I am one of the cheapest people you will ever meet. I drive a 1999 Toyota Corolla with 126,000 miles on it (a car is a depreciating asset, why would I spend a lot of money on one?). A few weeks ago when I was at Disney World I carried around the same bottle of water all week and I brought food into the park to eat for lunch everyday (there was no way I was paying $4.00 for a bottle of water and $7.00 for a hot dog).

When I go on dates, which is very rare since I am a workaholic, a “nice” restaurant to me is Ruby Tuesday’s (yes…now you know one of the many reasons I am single.) I mean, if I take a girl to the Cheesecake Factory or the Melting Pot, we better be engaged!

That being said, I believe that one of the only reasons to spend my hard earned money is to make more money. This includes my education and power team. I will never understand how any intelligent person, how anyone who is serious about success (only about 5% of people are truly serious) will not invest in their business. I know many folks out there love to “bash” courses and seminars. I guess these people are a lot smarter than me, because I never would have figured out how to do this business unless I worked with other investors, unless I bought courses and unless I attended seminars. I think the biggest problem that people who “bash” courses have, is that they are not implementers. These are the people who have attended a dozen seminars and who have 50 courses on their bookshelf, however, they have never closed a deal. (Just a quick thought…if you own multiple courses and have never done a deal, take a look in the mirror….it’s not the courses, it’s you.) Also, any decent course or seminar should have a 100% money back guarantee…so if the product stinks, which some do, just send it back.

Besides investing in your education, you should be investing in your power team. You need a good real estate attorney and accountant on your team. Sometimes I hear of investors who go to Staples and pay $14.95 for generic forms, rather than have a lawyer review a contract and spend a couple hundred bucks (knuckleheads.)

When investing in your education you need to think of the big picture and you need to think of the return on investment that you will get. For example, a few years ago I bought a course on short sales, which I think cost $1,000. I went on to do dozens of short sales and make a lot of money (I don’t do them anymore, because they are a pain in the butt, however, you get the point). So, whenever I invest in my education and in my business, I always want at least a 10:1 return on my money. And of course, I usually get many times that.

Also, when you are in Staples buying your $14.95 contract, think what it will cost you if you get sued over it, or if you lose a $50,000 deal because you didn’t want to spend $300 to have your lawyer review it. This is just like someone not spending $250 for a home inspection, only to find out later they have $10,000 worth of termite damage.

One more story, which will probably make a lot of folks eyes roll… As many of you know I am a student of direct mail, I am obsessed with increasing my response rates. My favorite niche to target is absentee owners and I am always searching for unique ways to boost my rates…so that I get more leads, more deals and make more money. Anyway, a few weeks ago, I got an idea for a “type” of direct mail which I know pulls very well and I wanted to incorporate this type of direct mail to send to absentee owners, pre-foreclosure lists, free and clear lists, etc. This type of direct mail gets very high response rates but costs a lot more to send out. You can send out a regular letter for about .50, whereas this will cost me about $1.50 a letter.

Anyway, there is a marketing expert who is very familiar with the type of direct mail that I want to use. I have been keeping an eye on this guy through his books, websites and marketing emails. So finally, I decided that the best way to launch my new idea was to somehow hire this guy as a consultant. I called his office, told them I wanted to hire him and eventually I had a phone call with him. To get to the point, I am spending on day of consulting with him at a cost of $5,000. When I told my friends and family about this, they all laughed and thought I was nuts (yes, these are the same people who work in a cubicle every day…when it comes to criticism, the people “below” you financially are almost always the negative ones…very rarely will you get criticized by someone who is financially better off than you).

Yes, $5,000 is A LOT of money. It is about how much I spent on my last car. However, when I think of it with my “business” hat on, I know I will have a very high return on investment. Right now, I specialize in purchasing properties subject-to and selling them on a lease option. My minimum profit is $30,000, but on average around $50,000…so, if this consultant shows me how to use this new type of direct mail and it gets me one more house, then obviously it paid for itself…but of course I will buy many houses with this and get a ridiculous ROI! (also, like I said above, each letter will cost me about $1.50. I could spend a small fortune “testing” this type of mail, or this guy can show me what will work best and save me time and money.)

