All Forum Posts by: Johnny Kang

@Crystal Aravalo

That's great Crystal. I'm so happy for you, and give you credit for having the guts to go talk to them! There are hundreds of people who are thinking about things they're learning, but by doing, you've separated yourself from a lot of people. Just do more of it, align yourself with great people and you'll learn far more than just reading about real estate. I go to Doylestown PA to visit friends once in a while and know some people in Lancaster as well. And my business partner is from PA. Let me know if you need help with anything. 

Happy investing :)

Johnny

@Patrick Sullivan

this is what I use:

Ellen's my business partner. We use her name first because we just get better response having a female name. This letter gives us about a 3-4% response rate. My online marketer mentioned we should include an email address; will try that on our next campaign. If you decide to include your email, let me know what the response rate is on people emailing you.

Johnny

@Crystal Aravalo

- Send them a handwritten note first. If no response, send them a follow up letter saying you understand it might be a sensitive issue, but was wondering if the family might want to sell if they got a fair offer for their property (in the mean time, meet with some estate attorneys, real estate attorneys, title companies, to expand your network). If still no response, you might want to go see them, and since you've already sent 1-2 letters, when you go see them, it's not such a "cold" visit. 

- Yes, do run low comps so you have something to go by when you end up talking to this family (but really study why some properties sold for less/more than other properties in that area so you know what you're talking about. could be different lot size, year built, one house is on the "better" side than others, living space sq footage might be different, etc).

- Also try to get a feel for who's really in charge in that family. You have to make sure you're talking to the one who can influence the rest of the family. And have the mentality that you want to provide a solution. You don't explicitly say this, but this is more of an attitude you have regarding this whole interaction. Everybody want/needs something. Some people when their parents pass away, would rather sell off the property, split the proceeds and get on with their lives. Others have different want/needs. Find out what that is. And if making this sale happen for them helps them reach their goal, well, you've also gained something from it too.

Johnny

@Al Williamson

I agree with what Al said. When we buy properties, it's always subject to the property being delivered vacant. That does not mean trying to evict people. Our office is in Flushing, Queens, so I know how evictions go in NY. (we've actually been trying to evict someone since June 2014!!! We've offered them $6000 and they still won't leave.) Instead we ask them if they have a place they've picked out; if they need assistance packing up and moving, how we can help, and listen to what they're going through (a lot of people get overwhelmed when thinking about moving, and when they see that you actually care about them, they'll be more willing to work with you to). One tenant from another property, we paid for his moving cost twice, because half of his stuff weren't packed on the day of his move, so we had to get the movers come back a second time, and offered to pay half of his security deposit as well, and added an extra $1000 incentive on top of all this if he can move by the end of February, instead of beginning of March. He moved in March. We're only working with the tenant(s) after we go to contract, closing being subject to the property being delivered vacant, so we're not doing all this work for nothing. (the move itself cost us $1700, and $500 for 1/2 of security deposit).

Regarding how much you'd have to pay them, it really depends on how willing they are to work with you. The more willing they are, the less you'd have to spend, which is also an indication what kind of people you're dealing with. 

So the thing you want to do is, only close subject to the property being delivered vacant, and work with the seller and the tenants to move them, instead of closing on the property first, then trying to evict them out. If you've never done something like this, work with an investor who has experience doing this in NYC. And don't just take an attorney's word for it. My partners and I have dealt with many attorneys who sound good, but after they've got your retainer check, don't perform; but that could be in people in any profession.  

Johnny

@Trevor Jackson

Yes, there's no shame in having a job. I struggled for many years, telling myself "I can't go get a job, I need to make my career in finance work because I know wayyy too many people who are financially independent", without considering the fact that although that's sounds great, when you aren't paying your basic bills and getting in to debt, that can really hurt your motivation to get up everyday excited about what you're doing; and it'll seep out of you and affect the way you interact with people; whether they want to do business with you or not, which obviously hurts your ability to make a profit. Having a job for now so you're not stressed out about money is very important; something which isn't talked about much.

I get my mailing/post cardcampaign leads from List Source. (I haven't used other sources, so I can't speak about them)

Like I mentioned you can split your mailing/post card campaigns in to 2 categories:

A) Properties with Equity. Send yellow letters to them. ($1.30/letter from yellowletter.com)

- Absentee (in state & out of state)

- Probate

- Estate sales

- Properties which had recent fire (your local fire dept. may or may not give you this info)

-FSBO (Craig's List, Kijiji) These people you can just call, since they'll most likely have their phone # on the ad.

