Direct Marketing - First call = 88 year-old who owns 50+ houses

11 Replies

I recently started a direct mail campaign in Fargo, ND.

I received my first call today from an 88 year-old investor who owns 50+ houses in the area.  We had a very good, lengthy conversation about his background.

He's interested in selling a house for $139k that would rent for $1,100.  I'm targeting gross rents of 1% or more so this doesn't meet my target.

I'm thinking about calling back and offering him a $110k all-cash deal and simply explain my rationale.  I want to build the relationship while maintaining fiscal discipline.  

Any suggestions on how to handle this situation?  TIA

You need to take a look at the property first and find out what condition it is in. Then do a repair estimate (if any) and a comp analysis and determine ARV. THEN consider calculating your 1% rule, or whatever your target is. For all you know, this is a $5000 dollar property and he is "renting" it to his nephew for $1100....

I agree with your plan for building a relationship with the seller - this may be a great opportunity.  Just make sure it's worth the effort.

I looked at the property this afternoon.  It's in good condition and would likely require less than $1,000 in improvements.  

Part of me thinks it would be worthwhile to overpay a bit to build the relationship but what's the point if he wants full retail for all of his properties.   

You should build your relationship on quality fair deals. Also every deal should stand on its own.

If you overpay for this property he is going to think you will overpay for all the others, or you might only do one deal and you got stuck with a bad one. If he owns a lot of property he mostly knows what he doing. Make sure you inspect each property thoroughly. 

Peter MacKercher, Real Estate Agent in MO (#2010004223)
(314) 210-4414

Would you be in a position to buy two or more of his properties at a time? If so, he may be willing to make a better deal. Just make sure that you do you due diligence and make sure of the market rent amount and/or check the length and terms of the current lease agreement. 

Nice job on finding this possibly great lead! I would keep to your guns and not give in until you know its a good situation for yourself. That being said keep the doors open with this guy and build the relationship. Take him out to lunch and pick his brain, listen to his story of how he got started. He's probably going to like you a bit more if you're there to listen to him and boost his ego. 

Although I'm working a different route right now, you can consider that his 'no' is just a temporary no. I'm putting in offers quite often with the intention of the first offer being a 'no' so we can start the negotiation process. Whether that starts that same day, a week out, or months out, I've left the door open. Other times it won't happen at all. I think in this case, at the very least you've found an experienced old-school investor, who could possibly supply some good knowledge. 

If he owns 50 properties, there is likely at least one he would sell to you at a price that would meet the "1% rule".  However even though the property would meet your rule, it may not be a good deal.

Without knowing the all the details this initial offer sounds like a retail deal. I really don't blame him for starting there if it needs little work, is rented and could likely get a similar price listed on the MLS in a matter of weeks.

It might also be you are closer to what you want than you think.  If this is a long-term tenant who treats the place like he owns it, his rent could be below market and there may be a couple hundred in potential rental income.  I wouldn't necessarily try to charge that(85 to 90% of market rate with a great tenant is better than a vacancy), but it does justify a higher value.

If you think you will insult him with a cash offer ask if he can come down on price and maybe for some support of his asking price.  One thing you may point out to him is if he sells to you at a good price, you likely will be in a position to refinance and buy another property(or more) from him in a year or so.

What about seller financing? At 88 I'd imagine the man wants out of managing properties (assuming he does). Could you buy a block if properties with a small down and favorable financing and refi in the future to a conventional loan (ex., 5% down, 5 year balloon, 30 year amortization, interest only)? Perhaps creative financing is a way to break in with this seller at a price that may be closer to what he wants.

Anyway, the above is purely for illustration with no guarantee it resembles anything you may want to pursue. I can't speak to the man's motivations but at 88 I want all properties gone and be living off the interest on my big and fat (hopefully) savings account.

Originally posted by @Mike M. :

What about seller financing? At 88 I'd imagine the man wants out of managing properties (assuming he does). Could you buy a block if properties with a small down and favorable financing and refi in the future to a conventional loan (ex., 5% down, 5 year balloon, 30 year amortization, interest only)? Perhaps creative financing is a way to break in with this seller at a price that may be closer to what he wants.

Anyway, the above is purely for illustration with no guarantee it resembles anything you may want to pursue. I can't speak to the man's motivations but at 88 I want all properties gone and be living off the interest on my big and fat (hopefully) savings account.

I think the first step is to get to a good deal on a property(or multiples).  Seller financing would make it possible to make a good deal into a great one.  If the exit strategy is to sell everything retail, then this guy may just be a source of information, but you should be able to learn a lot.

If he isn't interested in selling out, would he be interested in hiring out property management?  He may not have enough for a full time gig, but it would be a good start if that is a direction the OP wants to go.

Thanks for all the great advice.  I'll let you all know how it turns out

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