I know this is a long post, but this is sooooo important to your success as a real estate investor. If you are cheap about investing in your business, then you will have a much more difficult and longer process to making big money in real estate. Another great reason to invest, is that it drastically cuts your learning curve…I can only imagine how long it would have taken me to figure out shore sales on my own!

So please remember that anytime you invest in your business, you:

1. Get a 10:1 return on your investment
2. Make sure you will implement what you have learned (or it will be a total waste of money)
3. If the product or course is terrible, return it
4. Think of the big picture
5. Only spend money if it will make you money

Now get out there and start treating real estate as a business and not a hobby! (Yes, that means that accountant who charges $30.00 an hour, who just became a CPA after finally passing the test after the 30th time and who does not own a single property………. probably won’t cut it).

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Tags: guru real estate guru, marketing, real estate, real estate investing, real estate marketing

I hate running (unless someone is chasing me). I haven’t run in probably four years. Elevators and escalators are my best friends…but through a series of events which I don’t feel like explaining, I am now training for a marathon because of a promise that I made to someone. When you give someone your word, you honor that word no matter what. I started training last week and hated every minute of it. Starting out running three miles a day might not sound like a lot, but go out and try it, I dare you! I will keep you posted on my marathon training; however, I am pretty sure that you will see the same information from me every week: That running still sucks!

Anyway, now to give you a deal closing technique that will put more money in your pocket this week. A few weeks ago I talked about the “yes or yes” close (if you didn’t learn that closing technique, search my post two weeks ago.) This week I am going to tell you about the “puppy dog” close.

Here is what I want you to imagine: It’s a beautiful Saturday afternoon. You and your son or daughter are at the mall. You pass a pet shop and see the cutest little puppy staring at you through the glass. Your child begs to see the dog, and you say “yes, but only a quick look, then we have to leave.” The salesman comes over and hands your child the puppy. As the time approaches to leave the store, your child throws a fit that they want the puppy. The salesman calmly says to you “why don’t you just take the puppy home for a night and if you really don’t like him, bring him back tomorrow.” Now, we all know the rest of the story…the puppy is never going back to the pet store and you are now the proud owner of a new dog.

Here is how this technique should be used when it comes to our real estate investing businesses.
Imagine you are sitting at a seller’s kitchen table. The sellers are motivated, you have handled all of their objections and questions, and all they need to do is sign the purchase agreement (always an agreement, never a contract.) They pick up the pen, but do not sign. They stare at the agreement for what seems to be an eternity, then they tell you they are not sure they are ready to go forward. You should immediately say, “Mr. Seller, I understand that you are nervous. This is an important decision. Why don’t we go ahead and sign the agreement now, and if you are still unsure tomorrow about going forward, give me a call and I will shred the agreement……because we certainly don’t want you to sell to us if you are not 100% comfortable with the solution.”

Many people will sign the agreement and very few will call you and change their minds the next day. This technique takes “courage” that many folks don’t have. Most people will just let the sellers not sign and will leave the house. Remember, the most important part of this business is closing the deal…as Zig Ziglar says, “Timid salespeople have skinny kids.”

So on your next meeting with a seller (which should be this week) let them take the puppy dog
home (the agreement) and they can always call you the next day if they change their minds.

Tags: real estate, real estate investing, real estate investor, real estate marketing, real estate sales, sales

I’m back from a long vacation in Florida where I celebrated the 4th at Disney World (along with the entire North American and European populations…what a nightmare). Anyway, it’s good to be home so that I can get back into super-productive mode, which means I get back to marketing, negotiating and closing deals. Speaking of marketing (how did you like that segue) what is the number one reason that most investors never get out of the gate and close their first deal? It’s because they don’t do their marketing (yes, this makes me heated because every networking event I attend, I hear investors whine about not closing deals. Then I ask them how many letters they mailed last month, or how many signs they put up…and this is where the person usually goes silent.)

Here is how to ensure you have at least 1,500 letters going out every single month (it’s pretty complicated so take good notes)…every single day do 50 letters. This means stuffing the envelopes, handwriting the addresses in blue ink and using a live stamp. Do 50 letters a day and at the end of the month you will have 1,500 letters to send out. So, to do these 50 letters wake up an hour earlier, do it at night before you go to bed, or do them on your lunch break at your job.

