February, 2014

Motivated Seller Gold Mine – Targeting Niches for a Higher R.O.I.

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Gold MineOver the last few blog posts (Direct Mail, Part 1 & Direct Mail, Part 2), I have been lauding the benefits of direct mail marketing, and discussing the strategies wherewith savvy real estate investors are able to generate a steady stream of motivated seller leads.  While direct mail should never be the only tool in your marketing belt, it is certainly a formidable one that should be an integral part of any effective motivated seller marketing plan.

While many investors use a shot gun approach, and target specific areas with their direct mail marketing, perhaps the most effective strategy is to target a specific type of SELLER with a specific type of DISTRESS.  Not only does this typically improve your advertising dollar ROI (return on investment), but it helps to ensure that the phone calls you receive will fit within your specific investment objectives.

In the next few posts, I will go through some of the specific niches that are available in the world of motivated seller marketing, most of which can be found free of charge on your local county’s clerk of courts website.  A few of the strategies may involve paying a lead service or data harvesting company for the leads, but most of those services are extremely affordable and cost-effective when used as part of a larger marketing campaign.

Niche #1 – Probate Properties: Probate properties are homes that have been inherited by someone, typically a friend or relative of the deceased owner.  Most peoplelast_will_and_testament don’t NEED a 2nd home, and so oftentimes the inherited property can be more of a burden than a blessing.  The new owner is now responsible for upkeep and lawn maintenance, property taxes, insurance, as well as securing the property from potential theft or vandalism.  These additional expenses can be budget-busters for the home’s heir, and so oftentimes they become a MOTIVATED seller.

Due to the sensitive nature of the situation, those who pursue probate properties need to be a little more understanding and compassionate than they would normally need to be with another type of motivated seller.  However, if you can be a sympathetic ear to someone in the grieving process, and you have the patience to wait through the potential legal bog, as well as the possibility of multiple squabbling heirs…then this could be an EXTREMELY profitable niche for you.

The exit strategy on most probate properties is going to be either rehab or wholesale.  Many of the homes will be dated and in need of numerous cosmetic and mechanical updates, and so they will unlikely be “turn-key.”  These are typically great properties to renovate and sell to a retail buyer, or wholesale to a rehabber for a quick assignment fee.  On a rare occasion, you will come across an overleveraged probate property that will require a short sale before any other investment strategy can be pursued.

Niche #2 – Code Violations: Code violation properties are homes in which the owner has violated a county ordinance or building code, and so they have been issued a warning or had a lien attached to the property.  Code violations can be given out by your local county enforcement officers for numerous reasons, some of which include a broken window, an unsafe structure on the property, or an overgrown lawn.

M4034S-4211Sellers who have had a LIEN placed against the property because of their code violation are typically very motivated.  If they had the money to remedy the violation, they would have most likely taken care of it long before it got to the lien stage, because the penalties for non-compliance are typically very hefty…sometimes $500 or more PER DAY.    However, while this niche market is typically very motivated and responds to letters at a higher-than-normal-rate, you also never know what you’re going to find when you look at the property.   Many of the homes will be “tear-downs” or vacant lots (homes that the county already tore down) and so some of the leads won’t be able to be converted.

The most common exit strategies will be similar to probate properties, because these will commonly be homes in very poor condition with little to no mortgage balance.  So, once again, code violation properties will generate a large amount of potential deals for renovation or wholesaling to other rehabbers in your area.  You might also want to connect with some small local builders in the area, or Habitat for Humanity, who might be interested in purchasing some discounted lots from you for new construction.

Be sure and stay tuned for our future posts, where I will be addressing a few more of the targeted niches in the motivated seller market.  Until then, are there any niches you’ve had success with in the past?  Have you tried probate or code enforcement lien properties?  If so, what were your results?  Let us know by commenting below!

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Targeting a Niche vs. Casting a Wide Net – Direct Mail Marketing

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Mail carrierIn my last blog post, we discussed the benefits of direct mail marketing in finding motivated sellers.  There are numerous ways to generate motivated seller leads in the world of creative real estate investing, but I have found that one of the most effective is through mailing compelling marketing messages directly to their homes – whether via a letter or postcard.  However, even within the world of direct mail marketing there are two main schools of thought regarding the most effective, and ultimately the most profitable, way to do it.

