I analyze small multifamily homes (my preferred property type) that are listed for sale and that I receive from a realtor. The few that cash flow acceptably are usually already contingent and get snatched up immediately. So I'm looking into direct mail. I started finding properties that are not for sale, and I want to mail the owners, but my question is this: is it more efficient to analyze each one and then mail out; or mail, and then in the few cases where I receive a reply, analyze and find a deal with it that cash flows? I'm leaning toward the latter but then you're out more mailing costs even for properties that might be highly unlikely to cash flow regardless of how you structure the deal.
Then, ANOTHER question: I understand one benefit of this method is avoiding realtor costs. But say I wanted to use a realtor still because I have never once bought any house, and am not super confident with the process. Does this defeat the purpose? I would think no because there are still other benefits for me, but was curious about your thoughts on it. I understand it's one less negotiation point I'll have with the potential seller.
Thanks for your ideas.
Deciding which properties to direct mail would depend on how big of a pool you are targeting. If you send out 100 without pre-analyzing you are spending $55. You would hopefully then analyze a few to a handful of potential deals. If you decided to pre-analyze you would have to experience of analyzing 100 deals and maybe mail out say 10 letters at $5.50 expense, but you may not get a bite on any of those 10. So a question to you would be do you have the time and want the practice of analyzing deals or do you want to spend the money to send out more lines and hope to catch a few to analyze at that time?
As far as using a Realtor, I am biased as I am an agent and feel we provide a wealth of knowledge and are particularly valuable to most home buyers and newer investors. Once you get a few transactions closed maybe you would feel confident moving forward without one. You can use a real estate attorney but they don't have the same fiduciary duties to you that a realtor would.
Have you reached out to an agent in your area? Maybe they could work with you in creating a direct mailing list where they could reduce their commission for your purchase with the benefit of potential listings that don't meet your criteria for a good deal?
Just some thoughts to chew on!
All great ideas, most of which I hadn't considered! That's a good point - I could benefit more from keeping my cash and practicing analyzing. Also love the creative ideas about working with realtors. Thanks for taking the time to help.
@Jessamyn Smith you're welcome! We've all had to flex those creative muscles to navigate these days. Good luck and happy number crunching!
You do not need an agent, if you can analyze yourself.
@Jessamyn Smith analyzing each record sometimes becomes impossible due to the lack of information provided by the list broker. Also, it's a very time-consuming process. I suggest that for your first mailing, use a first-class mailing and delete the records that bounce back.
It's okay to use a realtor at first if you are not confident. You can get to learn a lot of stuff which will help you in closing deals in the future.
That sounds very reasonable Ehsan, thank you. I just purchased a list today and will probably go that route.