Below is a letter I use to get about 3% response rate. 2000 letter -> 50-60 calls -> 10 motivated sellers -> 4-5 properties worth seeing -> 1-2 under contract. Ratios won't always be exactly like this, but you get the idea. On my list, I highlight the people that have called back, letters which came back to me as Un-Deliverable, so when I'm doing my drip campaign on the same list, I'm not sending letters to those who already called me back, or it was un-deliverable. 

Ellen's my business partner. We have her name first, cuz we think people respond better to females. Just our opinion.

B) Pre-Foreclosures. Send post cards. (about $.49 cents/postcard from Vistaprint). My response rate is about 2-2.5% on post cards, but gets better on the 2nd and 3rd drip campaign.

- Properties with no equity (short sale), since people who have equity that are in foreclosure can still sell their house and payoff the mortgage. (other’s in BP have talked about flipping those. I’ve never flipped a property in foreclosure that had equity. All my pre- foreclosures have been short sales). I prefer sending post cards to people in pre-foreclosure because a lot of them are mentally in denial. So why spend $1.30 sending them a letter, when I can spend about $.49 cents; and as soon as they get the post card at least they've seen the message, and decide whether to call us or maybe call us some other time. I do drip campaign for post cards as well.

C) Later on, when you've closed a few deals and you have the money, you can also target for motivated sellers by having an SEO optimized site and and doing PPC and google adwords, etc, which a friend is helping us with.

We are working on having a separate site for pre-foreclosure leads, so it's easier for us to track which lead funnel is doing what. Be sure to have separate contact info for each of your sales funnel. (i.e. yellow letters to one phone #/email, and a different phone #/email for post cards, and a different phone #/email for your online marketing.)

D) Also, consider finding a mentor who can help you. I wrote this response to someone asking about what they should do as a newbie starting out wholesaling http://www.biggerpockets.com/forums/93/topics/204099-wholesaling

I got my first deal under contract within a month of sending out 1800 letters, and closed on that the following month, netting $16,500 and haven't door-knocked since.

Go make it happen! :)

Johnny

To clarify, I'm not saying don't do door knocking just because it's "dangerous/desperate." I'm speaking more from the aspect of thinking about what your time & effort is worth. 

Of course you can drive around, door knocking 15 houses/day, but there are several factors you'll want to consider. 

1) Yes, nothing beats face to face discussion; but if that fact to face encounter is not welcomed, it's not a great encounter. It's similar to cold-calling. Does it work? Yes. Is it the most efficient, and effective way to get customers? No. When I was in finance, my first few years were spent cold-calling for clients to invest with me. Remember "Boiler Room" the movie? I was that guy, except all the cursing, etc. Making 100s of calls everyday. It wasn't the most effective, nor fun. Then I learned how to get referrals, where people were calling me. There are basically 2 ways to set up your marketing in business. Out-bound and In-bound. In-bound is much easier, more profitable, and less time consuming. And I've done door knocking (both when I was in finance and when I got started in real estate), so it's not like I've never done it, and advising people not to do it when I have no idea what I'm talking about. 

You can listen to Sean Terry's story on his podcast "Flip to Freedom" on iTunes on how he got started in the wholesaling business; door knocking on pre-foreclosure list, and if he still does it. (short answer: no) Yes he did get started with it, but he gets in to several reasons why you should consider otherwise, especially now with all this technology and resources, you can really leverage your time/money/energy and get the most out from what you've put in.      

2) Georgia is a non-judicial state, meaning the foreclosure process is much shorter than judicial states. By now, a lot of the pre-foreclosures/foreclosures have been "cleaned" up so the amount of properties that are still in that phase is much less than it used to be, say between 2009-2012. Plus, homes are more spread out, than areas like NYC, which means if you're going to 15 homes/day, you're spending anywhere between 1.5-2 hours/day driving around, talking to people, who some times say they're not the owners, when if fact they are and they just lie to you. So even if you talked to their neighbor about the owner of a certain property, and they tell you "yeah, he's the actual owner," what's the guy who lied to you going to say when you see him again? "Oh, I lied to you (cuz that's what some people facing foreclosure do), but let me talk to you now?" 

3) So if you break this down; 2 hours/day 3 times/week = 6 hours/week, 24 hours/mth, not to mention the extra gas, etc. Even if you found a job that pays $12/hr, 24x$12 = $288, plus say $40 for extra gas you had to spend, that's $328. That's not $328 dollars. That's the cost of your time you are spending, driving around, trying to talk to people, who more than likely don't want to talk to you. (cold, out-bound prospecting). 

