7 Simple Ways to Rejuvenate Your Dealflow

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I really didn’t feel like going that night.

It was a little after five o’clock on a Thursday night of what had become a very long week and I was tired. Dead tired, in fact.

After all, I had already been to two other networking events that week and I was feeling pretty burned out.

Plus my two daughters were heading back to school soon and I just felt like going home, grabbing a quick dinner with the family and then collapsing on the couch and watching some brainless TV with my girls.

Just then, my acquisition manager Bill bounded into my office and blurted out: “You ready to go?”

I looked up and replied, “Be right there” and started packing up my laptop to head to the REIA meeting across town.

Although going to a REIA meeting was the last thing I really wanted to do that night, I was so glad I did.

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Besieged at a REIA

When we arrived, we were barely five steps into the room when I was besieged by no less than five people – some whom I knew and some I didn’t – all with the same basic questions:

“How the heck are you guys finding all these properties right now? I’m looking in the same places you are but can’t find a single house to flip!”

With eight properties under agreement and dozens more in the pipeline, the word in the local real estate circles had traveled fast.

We were doing things other people weren’t doing – and word was getting around. I glanced at Bill with a sly smile of pride and started answering their questions as to just what we’ve been doing.

No Excuses When Finding Deals

About five months ago, I realized my deal flow was starting to dry up and I wasn’t exactly sure why but I had my suspicions. I had fallen into a comfort zone of doing the same things I’d always done. The problem was I wasn’t getting the same results.

The economy had started to turn around and there were simply not nearly enough new foreclosures, short sales and bank owned properties coming on the market to scoop up as there once were. Grabbing distressed properties was not as easy as it once was.

It’s true that there just aren’t as many motivated sellers today as there were a few years ago…but they do in fact, exist. If you search for motivated
sellers the same way today as you did just a yea ago, you may be waiting and waiting for new deals.

So I decided to shake things up, hire a full-time acquisition manager, then a wholesaler and focus my business on acquisitions – and finding motivated sellers. What I found is that just because there aren’t as many as there used to be just means that you need to be a little more creative than everyone else in finding them.

So I changed my approach…and so far, its working out pretty well.

So here’s a short list of some good types of motivated sellers for you to look out for so you can keep your pipeline full and perhaps this list will help you to jump-start your acquisition process as well.

1. The Frustrated Landlord

In many cases, a landlord who has multiple properties may just be getting sick of the grind of having unruly tenants. Maybe they just want to get our of real estate altogether. God knows, I’ve had properties that fit this bill at times.

Of maybe the landlord just isn’t making as much money as he once was and is highly motivated to sell. He may have bought in the wrong market, or maybe he just has bad tenants. Maybe its the upkeep is just way too much to keep up with. Who knows the reason – the point is he’s wanting to sell now.

Frustrated landlords are some of the most highly motivated sellers in the market. If they have tenant lease agreements still in place, the landlord can evict the tenant at the end of their term. If the tenants are “tenants that will”, it can move them out of the property quickly as well.

If they have tenants that are paying the rent, keeping the place clean and are not problem tenants, you as the new landlord can inherit these tenants and immediately have cash flow when you purchase the property.

2. Heirs

When someone dies, the person’s assets are passed on to the heirs through a will. One of largest assets is typically the home of the deceased.

In many cases, the heirs don’t want the property and are highly motivated to sell. As the responsible party for the taxes, insurance and upkeep, they’re usually losing money on the property every month and are highly motivated to sell.

If the homes ends up in private court, the court will assign someone to negotiate the sale of the home. This representative is often very willing to
negotiate – sometimes even below market value if necessary.

3. The Bank REO

When a house is foreclosed on, you can usually have an opportunity to purchase it a foreclosure auction. Oftentimes, these homes don’t sell at auction, keeping the lender as the owner of the property.

Banks want to get rid of these kinds of properties fast. Banks are not in the business of being homeowners and in most cases, the longer they hold onto the property, the more money they lose.