The shotgun approach is about casting a very wide net, to a large group of homeowners, in the hopes of finding those who are motivated to sell at an acceptable price.  This is oftentimes done by targeting a specific zip code, area, or neighborhood.  If there is a subdivision in your town that is known for very low days on market, or is a popular place to live, it might make sense to send a series of letters or postcards to the homes within that neighborhood.  The down side to this method is that it tends to be a little more expensive, and certainly less targeted, since there will be numerous owners in that subdivision that have no desire to sell, or a reasonable MOTIVATED to sell.

The sharpshooter approach is much more targeted in its efforts. Similar to a lasersharpshooter scope that pinpoints exactly where it wants the bullet to go, a targeted marketing effort is going to pursue a VERY specific type of seller that has a SIGNIFICANT motivation to sell.  A few examples would be to focus on those going through a divorce, someone who has recently inherited a house, or a homeowner that is in foreclosure.  This approach oftentimes yields a much higher response rate (and return on investment), which is especially important to beginning investors who have a very limited budget with which to try and generate profitable leads.

——>>> Big Profits from UGLY Houses <<<——

——>>> Shadow Inventory: BIG Opportunity for Investors <<<——

In my next post, I will discuss in detail some of the many niches that investors can pursue in their marketing efforts, along with the pros and cons and each one.  Every niche, and specific type of motivated seller, has a unique set of circumstances that will dictate both the buying strategy…as well as your exit strategy when trying to re-sell.

Until then, can you think of any good “motivated seller” niches to pursue?  Have you marketed to any in the past?  What were your results?  Leave a comment below, and let’s start a dialogue that we can ALL benefit from…

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Direct Mail Marketing for Motivated Sellers

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Direct Mail 1The biggest challenge for both new and experience investors is finding and creating a consistent source or quality motivated seller leads.  Some newbies mistakenly think that there is a plethora of high-equity deals just hanging out on the MLS, just waiting for them to come snatch them up and make a fortune on them.  Those of you who have been in this business for a while know that is not even close to reality.

In fact, experienced investors are not just realistic about the lack of high-equity deals on the MLS or other websites…they are leery about deals that are on the open market that have not been purchased yet.  They ask the question, and rightfully so, “If this is such a great deal, why haven’t any of the other thousands of  investors who scour the internet every day found this deal and purchased it already?”

It’s really as simple as the timeless business principle of supply and demand.  If you take something that is in limited supply (a great deal on the MLS), and add inSupply & Demand a massive volume of demand (every Tom, Dick, and Harry that wants to make money in the flipping business), then you are bound to see prices driven upward.  More exposure always leads to more competition and a higher price.

In contrast, let’s say you implement a marketing plan, and you get a motivated seller to call you who hasn’t yet spoken to a Realtor, and their house is NOT on the open market.  You now still have a limited supply (one house), but also a very limited demand….YOU!  You’re not competing with dozens of people that are clamoring to pay top dollar for this seller’s home.  It’s just you and them, and you will have a much easier time creating a win/win situation and a profitable deal in this scenario. That’s why it’s so critical for EVERY creative real estate investor to have a consistent marketing plan targeted at motivated sellers.

——>>>  Motivated Seller Marketing – Relationship Marketing <<<—–

——>>> “Sell the Sizzle, Not the Steak” <<<——

One of the most effective, targeted, and cost efficient forms of marketing to motivated sellers is through direct mail.  Direct mail allows you to choose a specific niche or target customer, and then customize and send your marketing message (and irresistible offer) right to their front door.  You can affordably create your own postcards or letters with standard programs like Microsoft Word & Publisher, or there are numerous templates you can edit and purchase online.

Cold_CallAnother benefit of direct mail is that it creates a warm lead environment.   Even though cold-calling “for sale by owners” or “for rent” ads can be very effective, most people don’t enjoy it very much.  You can overcome that awkward conversation by marketing through direct mail.  In this situation, the motivated seller is calling YOU (not the other way around), and so the ice is already broken…and you can just easily move through your call script to get the necessary information to analyze the deal.

——>>>  “Five Keys to Success with Lead Sources”  <<<——

In my next blog post, I will discuss some of the possible niches and target markets that are available in your area.  We will also discuss how to find a database of these potential leads, and even outsource the mailings to a fulfillment company if you are too busy to do it yourself.  But until then, let us know in the comment section below if you’ve ever tried direct mail.  If so, what were the results?  Would you do it again?  Join the conversation, and let us know!

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