So if you factor in the cost of your time ($328), plus, say you had a part-time job, working 20 hours/week at $12/hr; that's $960. So $328+$960=$1288. You can more than pay for bandit signs where people are calling you (again, check your local town/city laws regarding bandit signs), or if you can't put up bandit signs, you can take about $1000 and send out 2000 post cards. If your response rate is 1%, that's 20 calls, talking to people who want to talk to you. 

Out of the 20, say 15 people call you just because they're curious. But you find 5 that are motivated, and get 1 or 2 under contract.  

4) Regarding response rate, it should be at a minimum 2-3%. If your response rate is not around 2-3%, that can mean your message is not optimized. I've done campaigns where I sent out 1800 letters, and got maybe 4 calls. But after reading what I wrote and getting feedback from my partners, my response rate jumped to about 4%. 

I've also done post card campaigns where my response rate was less than 1%. Then I changed a few things on the post card and it jumped to 2.5%.

So bottom line is, everything works. The question is which method you think will give you the best return for your time/money/energy and help you reach your goals faster. 

Johnny  

@Tyrone Green

Thanks Tyrone!!

It's the old, which came first "chicken or the egg?"

Well I'd say in business, if you want to make it, you gotta do both as much as you can, as fast as you can, and some times you have to take a risk and can't wait for the perfect scenario. 

What I mean by that is, in one sense, I totally agree with @Brian Burke in that without a buyer, you really don't have anything to sell to. But some times we can have multiple buyers, know their criteria, but when we do our marketing (yellow letters, post cards, bandit signs, etc.), we don't know which motivated seller will be calling us that would have the type of property your buyers want. (I'm in NYC, so the market can be totally different 1 block away)

Case in point, we got a property under contract in Brooklyn, NY for $550,000 putting $25,000 as our earnest money. The zoning was such that you could build 8 apartments, or condos. But none of the buyers we had (and we knew what they were looking for) said they were interested, even though it matched their criteria as far as the town, purchase price, cost to build etc, saying it was a few blocks over from the side of town they prefer. Just a few blocks!! We didn't know what to do. But by making calls to other people we knew in the industry, our contact knew someone that develops on that side of town and we were able to assign it for $710,000. And it's not just about right side of town, wrong side of town. Buyers can give you everything they're looking for, but some times you just can't match up exactly what they want with the properties you end up finding. Now, the more deals you do, bigger and more diverse your buyers will be and have a larger pool of people you can market to. But some times you just have to jump in and make things happen. :)

Johnny 

Hey Trevor, 

A few things. 

1) Door knocking is dangerous. Especially going to homes where people are facing foreclosure. And very time consuming. 

2) Working foreclosure properties (either short sale, auction, etc) you'll need someone to guide you, because it's a little more involved than, say, properties with equity.

I've been there, where I didn't want to work for other people even if I was struggling running my own business. But worrying about finances while trying to learn a new venture (and real estate is not something you'll learn to do correctly, profitably over night) is not the type of life you want either, and because working pre-foreclosure is not the easiest to do without guidance, my suggestion is that you can still find a job where it doesn't require you to work 65 hours/week, use the money you'll be making from a job to do mail/post card campaigns so you're only talking to people who want to talk to you. 

I suggest doing yellow letters for people with equity, and doing post cards for people who are in foreclosure. You can also do bandit signs, but make sure you check your local town/city regarding putting up bandit signs. Read BP forums, and listen to several podcasts on iTunes and get a basic gist of which direction you want to start off with in real estate. You learn to do it right, and profitably, believe me, you'll never have to have a job. 

Johnny  

1) you want to know your ratios. 

How many letters sent -> how many people called -> how many were interested in showing you their house -> how many you got under contract, etc.

Let's say you send out 2000 -> 60 calls -> saw 5 houses -> 1 under contract.

So if you're getting a lot of people asking you what your offer is, you're still in that phase where you're having to filter out the motivated ones from the unmotivated ones. 

Key, if they're not willing to tell you a ballpark figure first, more than likely they're just calling to see what your offer would be. (it's always not the case, but more often than not, it is). I test them to see how motivated they are by asking "if you were to get an offer today, what would you feel is a fair offer?", then let them speak.  

2) test what message in the letter gets you friendlier call-backs. I found saying that "I'm a private investor who buys in the local area... if you don't want to work with a realtor and pay commission but would rather work directly with a cash buyer like myself..." works well for me. Anything that makes people feel they're dealing with a real person, and not a shrewd investor.

3) It's a numbers game. Make sure you're sending out enough letters. 2000 is a good number in a month, but don't send all 2000 the same day. You won't be able to handle all the calls. :)

Johnny