Why Probates Continue to Be the Cornerstone of My Business — Despite Tough Competition
As many of you are undoubtedly aware, the Dallas Fort Worth market is one of the most desirable in the country when it comes to investing in real estate. Some areas have less than two months’ supply of inventory right now (six months is roughly equilibrium). Unfortunately, that kind of appeal doesn’t come without its drawbacks. There may be plenty of opportunity, but it is also met with a ferocious level of competition.
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Because of the widely available lists that contain probate leads, these often are the most difficult leads to secure. As a result, some people I know have given up on probates as a lead source. I am here to encourage you not to abandon but to persist.
While it’s true that many people will carpet bomb these leads, many will do so infrequently or sporadically. Others will mail once or twice, then taper off and stop mailing them altogether. Me personally? I mail until I am the last investor standing.
I don’t simply mail them one or twice, get frustrated from a lack of calls or appointments and then give up. I continue to mail them several times throughout the year. If it’s a house in an area that I really want, I continue marketing to them until they either sell to me or someone else buys the house. That is the kind of persistence it can take to secure some of these leads. But for those of us who have the persistence to do this, the reward is some of the best leads you can find in real estate — period.
Why Are Probate Leads So Valuable?
This is not about low balling sellers or taking advantage of people in tough situations. I am always about being honest and giving the seller the best offer I can depending on the value of the home and what it needs in repairs. So when I speak about probate leads being valuable, I am not strictly talking about a monetary sense. Instead, I view them as highly valuable because this lead source is one that is most likely one who WANTS to work with me. This is one of the top reasons why I choose to build a significant portion of my business around these leads.
In my previous article, I tell a story where at a probate lead, I met with the seller, and their kitchen table was literally covered with what must have been at least 100 different postcards and yellow/white letters. Fortunately for that particular appointment, my postcard was one of the few marketing pieces they had pinned to a cork board in the kitchen.
The Type of Leads You Want to Work With
I can’t overstate how critical that can be. Sometimes when you market looking for distressed properties, it can be frustrating. You mail absentee owners, you go on the appointments, and despite your best efforts, the sellers just have an unrealistic idea of what the house is worth — or they aren’t motivated enough to sell.
When you work with probates as one of your main lead sources, all of that nonsense melts away. Oftentimes probate leads are the exact type of leads you want. They are houses with equity (usually because they are older), and more often than not, they need some level of repair, whether it’s just cosmetic in nature or requires something more profound, such as roof or foundation repair.
The sellers know and understand that. They are usually not experienced landlords themselves and don’t even consider fixing it themselves. With absentee owners, who sometimes can be fellow investors, it can be difficult to get on the same page. You want the property as a rental, and you know the property needs at least $12k to be rent ready at current rent rates. The seller, being a landlord, also has some degree of knowledge. Usually these landlord “experts” are people who only have a single rental unit — and run it very poorly. Yet they feel their brief run in with real estate qualifies them to be an expert.
Maybe the reason they couldn’t keep tenants is partly due to never putting in the repairs needed to get on top of market rent rates, but they never see it like that. So what I’m getting at is that it can be a struggle working with other lead types at times.
Local and Family Owned vs. Large Corporate Entities
Even though the competition can be tough, at least here in DFW, a decent portion of the people who market to these type of leads are large corporations that are buying up properties here (such as hedge funds). Many sellers hate this type of approach. They send out these guys sometimes who look like bankers, and they don’t seem to understand that’s a big turnoff to regular folk. Many of the sellers I work with would much rather work with someone who is local — especially a family owned and operated business, even if that means I might be paying a little less.
Other times, it’s heavy competition from other local businesses. Sometimes I get the deals; sometimes I don’t. But as they say, real estate is a numbers game. The more you play the game, the more appointments you make, the more offers you put out there, the more success you will see.
Investors: Do you use probate leads to grow your business?
Weigh in with a comment!