First Failure (And I haven’t even gotten started yet!)

16 Replies

Failure probably isn’t the right word to describe my action thus far, as there are still a few days left in 2017. In Late October, I set a goal to buy my first investment property by Jan 1, 2018. I suppose I can still get one under contract, but am not likely to close. Falling short of my goal to this point certainly hasn’t been a result of low effort. I’ve made tens of offers and analyzed dozens more properties since I set my goal. In fact, I even had one under contract, but unfortunately had to back out due to extensive termite damage. That said, the hot market I am looking at and numerous failed offers aren’t getting me down, but rather they are fueling my motivation to succeed even more. So, moving into 2018 I have goals that I am determined to meet. It starts with the first property. My question to the forum is regarding deal flow. I have been unsuccessful in generating anything remotely close to “flow”. I have begun networking with some local talent and am coordinating the start of a BiggerPockets meetup for Pensacola area real estate investors. But other than staying in touch with wholesalers, scraping Craigslist and the MLS, I have (admittedly) been unsuccessful to this point in finding good deals. For those of you who have found direct mail to be successful, I am considering doing very targeted and small mailing campaigns in addition to the other channels of deal generation I am currently trying to leverage. I am looking to close and flip on the properties, not wholesale. I would love to get some feedback on small, highly targeted marketing campaigns to generate deal flow for low volume startup flippers. Additionally, many of us are dealing with hot, competitive markets across the country - what strategies are working for you to generate the type of deal flow you need to be successful? I question whether or not my criterion are too strict, or I am just not yet generating the right deals. All in all, I am analytical by nature and refuse to offer what competitors are paying in the area for REOs. Anyway, thank you in advance for your feedback, and best of luck on accomplishing your goals in 2018.

This might be a long shot but if the market in your targeted area is that hot you might have to pay closer to market or lower your standards to gain traction

Apologies for the long post. When I posted on the app, it consolidated my entire post into one paragraph.

@Dean H. Thanks for the reply. I have a difficult time wrestling with that approach. I feel that in order to achieve the type of return on my time I am looking for, I just can’t pay the prices that foreclosures are going for here locally.

There are two problems with what you said.  One is a partial problem.

Problem #1 (partial) has 2 parts to it:  Saying that your goal was/is to get your first property by /1/1/18.  1 - Your goal isn't to get anything by a specific date.  Your goals should be purely financial in the end, based on your personal financial needs.  2 - Don't focus on properties...focus on needs.

Problem #2:  Saying you "failed" because you didn't get a property yet, with all the offers you made.  Edison, when inventing the lightbulb, would have been ashamed of you...because you didn't fail...yet.  In Edison's case, his failure would have been giving up before he invented the lightbulb.  In your case, your failure would have been buying a property you shouldn't have, just to get a property.  You didn't, therefor, much like Edison, didn't fail.  Sometimes the best deals you make, are the ones you don't make.

You're doing just fine.

@Joe Villeneuve , terrific points. Couldn’t agree more. Had I been willing to pay market rate for these properties, I’d have one and would be disappointed with the financial results. 

Regarding your first point, my goal was on acquiring my first property for a couple of reasons: 1) it implies I have successfully found, offered, closed on a property which encompasses a large number of critical skills in this business, and 2) it seems to me that closing on the first deal forces you to “make it happen” or, in another way of saying, taking the property and generating profit. 

Originally posted by @Benjamin Ervin :

@Joe Villeneuve, terrific points. Couldn’t agree more. Had I been willing to pay market rate for these properties, I’d have one and would be disappointed with the financial results. 

Regarding your first point, my goal was on acquiring my first property for a couple of reasons: 1) it implies I have successfully found, offered, closed on a property which encompasses a large number of critical skills in this business, and 2) it seems to me that closing on the first deal forces you to “make it happen” or, in another way of saying, taking the property and generating profit. 

 Don't force the first deal...or all you will get is your first property

@Joe Villeneuve I think we are agreeing. The very reason I don’t have a property yet is my lack of willingness to “force” a deal. My question is really more-so regarding the generation of adequate deal flow.

Originally posted by @Benjamin Ervin :

Joe Villeneuve I think we are agreeing. The very reason I don’t have a property yet is my lack of willingness to “force” a deal. My question is really more-so regarding the generation of adequate deal flow.

