A Case Study: From Direct Mail to Closing (And Everything Else In-Between!)
Case studies are on my favorite ways to learn in real estate because this is actual work in the trenches, not just some theories you hear being discussed.
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For this reason I would like to share one of my past closings, from lead generation to closing, with the BP community. I feel it would be a great way to give back and help others along on their journey.
The Dallas-Fort Worth market is notoriously competitive right now, but with the right strategies you can still find deals out there believe it or not. This particular case study will revolve around a lead that I generated through direct mail .
Every lead originates from somewhere.
In this case one of the criteria I used was out of state absentee owners with high equity within my farm area. I approximate equity by deed date 15+ years back in this case. You can find this information from your local appraisal district or various listing providers.
People often ask me what my marketing piece of choice is, and I always prefer postcards which may surprise some of you. Some investors like to use yellow letters; however, in my own personal split tests I have found yellow letters tend to generate more calls, but the overall lead quality (seller motivation etc) tends to be much lower than the calls I receive off post cards.
However, if you are looking to market for listings as well as a licensed realtor, it may serve you well to use yellow letters as you may be able to convert some of these prospects into listings. But that’s a discussion for another blog post. I first began mailing this lead in late October of 2013. For this particular lead I did not receive the first call until March 2014.
Many would be real estate investors give up on mailing after having a poor result on the 1 month, so keep mailing! Consistency is the key to a successful direct mail marketing campaign. You will find the longer you continue to mail without giving up the more prospects you will have to fill up your deal pipeline to keep the deals consistent. Not all leads take this long to convert, but it does happen.
The Sellers Situation:
I don’t want to get too specific here, but this case involves a mother and her son.
The mother had been living in an assisted living center and was suffering with a form of dementia. As a result the mother was capable of making sound decisions, thus her son had been granted power of attorney. When the son initially contacted me he was not all that motivated, and didn’t even want to set the appointment.
However, as time passed on, some expensive medical bills came due that they simply did not have the means to pay, thats when the son called me back the second time. The seller was now under the gun and needed to liquidate the house fast, and had less than a month to do so.
When I go on appointments the last thing on my mind typically is the house.
At the forefront of my mind is building an excellent rapport with the sellers and trying to connect with them anyway I can. I genuinely care about their problems and will suggest the best course of action based on their situation. If a seller is better suited by a realtor and listing the house traditionally, I let them know.
Of course all this is not to say I don’t do the normal appointment prep items like hopping on the MLS and research what’s going on in that area, or drive the comps and all the other stuff we must do as real estate investors. No, I work on building an excellent rapport first with the seller so I can earn their trust. This allows me to get properties under contract even when my offer may not be the best.
This appointment was a little more challenging. The property had been turned into a rental unit to help cover the mothers medical bills. The property also used to be the mothers primary residence. There was a full family renting out the property now. Not only did I have to bond with the seller, but the renters as well.
I knew when I would later have to show the property to investor colleagues later as my intent was to wholesale it. And this would be a challenge if the tenants gave me trouble. The tenants seemed to like me, but also a bit resilient since the property could be sold. Let me make it clear, they did not want to move. To make it easy as possible I took very good pictures and a walk through movie of the property while I was there on the premises.
This would make it MUCH easier to move the property later when I had it under contract. Other investors were scheduled to take a look at the house that day as well, however the seller felt so comfortable with me he canceled the remaining appointments (see I told you that rapport building thing would come in handy).
The seller also began to reveal to me truly how dire the situation was touching on some of the details I had discussed earlier regarding her mothers living situation and the medical bills that were now due. Because the property was in an area that I was not comfortable with, I let the seller know that I did not intend to close on the house myself, but could likely find one of my colleagues to do so. The seller agreed that giving this a shot would be fine.
Making The Offer & Contract:
In this particular instance I wasn’t confident enough to make an offer at the property, although I usually do make an offer in person.
Sometimes you need some additional time to crunch the numbers. Instead I called back later that evening and made him a fair offer based on the market value of the property and the amount of repairs it needed. Since this property was tenant occupied, and I wanted as few people looking through it, I was a bit more aggressive in my pricing to make sure it would sell.
The seller took my offer well but was hoping to receive a little more for it. I continued to educate the seller on the nature of the repairs (quite extensive) and the fair market value of the house. The seller needed a day or two to think about the offer. In the mean time I submitted a PDF offer for his records via email (a nice professional touch). A few days later the seller decided to write it up, so we met and filled out the contract.
Showing the Property With the Tenant in Place:
Immediately after signing the contract I began putting together my property packet.
Although I had a 10 day option, I didn’t sit around and do nothing for a few days. From the moment the contract was executed I put myself under the gun, I became the motivated seller and started calling up a few of my colleagues as soon as the contract was executed .
Unfortunately for me, this particular property was in an area where I had fewer established buyers, but I KNEW from experience at the price I had it, it should have no problems selling. The first night I had this one under contract was probably one of the most stressful nights I have ever experienced. I really wanted to help the seller, I didn’t know what to do showing the property with a tenant in place and ultimately wanted to perform on the timeline they needed.
Fortunately I started getting some calls and one of them was a big investor in the area that I knew I could trust, although this was the first time I had met with him. I gave the tenant a call and scheduled another appointment to look at the property.
We both arrived at the property and I could see the tenant from the drive way, he looked very annoyed and displeased. I don’t blame him, but this process wasn’t exactly easy on me either.
We got out of our cars and started to look around. After finishing our walk through I pulled him aside and asked what he thought. To my surprise he wanted to buy it now on the spot and whipped out his check book giving me his nonrefundable deposit. I only had to show the property once, thankfully.
Because I made sure the numbers worked and had great pictures and video, it really helped me package the deal together and market it efficiently and ultimately close earlier than what the seller needed on their timeline.
Always aim to create a win-win situation where the seller benefits and gets the amount of money they need and the end investor gets a great deal. Don’t be afraid to get your hands dirty and try some new things you have not yet experienced.
What’s something new that you’ve tried that got you awesome results?
Be sure to leave your comments below!