Probates can be a great way to score good deals through motivated sellers — and potentially help others out of hard situations. I’ve compiled a few reasons why I believe more investors should try their hand at probates.
Let me know what you think in the comments section!
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
5 Reasons You Should Be Investing in Probates
1. This Group is Motivated
When we talk about trying to find a deal to flip, rent or wholesale, it all comes down to marketing. It can be difficult to find individuals who are both able and willing to sell at a discount.
However, with probate it’s a different story. The heirs are almost always motivated to sell. Whether they decide they need to list the property with a realtor or sell for cash to an investor usually depends on their circumstances and the condition of the property. Obviously, the less “market ready” the property is and the more it needs repairs, the higher the likelihood you will be able to pick it up at a discount.
But just because the sellers decide to list doesn’t mean you can’t pick the property up at a discount eventually. Many times people have unrealistic expectations, and the listings will expire. This is what I call having the seller’s expectations set. Previously, they were not motivated and wanted a retail sale, but after a long, drawn out sale process with no sale, coupled with unrealistic expectations, sometimes this group can become motivated to sell at a discount as well.
Sometimes just being the “neutral party” amongst a group of heirs that are not getting along can be the reason you get the deal. I’ve had that happen before; the Executor was not on good speaking terms with many of the siblings, and he was expected to do all the work. However, when it came time to sell, guess what — all the siblings who had not done squat all had their hands out.
2. Probates Are Easy to Market to
With probates, it is not time sensitive or anything of that nature. You are working on the seller’s timeline in regard to their motivation. This makes this group the perfect target for slow drip campaigns via direct mail. All you really have to do is grow and maintain a database and set your campaign on autopilot — just be sure you are in it for the long haul and mail regularly.
Just an extra tip for marketing: the very first time I contact the seller, I will use a nice white letter format. Every contact from that point onward will be a simple postcard, just so I remain at the forefront of their mind when it comes time to sell.
3. Probates Can Offer Deep Discounts & Negotiation Leverage
A lot of times if it’s a probate property, I will make my offer a nice even number divisible by the amount of heirs there are. It’s a nice little trick that lets them quickly do the math in their head.
Sometimes when I quote these nice round numbers, I can see them doing some quick mental math in their heads to see what portion of the share belongs to them.
4. Many New Investors Quit This Niche
A lot of sectors of real estate are bombarded with direct mail; however, with probates the investors who consistently mail will win. Many times, new investors begin their marketing campaign, mail the prospect one or two times, and then give up after a few months.
Related: 5 Reasons Why Probates are A Great Niche to Invest In
Now, this might not sound like a good thing initially, but it really is. Even though a lot of people market to probates, the amount of people who stick with it are few and far between, and this makes you much more likely to get the contract. What they are failing to understand is probate is a process.
You have to be sensitive to their timeline. Think about it: they just lost a loved one and now have this vacant property — and who knows what else going on in their life. Sometimes it takes a while.
5. The Lists Are Easy to Outsource
Some of the most common questions I see posted on the BiggerPockets Forums are, “Where should I get my list,” “How should I generate it,” etc. Probate is one of the most widely available lists, and many data providers can give you access to this information. And if you’re old fashioned, you can even go down to your local county courthouse and pick up this information for free.
Probate is one of my favorite niches in real estate, and hopefully after reading this list, you can see a few more reasons as to why it’s so popular.
Have you tried your hand at probates? What would you add to this list?
Leave me a comment below!