Once you start this daily process of 50 pieces, it will soon become habit. You will actually feel awkward on the days that you don’t do this (which is one of the reasons I don’t take many vacations because it takes me out of my daily routines.)

As soon as you can afford it, you can hire others to do your mailings for you. Until then, however, don’t be lazy and schedule the same time every day that you will do your mailing pieces….and stick to this time. One of the keys to success is being disciplined, so if you schedule 9:00-10:00 at night to do your letters, don’t let anyone interrupt you.

Now, I know that real estate is a get rich quick scheme, that you were promised you would make your first million yesterday and that the real estate investing fairy is going to teach you a system where you don’t have to do anything and you will magically make money….but for the next 30 days, do the 50 letters a day, at the end of the month send out 1,500 letters (to a highly targeted list such as absentee owners) and you will start making real money. (If you want to make more money and quit your job sooner, then do 100 letters a day and send out 3,000 pieces a month). So, for heaven’s sake do your marketing!

Tags: marketing, real estate, real estate investing, real estate marketing

Direct mail is one of the best ways to buy houses, if not THE best way.
We all have our lists and the same sellers are getting bombarded over and over (absentee owners, free and clear, probate, pre-foreclosure, bankruptcy). The key to direct mail success is standing out from your competition and not sending the typical boring “we buy houses” piece. The best way to stand out and get your seller’s attention is by using a “grabber”.

A grabber is an object which is included with your letter or which is attached to the top of your letter. The best grabber to use is the good ole’ one dollar bill (not a fake one, not monopoly money, a real dollar you cheapskate). This takes guts and most people will not do it, and this is the reason you will stand out and make so much more money than the “average” investor. So take a dollar bill and paperclip it to the top of your letter. Then start the letter with the following sentences:

“Mr. Seller, as you can see I have attached a crisp one dollar bill to the top of this letter. I have done this for two important reasons. First, I have something very important to tell you and I needed a way to get your attention. Second, I want to show you how you can save 29,000 more of those dollars.” (Then go on in the letter about how you are not a Realtor and don’t charge any fees or commissions and can save them $29,000 when they sell their house to you, or whatever the true number is.)

The funny thing is, I still know most folks will never do this…let’s say you stuff and send your own direct mail. You send out 1,000 letters a month for a cost of around $450. You get a typical 2-4% response and it takes you four months to buy a house this way. Or, you decide to play with the big boys and you mail out 1,000 letters with a dollar bill attached to the top, for a cost of $1,450. And, you get a 5%…10%…even 20% response rate and get a $30,000 deal off of your first mailing. Which one makes more sense?

Also, since you are mailing letters with a real one dollar bill you need to make sure your envelope gets opened. Use a regular number 10 white envelope, hand write both the mailing address and return address in blue ink (if you use labels you might as well throw your letters in the trash, so the sellers don’t have to), and use a commemorative live stamp.

For all of you investors who have the guts and courage to send out the dollar bill letter I would love to hear about your results and how much money you made.

Tags: direct marketing, real estate, real estate farm, real estate mailing, real estate marketing, ugly houses, we buy houses

This week I’d like to be both practical and a little futuristic. On Bloodhound Blog, my blog, Bonzai, and several other blogs, such as, A Life That POPS, lately, there has been talk about changes in the real estate field, and one of those changes, the team approach, is a topic I’d like to relate to investing — not just “team” as in professionals you use for guidance or as vendors to make individual deals, but a partnership “team”, a small, local investment company. I was going to write about Economic Conversion, but I’ll save that. Investment groups are nothing new, just as real estate teams are nothing new, but how these teams/groups function in a biz 2.0 world will, no doubt, be changing quickly.

It’s difficult for one person with a notebook to keep up with all the information inundating us in the information age. The concept of a local diverse, super investment team using some of the practices of Business 2.0 is an appealing idea. How such a team could be arranged is open to many possibilities, but allow me to build one possibility. Let’s say you’ve decided to become an investor, or you are an experienced investor, and you’ve realized it would be much more effective and efficient if you formed a partnership team. You’ve been a leader all your life and you’re skilled at bringing people together to achieve a common purpose, so you thought you’d use these skills to create an investment team. Your idea is to build the team on four strengths: Internet/information mangagement, financial expertise, real estate expertise and local government expertise.