 Deal flow is based on your ability to find the correct micro-markets.  Don't look for properties, look to find the correct markets...and the properties will come like a Pezz dispenser

Requirements for a Market to be good:

1 - 4Sale Properties:  This is your Entrance/opportunity requirement.  Take your budget to buy, and find out where there are more properties that can be found for sale at, less than, or a little more than (negotiable) your budget.

2 - Sold Comps:  This is obvious.  Start with your desired profit, then add to that your budget to buy and rehab (plus misc costs).  This is your minimum "sold comp" to make the desired profit.  Find the Markets where  you have a lot of these properties.

3 - Rental Comps:  This is just as obvious.  Read #2 above, and substitute "rental" for "4 sale", and "monthly expenses", for "costs".

When you find a market, as specific "Micro-Market", where all three of these requirements are found, you have your micro-market of choice.  Camp out there, and the properties will come to you.

Thanks for offering that advice, @Joe Villeneuve . I have spent a great deal of time doing just what you’ve described and I have a good understanding of where these pockets are at in my market. I’ve also lived here in the Escambia/Santa Rosa county Florida area my whole life. This is the reason I am considering smaller, more targeted direct mail campaigns.

Originally posted by @Benjamin Ervin :

Thanks for offering that advice, Joe Villeneuve . I have spent a great deal of time doing just what you’ve described and I have a good understanding of where these pockets are at in my market. I’ve also lived here in the Escambia/Santa Rosa county Florida area my whole life. This is the reason I am considering smaller, more targeted direct mail campaigns.

 Living in an area doesn't mean it's the best area to invest in...it just means you know that area.  Have you investigated/analyzed other areas outside the area you live in?

I have. I really like the Mobile, AL and surrounding areas a lot. There are 1 or 2 heavy hitters in the area but I think there’s is plenty of love to go around.

I am primarily focused in my market right now, though. I will be doing a good portion of the rehab myself in the beginning and want the location to be within reason of my commute to and from my day job. Fortunately I have a 30 mile commute one way, so I am morning limiting myself too much in that regard. 

Have you tried direct mail? What type of properties are you targeting? i.e., vacants? Less competition off the MLS, "off market." Patience and persistence are your allies. Repetitive mailing to your target properties.

@Andrew Briggs , I’ve yet to start mailing. I was hoping to submit to the forum the idea of small mail campaigns (i.e. 100 mailers) that are highly targeted to lists I obtain through driving for dollars - among other methods. I don’t think my market isn’t affording deals because it’s “too hot”. I just think that until I can compete from a buying standpoint, I need to find these deals in the less competitive, off-market domain. 

I would i.d. vacants and mail to the owners' address a personalized letter or postcard.  3 times minimum each time with a slightly different message.  Don't be surprised if it takes more than 3 times to get a reply.  Pick a neighborhood or two and focus your campaign there.  Repetition is key.  Sticking to neighborhoods within convenient drive times is wise, especially if you plan on putting in a good amount of sweat equity.  And once you have tenants you don't want to have to drive way out of your way to i.e., fix a broken screen door.  If you opt to do off market, then familiarize yourself with the real estate contract you'll need to close the deal.  Remember patience.  Best of luck.

@Andrew Briggs , I have no delusions about killer response rates on a first time mail campaign.  My approach would be to do exactly as you suggest, target vacant properties with value-add opportunity in specific areas I want to buy in, and repeatedly mail to these areas/homeowners.  It sounds like you've had success mailing before, correct?  I am really hoping to get an idea from folks who've had success using direct mail on the type of volume I should start with.  As mentioned previously, I am looking for my first deal right now and do not have the buying capacity to take down more than one property at a time (at least until I can establish a track record of profitability).  That said, I would like to begin generating leads for scalability.  My thought was to start with 100 or so for a couple of reasons:

- I can ensure my list is very targeted to areas/properties I WANT to actually buy

- Costs will be very manageable at this volume

- I am unable to buy multiple properties right now

Yes, 100 properties with repetitive marketing could be a solid targeted approach. For Sale by Owner rentals could also be included in the mix.. You can possibly get a better deal negotiating directly with an investor vs. competing on the MLS. Think Craigslist. However, vacants have all of the signs of a distressed property. Both types can be good buys.

The biggest thing is pick your neighborhoods, drive your neighborhoods, know the values of your neighborhoods and let the residents know that you're interested in buying there.  They could also be a good source for leads.  Track whatever properties you find whether it's 100, 50 or 200.  Real estate investors are professional marketers.  You're establishing your brand in those neighborhoods.

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