Advice on Tired Landlord sellers who are offended by the standard 70%-Repair-fee formula.

17 Replies

I have been marketing less than a year to absentee owners.This past week’s mailing resulted in a few leads that are holding 5-20 other properties than the one I landed on with my list.I have had a great response rate this week, 14%.

When I got a couple of these landlords on the phone in talking with them and being very honest that I was looking for properties at wholesale, they opened up with their story of their real estate investing career and talked about wanting to cash out all together or sell one or two of their properties. I felt like I did a great job at building rapport with these investors.

Problem I am having is that while there is some motivation they are not receptive to the ARV*70% - Repair- my fee= MAO formula.I tweak the numbers from 70%-80% and my fee schedule from $10k-5k depending on amount of the ARV.I get the impression that they have been approached with numbers like this before and feel that the offer is "stealing" the property.

Most of their properties I have seen look really nice and well-kept and most have good tenants in place.

I also recognize that these are not truly motivated sellers but they do have some degree of wanting to sell some of their properties, just at higher margins than I would like.

So the question is: Should I just give these sellers an offer and stick to the formula and move on if rejected. Or is it worth looking at skinnier deals with these folks and grooming a longer term relationship for possible future deals? I know there is something to work with here but I am just not recognizing it right away.

Thanks in advance for your advice.

The broker side of me says take the skinny deal as an investment in the relationship for long term business. The investor side says don't do that unless you can see the long term business clearly on the horizon. Look at the $$$ you're foregoing the same way you'd look at $$$ you'd be investing anywhere else. Unless the seller has a portfolio you can reasonably assure yourself you can tap in the future, why invest?

Forget about explaining the ARV*70% rule just make the seller a cash offer with no contingency and leave out the weasel clauses...

Joe Gore


I cringed a bit when I read that you told the owners you were looking for wholesale deals. I think that's being a bit too honest. Of course you're looking for that, but I don't see how it helps your cause to be so blatant about it. No, honesty is not always the best policy, and this is one situation where it's probably not good to be "that" honest. You are looking for a particular situation, and you don't need an adjective to describe it. The seller doesn't care what you call it, as long as you solve their problem. Focus on finding the problem and then solving. Just because a landlord says he thinks about cashing out sometime doesn't necessarily mean he's ready to do it right now. That's fine if you want to set up a contact now for a possible future purchase, but you could be waiting a long time.

If most of these properties look really nice and have good tenants, where is the motivation for them to sell? You're wasting your time with these sellers, unless the effort they're spending to keep these properties and tenants is just not something they want to continue. Absentee landlord does not automatically mean "motivated seller." It only indicates a possibility. Until you find more motivated sellers, you're not going to have any better luck in having them accept your formula-based offers. And considering accepting thinner profit margins is understandable, but is probably not a good idea. Sadly, I'm afraid you are discovering that this can be an extremely difficult business to be in. As I and many others have discovered. I wish I could be more helpful, but I just don't have the skills and knowledge that some others may have.

@John Souerbry

Thanks and that is the quagmire I’m trying to decide. If they are worth the pursuit or not?

@Joe Gore

I don’t explain that formula to them that is just how I arrive at the offer.I wanted to explain to everyone trying to help me on this post understand how I’m figuring the offer price.

@Ed B.

Yeah, I don’t right off the bat tell them I’m looking for wholesale deals but after a few minutes into the conversation when I discover they have been investing for a long time this is where the conversation heads.

To answer your question, why they want out with nice properties and good tenants is that what I have discovered with some of these folks around here is that they aren’t using any kind of property managers for whatever reasons, and these 60+ year old investors are tired of the work involved with the management.

I do believe that my honest approach in letting them know that I look for deals with “meat left on the bone” helps me build that rapport with these types of owners though, and doesn’t give them the impression that I’m some sort of “slick salesman” trying to steal their house.

These are not all the leads I get, only a small subset, but rather than just give up on them, I’d thought I’d ask this question here.Wholesaling is hard and I’m not giving up or looking for the easy button.This is one scenario that I have recognized could be an opportunity and didn’t want to waste it.After all they called me from my yellow letter.

Thanks for your replies and help.

@Dave Slaughter A suggestion I have been given that has been successful is ask their price, then when they give their answer just sigh, then wait a minute. If they don't drop the price to a good number just tell them you are embarrassed to tell them what you could afford. If they push at all tell them your number, but continue to act embarrassed about it. Then leave it at that, just make sure they know how to get in touch.

@Dave Slaughter Try to quantify their future business based on their assets, but don't burn bridges. Easier to say than do, for sure.

To be clear, when you offer less then the property is worth and are aware of it, you're stealing.