Internet/information management:
With constant innovations taking place in online information search all the time, the investor who’s being fed the most focused, contextual information has an advantage. Having that expertise on an investment team, someone skilled in web 2.0 concepts, allows the players to consider a steady stream of useful information that can be analyzed on a daily basis. Many local governments are putting up websites with updated changes you can feed into by email alerts. Although small cities may not be on the edge of information yet, all this is rapidly changing. Also, by hooking up the investment team with web 2.0 tools, you’ll be able to make information management efficient: blogging to encourage interaction in the communtity; online meetings for the team, quick information display and contact management through something like Open Office, Web Officeor Zoho (check them out carefully — each has strengths and weaknesses) to be accessed anywhere; mapping technology for visual inspiration — being connected will be light years ahead of those investors who aren’t and will bring the following categories together in powerful, useful ways.

Financial Expertise:
Having someone knowledgable about financial management and loan products with their finger on the industry’s pulse will be a powerful addition to the team. New products are coming out all the time — being quick to take advantage of the innovatons, knowing the trends of loan products and having connections to lenders will place the team in a good financial position to maximize profits and design each investment with the most efficient and profitable financing.

Real Estate Expertise:
This could be a commercial agent or a real estate attorney, anyone with real estate expertise that has comprehensive knowledge of the local RE market, access to market information and connections to all the local RE players. People who spend all their time in the RE business hear things and know things that the general public would not be aware of, plus they have a feel for the trends and red flags to consider. Someone experienced and connected to the local RE community will be a valuable addition. You might also want to consider someone who has experience with building and knows about the product itself — building and buildings — at least enough to be helpful in identifying maintenance, repair and renovation costs.

Local Government Expertise:
It would probably be helpful to have someone on the team who knows local government, who has experience dealing with zoning and planning, knows all the players and how to navigate the system. Insider knowledge would be helpful in effectively analyzing information by understanding the mindset of the local players for future development in different areas of town - what concerns for development are a top priority? Are there plans to promote growth on the east side? Are there plans underway to provide incentives for downtown investment and re-building?

Building a strong local investment team like this has pros and cons. The pros are a co-ordinated team approach that if managed correctly could be synergistically more powerful and efficient than an individual effort. If pulled off, it could be attractive to private lenders who want to put up money but not get bogged down in nuts and bolts. It would be attractive to banks, giving them confidence that the well rounded approach would be effective in producing results. It would be effective in making good investment decisions, and being the first to recognize opportunities for investment. It would be good for the gathering, managing and analyzing of information and helping with the due diligence process, having four areas of expertise investigating the viability of a project. It would give each team member more confidence, drawing from the strength of each other, bouncing ideas around, communicating and receiving feedback. It would add financial strength so that larger, more profitable projects could be handled.

The cons, or possible problems, are settling disagreements among team players over strategies and investment choices, creating equitable partnership arrangements, deciding where responsibilities lie with each team member, ending partnerships if it’s not working for a member — there can be many problems with any team or partnership arrangement, so it would pay to take the necessary time to work all these out and to choose carefully. However, I believe all the problems can be worked out if there is an easy exit plan for dissatisfied members. I believe the pros outweigh the cons, but not if it’s poorly planned — four minds can be worse that one if teamwork is not executed to its full potential.

If teamwork IS executed to its full potential, I think an investment team could achieve extraordinary results, especially if all the modern tools of information management are used to provide speed, co-operation, comprehensive knowledge and efficiency.

Note from the editor: Read more about assembling your real estate investing team and be sure to look at some of the great suggestions in the comments.

Tags: investment teams, real estate, real estate 2.0, real estate investing, real estate marketing, real estate team

How Valuable is One Lead?

People often ask me what the average response rate is when mail marketing to homeowners in pre-foreclosure. There are two answers depending on what the content of the letter is. If the purpose of the letter is to see if the homeowner is willing to sell, then the average response rate is one half of one percent (.005%). If the letter is offering to allow the homeowner to remain in their house, then the average response rate jumps up between 1% and 4%.

So if 100 letters are sent, you could expect 1 call every other month. The point is, every response is extremely valuable and it is even more important to answer the call and not let it go to voice mail. My opinion is, if they took the time to call you… They will take the time to call the next person in line as well.

What extreme are you willing to take that to in order to get a deal?

