling. Each of these factors that create motivation in sellers can be uncovered through marketing….and the best way to do this is either via direct mail or through online marketing. So stay tuned for the next couple articles in this series in order to find out what marketing sources we use in order to find sellers that are experiencing these different types of motivation….and how you can do it in your own business to explode your income! My goal in this series of articles is to pull back the curtain on “Motivated Seller” marketing so that once and for all you can see how it really works!

We will be kicking off our “Real Dealz” Podcast at the end of this month, and the hope is that the Podcast will be even more helpful in allowing you to learn how to master the art of motivated seller marketing. We will be going through real deals that we are currently flipping in our real estate business and deals that were generated by marketing for motivated sellers. Also keep a watch out for the opening date of our Mentor Program….as this program has been designed to teach experienced investors how to transition their business from buying through Realtors & at auctions to buying directly from Motivated Sellers! We want to provide you the tools and know how to make your business a long term success in whatever market you call home.

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