Flipper/Rehabber · Phoenix, AZ · Member since 2015 · 80 posts · 10 votes
In a previous forum about marketing, @Steven Butala brought up an amazing technique for marketing that is direct to point and completely transparent. Instead of sending yellow letters, post cards or anything of that sort, he sends a pre-filled out purchase agreement right off the bat. I am interested in learning more about his method so I asked him about it, and he told me he wanted to share his strategy publicly for everyone's benefit. I love the direct and honest approach, but am curious how he gets all the right data before even talking to the owners and seeing the house.
This guy has been in the biz for decades so i'm looking forward to the wisdom he is about to share with all of us!
Right. We'd have TAX APPRAISED VALUE (call that "A")
Our offer (call that "B") would be computed something like:
B = ((A x .7) - A x .1)
The key variables are:
.7 = 70% of the tax appraised value
.1 = minus another 10% for repairs
Something like that. It helps if you know about how your tax values run compared to actual market values. If your tax appraised value is typically 90% of market value, you might increase the .7 variable to .75 or . 8 to adjust the formula.
We've done this. You pull tax records from the county into a spreadsheet. Then you compute the offer based on a percentage of the tax-assessed value and/or market value from the county, which just becomes one more field in your spreadsheet (the Offer).
You populate the info from the spreadsheet into your Purchase and Sale contract, as well as a cover letter. So it's basically a mail merge type of thing.
We've fed this process with data from a CRM system, so it doesn't have to be a spreadsheet but that might be easiest for most people.
The technique is cool and will generate calls. If the county data is not accurate of course you might end up making some weird offers so you'll want to sanity check them before they go out.
I don't know Steven but perhaps he has an even more refined process for this...
We've done this. You pull tax records from the county into a spreadsheet. Then you compute the offer based on a percentage of the tax-assessed value and/or market value from the county, which just becomes one more field in your spreadsheet (the Offer).
You populate the info from the spreadsheet into your Purchase and Sale contract, as well as a cover letter. So it's basically a mail merge type of thing.
We've fed this process with data from a CRM system, so it doesn't have to be a spreadsheet but that might be easiest for most people.
The technique is cool and will generate calls. If the county data is not accurate of course you might end up making some weird offers so you'll want to sanity check them before they go out.
I don't know Steven but perhaps he has an even more refined process for this...
Best wishes!
All good tips! Thank you Mr. Horn, but how do you estimate rehab costs without seing the property? That has to be built into your offer price, right?
Right. We'd have TAX APPRAISED VALUE (call that "A")
Our offer (call that "B") would be computed something like:
B = ((A x .7) - A x .1)
The key variables are:
.7 = 70% of the tax appraised value
.1 = minus another 10% for repairs
Something like that. It helps if you know about how your tax values run compared to actual market values. If your tax appraised value is typically 90% of market value, you might increase the .7 variable to .75 or . 8 to adjust the formula.
Right. We'd have TAX APPRAISED VALUE (call that "A")
Our offer (call that "B") would be computed something like:
B = ((A x .7) - A x .1)
The key variables are:
.7 = 70% of the tax appraised value
.1 = minus another 10% for repairs
Something like that. It helps if you know about how your tax values run compared to actual market values. If your tax appraised value is typically 90% of market value, you might increase the .7 variable to .75 or . 8 to adjust the formula.
Hopefully you get the general idea! =)
That is great info. Love formulas! My mother is a realtor so she pulls the tax info sheet as well as comps on all the properties I get calls on so that is how I would also evaluate properties that i send PA's to directly. The 10% repair cost seems a bit hap-hazard still. What happens if the seller signs the PA and you find out after you need double the allowance for repairs? Do you renegotiate the price per one of the "subject to" out clauses built into your PA?
@Dev Horn Thanks for the shout out. We a lot in common.
We use price per acre methodology in the South Western States with a minimums for smaller lots. It has been working great for years.
For cabin lots in the Midwest, South and North East we look at each assessment method (different in each state) and run a multiple minus the back tax amount.
YES! A well executed Mail Merge with great data is the key to buying dirt cheap property.
Right. We'd have TAX APPRAISED VALUE (call that "A")
Our offer (call that "B") would be computed something like:
B = ((A x .7) - A x .1)
The key variables are:
.7 = 70% of the tax appraised value
.1 = minus another 10% for repairs
Something like that. It helps if you know about how your tax values run compared to actual market values. If your tax appraised value is typically 90% of market value, you might increase the .7 variable to .75 or . 8 to adjust the formula.
Hopefully you get the general idea! =)
That is great info. Love formulas! My mother is a realtor so she pulls the tax info sheet as well as comps on all the properties I get calls on so that is how I would also evaluate properties that i send PA's to directly. The 10% repair cost seems a bit hap-hazard still. What happens if the seller signs the PA and you find out after you need double the allowance for repairs? Do you renegotiate the price per one of the "subject to" out clauses built into your PA?
Thank you,
Billy
Your Purchase Agreement has an inspection clause, giving you an out once you get into the property and discover that it needs a lot more. Then we'd simply explain what we found and adjust our offer.
On the repair estimate - as an alternative, you could make your repair cost a variable applied to the number of square feet in the house - e.g. $10 x #Sq.Feet
Some people will freak out when you send them a prepared contract to purchase their home. You get some interesting calls. =) But you'll get some serious inquiries from people who really need to move fast.
@Dev Horn awesome! That is what I figured, but wasn't sure. My PA already has that clause built in so I should be good to go. Now just to figure out how to use my mail merge to do this instantly to 1000 PA's!
This is a really interesting approach to marketing. Would you mind sharing what kind of results you have received. Have you got any deals with this process?
I'm an investor from southern California. Thanks for sharing some of the methods you guys utilize. I think it's quite a brilliant approach; I'm a huge proponent of leveraging data and automation to streamline processes.
Would you guys be willing to share your purchase agreement template? Perhaps the cover letter you've found to be relatively effective, as well?
@DevHorn thanks for the awesome tip. I'm a newbie investor from Southern, Ca. Any advice for someone like me looking to purchase a duplex or a fourplex with owner financing? Thanks, Lia