Worst of all, because the home is vacant and typically uncared for, it’s subject to vandalism – not to mention it becomes the neighborhood eyesore.

This all makes for a very motivated seller – and although these properties are not in as big supply as they once were, they do exist. Banks who are
desperate to get rid of these kinds of properties are very willing to negotiate – oftentimes even lower than the price at auction. These make for great deals.

4. The Job Transfer

With the economy slowly recovering, jobs can be hard to come by. Sometimes, if a person is offered a job in another town or state, he or she will have to quickly sell their house so they can move to a new area before their job begins.

The homeowner won’t have time to haggle or sit on the house until he finds the right buyer. Instead, he’ll want to get the sale over and done with so he can move on to his new life.

Additionally, if the person has already moved, it might be harder for him to meet in person and to be available in any way during the sale.

While these people might be hard to come by, if you do find one, make sure you take advantage of the opportunity.

5. The Expectant Baby Family

A pregnancy in a family can often mean one thing: time to move out of our little home and upgrade to something bigger. The clock is ticking, too. No more than nine months until a new member is added to the family and the parents need to find a house to raise him or her in before the time runs out.

During this time, the parents will be busy reading baby books, heading off to doctor’s appointments, and trying not to avoid the occasional panic attack.

Because of all this commotion, selling their old house often becomes peripheral. It just simply isn’t as important in the grand scheme of things.

If you find a situation like this, make sure you take advantage of the opportunity and try to buy the property for well under market value.

6. The Deferred Maintenance Property

Sometimes, when strapped for cash, homeowners will neglect their home maintenance in order to save money so that they can pay their mortgage, or other financial obligations.

When they do this, they essentially make their home into an unappealing property for future buyers.

When they decide they want to sell, they’ll find that most personal buyers won’t want to buy the home, especially for the price it is listed at. As a house flipper, however, it is your job to renovate and improve. And since you are probably one of a few, or even the sole person interested in the property, you can force the seller to cater to your demands.

7. The Old Property Owner

Similar to the deferred maintenance owner is and old property owner. Both are particularly undesirable to most home buyer, which make them ideal for a real estate investor. If you can make the seller feel as if you’re his or her only way out of their situation, then give them an offer.

If you find an old property with good bones, this is an ideal house flip. Just make sure they’re aren’t any permanent structural damages – if there are, then make sure you acquire the home at a serious discount. Always have your general contractor check out the home – and if you’re bidding on it, use a home inspection contingency clause in your offer, so you can bail out if the home is beyond the point of repair or it throws off your house flipping math.

If you’ve gone this far, please leave a commment below! What other sources have you found to generate more properties for your business? Let me know by making a comment below.

Photo: Kerry Sanders

About Author

Mike LaCava

Michael LaCava is a full time real estate investor, house flipping coach and the President of Hold Em Realty located in Wareham, MA. He runs the website House Flipping School to teach new real estate investors how to flip houses and is the author of "How to Flip a House in 5 Simple Steps".

15 Comments

  1. Thanks Michael for sharing, good article.

    I’ve been in RE for 10 years, but just started to invest. My area is just like yours and I started sending out letters to landlords. In the first week I got a deal, and passed it along to my broker/friend who flips a high amount of homes.

    He was excited and is walking me thru the whole deal even though, I am just getting a flat $5,000 fee. I wasn’t comfortable keeping this house all to myself because the comps were all over the place, custom homes, higher price range, and slightly outside the city on land.

    My friend didn’t know I was sending letters or that I wanted to become an investor, so when the owner of the property told my friend I sent a letter he was intrigued and asked me latter what I did.

    I told him how I did it, but was worried with only 4,200 rentals with 25% equity or more in my area that we could start sticking our hands in the same cookie jar.

    Q. People on this site always talk about abundance and there being almost too many houses for 1 person to buy…Sounds like Utopia, but should I still be trying to keep my system of finding homes to myself?

