BiggerPockets

I sent out my first direct mail marketing campaign. I got two calls the first day they arrived (yesterday). I felt ready but after going through both calls I think I'm behind where I need to be. These are all OOS owners.

Owner #1: Wants to sell 5 properties. Purchased in 2006. Not a single one falls into my target area (I had a targeted list that slightly overlapped a bad area). He's VERY motivated, because he just had 2 of 5 go vacant and one of those two got vandalized. Without even knowing how to perfectly get an ARV, I can tell you he owes right at what they are worth, maybe a tad more or a tad less but pretty close. I honestly don't think there's anything that can be done.He admitted on the phone he got burned when he bought them. Best bet is just to get them rented and keep trying to sell them.

Owner #2: I was happy to receive my second phone call so quickly until I found out he had 7 properties to sell!! He lived in my area for 17 years, then moved. He doesn't have a property manager but has all 7 properties currently rented. He has 5 properties grouped into a commercial loan @ 7% variable. I can see through the assessor website what he paid and calculate what he likely owes. I actually think there's a deal here to be made based on the rental amounts. These properties are also NOT in my target area and they are all very small houses (less than 1000 sq ft). I think they could be a decent deal for a landlord looking to acquire more property if the owner is willing to take a small hit when he sells (he sounded semi-motivated on the phone).

In the end, I called both owners and told them I was going to refer their information on to someone who is more familiar with the area their properties are located in. I talked with that individual today, sent them an e-mail with all the info I had and it could potentially work out to be a referral fee if one of them pans out.

So my questions now are, did I do something wrong? Should I have followed up with owner #2 and tried to working on getting some of the properties under contract? Some of them weren't that far from my target area. I was extremely overwhelmed by 7 properties, on top of the other 5, so I felt like it was a bit more than I could handle for a first deal. I did ask him if he'd be willing to break them off and sell one by one and he said yes, so that was a possibility but I don't know anything about commercial loans and how that would work so that made me nervous as well.

I feel like I can come up with a somewhat accurate ARV, but how in the world am I supposed to estimate the repair costs on 7 properties over the phone based on the descriptions? It was my understanding that I want to guess at the repair costs over the phone based on our discuss and then go look at the property and adjust accordingly once I've done an inspection. Am I off base here? I'd be looking at 7 properties in this case that may have 0 chance of working if I don't get the seller to agree on at least some basic numbers on the phone.

When you have a tenant in place, does that change my formula? If I can get a price that will satisfy the 50% rule and still cash flow, do I need to subtract additional money for repair costs?

All in all I'm happy. Sent letters Monday, two calls on Thursday and both were at least decent leads even though they didn't work out. I know most deals won't work out and I am ready for that, I just want to make sure I have everything in place when I find a seller that has what I want.

Eric-

A couple lessons here for you.

1. Fantastic job on walking away from a deal when you did not like it. A lot of newbies will chase leads to get their first deal completed. Your investing maturity is leaps and bounds ahead where you should be without closing a deal.

2. Nice job on a referring your leads to another investor who could help the home owners. The first person had some potential short sale deals, looks like that is not your focus, so you referred. Again, knowing your focus and plan and sticking to it is a rare trait.

I think you did a great job. You screened the callers and did not like the deals. Walking away is not an easy trait to learn.

Even if you could have made a deal, you did what your gut told you to do and did not waste your valuable time on the leads. Trust me, I chased every lead I had and I wasted a ton of time. Good job by you. Forget these leads and move on to the next ones.

My 2 cents.

Hey Eric,

Great questions! Here's some ideas to get your started:

1. There's a couple ways to do this. Depending on where you live, you may have a delinquent tax list online that you can easily download for the most current information. This can also be obtained by physically going down to your county courthouse where the property is located. Finally, this is something that your title company will figure out prior to closing. You can even run a preliminary search to get the answer to that question.

2. Be sure to confirm with him that he is the current owner of the property. It is important to speak with the person who has the decision making power when possible. I would just call him and say, "Hi John, I wanted to confirm that you are one of the parties on the deed. This is important for me to know, because we will need each party to sign off in order for me to close on the property." Also remember that every party on the deed will need to sign the contract, disclosure, etc. If he is currently a power of attorney (POA) for example, then he can legally sign off as the owner's representative. I can't give you an exact answer, because it seems you are unclear on what he told you over the phone. Additionally, this can be also confirmed through the title search, but try to save yourself the time and money by just asking.

3. A very high percentage of the time, they are not motivated to sell and just want to see your best offer. This is something you will have to learn on your own. As you speak to more people, you will begin to know when someone is a tirekicker or not. However, it never hurts to throw out a lowball offer if they absolutely refuse to give you their asking price and seem to be toying with you. Be sure you are 100% confident they won't give you a number before you state yours though. If they don't budge, start VERY low in order to leave room for renegotiation. Their reaction will be your answer. Maybe they truly don't know what the house is worth and will take what you offer. I typically offer 50% of value or lower when this happens (depending on repairs). They'll do one of 3 things: say yes, no, or renegotiate. Good luck!