I recall a phone call I got on Christmas Eve, 2001. My Fiancee at the time and I were all dressed up and were walking out the door on our way to her mothers house for dinner. She had just stepped outside and I was closing the door when the phone rang. She stopped dead in her tracks, her head swung downward and she said, “Whatever you do… Do not answer that phone.”

I answered it.

A homeowner had received my letter and wanted to see what I was offering. Since it was Christmas Eve, there wasn’t much I could do so, I got their information and we agreed that we would get together the day after Christmas. My Fiancee was relieved.

About halfway to her mothers house I stopped the car and she asked what I was doing. Not remembering my exact words, I said something like this… “That homeowner sounded pretty confused and I would be willing to bet that I am not the only person they called tonight and I guarantee you that no one else will actually go visit with them tonight.” I remember she shook her head and said with her teeth gritted together, “Fine! Let’s go! YOU get to call my mom and tell her why we are going to be late and you owe me BIG TIME for this!” I agreed and turned the car around. I called the homeowner back and told them I was on my way and would be there within an hour.

Was it worth it?

It turned out that they had called four other investors and had made appointments with all of them for the day after Christmas…And I had told them that I would call them on that day. Had I not turned around and met with them when I did, I would have been too late by the time I called on the 26th.

I was able to reinstate their mortgage and they signed a Warranty Deed just a few days after I went to meet with them. Less than 4 months after that I finished the rehab and sold the house. When I got home from the closing, I showed the cashiers check that was for more than $12,000 to my fiancée, I asked her, “Do I still owe you Big Time?”

She looked at the check, gave me a smile and said, “That’s okay, I really didn’t want to go to my mothers house on Christmas Eve anyway.”

I compare real estate investors to Doctors who are On-Call. When a call comes in… Drop what you are doing, take the call and go meet with them right then, if at all possible.

Tags: foreclosure, marketing real estate, pre-foreclosure, preforeclosure, real estate, real estate leads, real estate marketing

In 2004, I held a mini-workshop on the topic of effective mail marketing. At the time, I had already been using my own system for several years but I needed to help the students come up with a letter of their own, otherwise most of the homeowners would have received identical letters and none of them would have been effective.

One of the students was a mother and mostly worked at home. She had a big smile as she asked me to read her letter and wanted to get my thoughts on it.

I read it fairly quickly but it took an extra 30 seconds for me to look up at her because I was horrified with what she had written.

It was awful. It was horrible. It was beyond tacky and I didn’t remember ever seeing a letter that was as bad as hers was. The letters she wanted to send would all be going to homeowners currently in foreclosure. My experience with homeowners in foreclosure has shown me that “gimmicks” and “cute, happy” type letters are not very effective.

What my student had come up with was a letter that had a 3-inch piece of string taped over the words, “Tie this string around your finger to remind yourself to call me.”

I shook my head and asked her if she was really serious about sending it out. I went on to tell her examples of what has worked before and what hasn’t. At one point I remember that I had told her that her letter was quite possibly the tackiest foreclosure letter I had seen and pleaded with her to not send it.

She was such a sport for taking my harsh critique, as it was obvious I had really hurt her feelings (I ended up calling her the next day to apologize for being insensitive).

She sent it anyway.

Out of the 100 or so she mailed out, she got over 20 replies! For those with a marketing background, I am sure you are as amazed as I was. The average response rate for pre foreclosure mailings is about _ of one percent. In other words, one reply out of 200 and her letter got an amazing 1 out of 5!

My opinions and beliefs on mail marketing changed forever after that student taught me that valuable lesson. She taught me that no matter how bad a letter may seem… Send it! If ONE person responds to an awful mailer that results in a deal…Then it was a great success!

Since then, anytime a student asks me what type of letters work best… I tell them that any letter can work. I also tell them that what doesn’t work is… Not trying!

To end on a lighter note…
That student called me a few months later and told me she had sent out a letter that included the words, “Call me because I am your Life Saver.” She had taped a single, wrapped Life Saver to each letter. I asked her how it worked and she told me that the Post Office returned every single letter because the machines at the Post Office couldn’t process them. Considering the lesson she had taught me before that…I was happy she didn’t listen to me and tried anyway.

Tags: invest, marketing, real estate investing, real estate investor, real estate marketing