    Thanks,
    Adam

    • That is a good point Adam. I too worry sometimes about that and you should to some degree. IN your example I don’t think you should be telling your broker all the details on how you are getting deals if you feel somehow you will loose out. what you should do is see if you can partner up with him or her. You can do all the marketing,research, testing, negotiating …….. and acquiring the property and they can list and sell the property. You may participate in some of the renovations as well. You can work out the details. The bottom line is you bring something to the table in deal flow and you may be able to get more than the $5000 fee. If you are happy with $5000 or more per deal then that is fine to. Offer him or her exclusivity to buy all your deals and now you have a solid income stream for wholesaling. Many ways to work this. Hopefully you have a few to start with.
      Let me know how you make out.

    • Adam,
      Are you still on BP? Your post is from last year, but I was wondering if we could talk about your post and wholesaling?
      Let me know by reply if you get this.
      Dena

    • Hi Alison – I am not aware of any list you could buy with this criteria. These are just general ways to mention in your networking or social sites of people you may be able to help that need to sell quickly. I belong to a group called BNI (business networking international), the chamber of commerce and other groups. Just make people aware because you never know where you next lead will come from.
      All the best

      Mike

  2. So what is the new approach that you’re taking to find all these deals? The article has a great list of the various types of properties that may be distressed, but can you go into some detail about the most effective ways to find these properties?

    • Hi Adrian
      Mostly by direct mail and a lot of networking. Check out some of my other blogs where we go into detail. Check out Sharon Vornholt, Danny Johnson and many others here on BP for finding deals as well. You will be amazed all the great information you will find here.

  3. Great article, I’ve been in the business for a few months now and although we have done a few deals (flip and wholesales) we have only been looking for REO properties since were investing remotely. The more I read on BP it definitely seems like direct mail is the way to go when trying to increase deal flow.

    What do you suggest for someone like myself that is investing 1,400 miles from my home? I have a guy there on the ground that is willing to do the marketing if I tell him what it should say, I think I can convince him to visit the properties for me as well. I’m thinking enlist him to pay for the marketing, send it out and preview the properties and initiate contact with the sellers then refer the leads to me and pay him a finders fee. This is something he is for the most part on board for already. Anything you would do differently instead or does this seem like the right approach?

    • Hey Matt – Well I haven’t done this so Maybe post this question on the forum. I do think it might be worth trying if your deals in your area are not to be found. I am not sure but why are you investing in flips 1400 miles away. Are there just no deals close to home?
      You must test and measure your results in all marketing so try this out and if it works then great and if after 6 months you are not getting the results you need after a serious effort then re-evaluate and modify. Good to see you taking action. That is how to get it done. Just keep improving. Look forward to hearing back from you

      • Thanks for the feedback Michael.

        I live in Riverside County area of So Cal and as you know this market is simply swamped with investors. I am new to the business and have no funds of my own so when I make offers they need to have enough profit for a HML, gap lender etc…due to that I never get offers accepted and really can’t compete with the bigger cheaper money other investors here have.

        My business partner lived in OK for about 20 years so when we stepped back and re-evaluated that is where we decided to go. It is a market that he knows and understand very well and we figured that would be more useful than going to a market we had no knowledge of.

        So far things are going well. I talked to my guy on the ground over there (who used to work for the city) and he is going to build us lists of people to send our marketing to. Were looking at focusing on vacant homes, absentee owners and properties that are on the demo list. I think this should be a good and profitable approach, these properties will likely be the more in depth rehabs but I like that because those are usually the ones no one else wants and have the larger profits.

        • Hey Matt – Ok I have a better understanding now and I like the idea that you go where you can make money after your research has determined that. I agree your market is high and the competition is driving prices up which makes it difficult to compete or maybe you can compete but the margins are low. Sounds like you have a good plan. You just need to make sure you are connected and your partner keeps you well informed on everything. Clearly identify each of your roles in the plan and keep each other accountable. Keep me posted.

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