First of all why are you using the 70% formula for a rental - it does not apply.

Secondly these are not motivated sellers. Simply move on. Many sellers have an inflated value of their properties.

Third and this is reply to @Account Closed 's comment. Offering what works for you is never stealing. They don't have to accept your offer.

Regarding my last point. If you go into a pawn shop to sell a guitar and the store owner offers you $25. Is the owner obliged to tell you the pawn shop down the street offers $30 for guitars? Is he obliged to tell you that you could sell it yourself on eBay for $50? No of course not.

Now if you lie and deliberately mislead the property owner of the value of the property that is a different story. I suspect Seth and I can agree on that.

stealing this isnt, attempting to take advantage of the desperation or misfortune of others, would be more accurate. Dont be suprised when people get offended as a result

Originally posted by @Ned Carey :

Now if you lie and deliberately mislead the property owner of the value of the property that is a different story. I suspect Seth and I can agree on that.

This is why I take comps with me and show the seller what the house could be worth on the MLS. The worth value has little to do with the money value except for guiding my money value offer.

A motivated seller is willing to mitigate the loss because of their underlying motivating factors. So it doesn't matter what they could fetch on the open market because they cannot market their property there.

I bought a house from a Superior Court Judge who told me he knew I was going to flip the house and make 60k, more than doubling my money. And he was right, however his motivating factor was larger than 60 thousands dollar loss he took.

Or the house I bought from the lady who was being physically abused by her son and the only way she could get him to stop beating her was to sell the house they lived in without his knowledge and run away.

We dont steal house we buy houses for profit and without a motivation by the seller larger than what the loss represents we won't buy.

Originally posted by Account Closed:
To be clear, when you offer less then the property is worth and are aware of it, you're stealing.

Good evening Seth. Your profile says you occasionally flip houses when time permits. It seems to me one must buy below market value in order to create a profitable rehab. Please explain how you buy properties with enough margin to rehab and make a profit. To me no matter how one looks at it, a retail buyer could buy a property for more than a rehabber no matter the amount of work needed. The retail buyer can rehab themselves with no profit factor.

To disclose I totally disagree with your statement. I have bought my fair share of properties below market value and the sellers knew it. I dont hide it. As a matter of fact I tell them the difference between what I think they could get off the MLS vs what I will pay. I show them comps. Simply put price is only one factor in the motivation equation.

1. Read my follow up statement. I agree stealing might be a tad harsh plus inaccurate as their would be a willing participant.

2. People that lost their houses in the form of an reo are usually what i buy.The difference is that the bank has usually lost money on this transaction and is now trying to get as much as possible returned to it. What you do is add yourself into the mix so as to reduce the amount the seller gets while maximizing the amount you make someone like me pay you for it. Make no mistake, a wholesaler is nothing more than a middleman. If never see a " we buy houses for cash" sign again it will be too soon

Everyone is a middle person. Irrespective of how one buys and what they do with whatever they buy.

I do agree with your bandit sign comment however only because without signs I would sell more mail.

I think the issue here is that retiring landlords are NOT distressed sellers. With all the baby boomers retiring, you are going to continue to get a lot more of this. They are looking for an exit, have made plenty of money or paid their kid’s college, and they are tired of managing property but not so much that they will throw away their life's earnings. These are generally turnkey ready, or at slightly below market rate. They generally have some differed maintenance, but not enough "meat on the bone" to attract me.

This makes it difficult for me to purchase and repair; and then finance myself back out of the property. I always look for a property that I can get out of < 80% of appraisal. Leveraging other people’s money is the key.

I live in Louisville and I have experienced this quite often with realtors bringing me so called deals where a retiring landlord is "ready to make a deal". These retired landlords have more time than ever, and the properties are ruining their golf game. These are arm’s length deals.

Agree completely with @Ned Carey - for a rental, do not use the 70% rule. Use a spreadsheet like below to decide how much you can acquire the property for and how much you can sell them. (the spreadsheet is in the FilePlace here on BP)

Thanks for all of your comments and sorry for stirring up the debate over stealing houses. I was merely using that term because this is usually the response when an offer is presented.

Account Closed thanks for pointing to the spreadsheet. I'll be sure to use that too when talking to sellers and be ready for both options while on the phone. Since I don't know initially that the lead is renting it out or not in the beginning of the call. My inexperience.

@Michael Q. Taking comps to the appointment is a great technique that I'll put in my arsenal. Thank you.

@Walt Payne love this technique too. When I sold cars 15 years ago we called it "flinching"

I learned a lot in this post thanks again. Most of all I won't be spending a ton of time with these types of investors but will stay in front of them should their motivation or situation changes.

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