“Three Good Ways To Find Pretty House Deals” by Ron LeGrand
We should start with defining what a pretty house really is. It’s not the price that makes the definition. The house could be high-priced, but most people in the pretty house business work in a range from $70-$200,000. If you’re in a high-priced market such as San Francisco where a $200,000 house is rare, your range will be higher.
The point is, pretty houses start at the bottom end and go up. It’s not just expensive houses. My definition of a pretty house is any house requiring less than $5,000 in work to get it in a good, saleable condition. An distressed house is one that needs a rehab or a lot of repairs.
I’d want you to work both sides of the business and become a transaction engineer who can recognize a deal when you see it, whether it’s pretty or distressed. Don’t fall into the trap of trying to get so specialized that you turn your back on lots of other profits. There’s gold in both the distressed and the pretty house business. Besides……
You Can’t Find Pretties Without Finding Uglies And Vice Versa!
Most people start with distressed houses because they’re easy to find and understand. They either wholesale or rehab and retail. That’s OK, but it’s only a start. Pretty houses are easy in, easy out. Usually it’s get the deed and lease option to a tenant buyer. That takes a few days, eliminates contractors and reduces holding costs. Plus, it produces a few thousand dollars in front-end profit. A person could get used to this part of the business and easily make the decision to ignore the uglies.
In my opinion, that’s not a smart move. I like a little of both. I’m about 50/50. Last month my IRA received $82,000 from two distressed house deals, and that was only my half! I’d hate to lose all that money because I had blinders on. So how do you find pretty houses? Well, there are a number of ways as discussed in my Million-Maker Boot Camp. We’ll focus on three good ones here.
Method Number One: Signs
Signsnever fail to get calls-usually before you get home. I’m referring to stick signs you place on the side of the road. They can be put up with a 1 x 2 stake with a point. You can buy them at Home Depot in bundles, or with a wire rack.
The good news is you’ll get calls. The bad news is, some might be from the city asking you to remove one or two because someone has complained about them. If a call from the city will give you a heart attack, this business isn’t for you! Most cities have ordinances against signs, but some don’t. You’ll have to check into that, but the bottom line is, all cities have signs and a lot of students elect to take their chances knowing the most they can do is call and ask you to remove them.
I’ve heard news of some who were subjected to a fine as repeat offenders, and every once in a while I’ll hear of a city that gets nasty. I received a letter from a city office in Oregon asking me to advise my students they have ordinances against these signs. So there, you’ve been advised! I’ll bet this same city has ordinances against spitting on the sidewalk, sex before marriage and jaywalking.
Many students put signs out on Friday afternoon and pick them up on Sunday night to avoid the aggravation from the city. This may sound foolish until you look at the numbers. The sign cost about $3 each so if you put out 50, you’ve got $150 invested. Pick up the remaining 40 on Sunday night and the cost was $30 for the ten signs that come up missing…and I promise, they will.
If you get 10-15 calls over the weekend and buy 1 house (as you should), with a $20,000 profit, it’s a no-brainer. All of the sudden, it’s worth the risk of city heat. In some areas, the city could care less and your signs have a long life. Don’t be scared off by my warning here. Do your own due diligence and make the best decision for you.
Most signs are on fiberboard, around 18×24 inches. I like black letters on yellow, but have used other colors successfully. Be careful when you make up the sign, you don’t want to put too much detail on it. Remember, people are moving when they see it. Make the phone number large and don’t forget your website address if you have one set up.
Method Number Two: Direct Mail Campaigns
This can be a full marketing machine all in one if you do nothing else. Not only does it work well for many people, but also the list of targets is so big you can target your chosen prospects and never run out of mailing campaigns. Even though signs work well, the best target you can hope for is an area you like. With direct mail, you can use a rifle approach.
(1) Pre-Foreclosures are a goldmine if worked correctly. This is a whole business within the business that’s worth the time and expense to learn.
(2) Out-of-town owners almost always work. The list is easy to get from a Realtor or your local record office. This is one Kathy specializes in (with a 12% response rate if I remember correctly). Be sure to mention the property address in the letter and include a response card to make it easy for them to reach you without calling. Some people simply WON’T call. You must call them!
(3) New Homeowners who’ve been in the house less than two years. I’ve heard over 70% of the foreclosures occurs within the first two years of ownership and a large percentage of those occur in the first year. Any broker can get you the list. You’re looking for pretty houses so you can get the deed!
(4) Vacant Ugly Houses.
(5) Target Zip codes you want to buy in. Just pick an area, rent the list of homeowners from a list broker and mail a postcard.
(6) Divorces. Usually a sale is imminent so get the list from public records and contact them.
(7) Estate sales. Mail to the trustee. They almost always need to sell.
(8) FSBO Signs. You can download them off the online classifieds from your local paper or get them from a FSBO magazine.
(9) VA Homeowners. You can get a list from a broker and select by zip code and other factors such as property value, length of ownership and age of veteran.
(10) Bankruptcies are a matter of public record and many of them are looking to sell a home. You can pay cash for junkers or get the deed on pretty houses and petition the bankruptcy trustee to release the house from the bankruptcy.
If the seller is getting little or no money, it’s usually not a problem unless the house has a lot of equity and the trustee blocks the sale. That’s the exception, not the rule. Your mail should be directed to the owner not the trustee, and your letter should mention you specialize in bankruptcy purchases.
OK, I know you don’t feel comfortable with this, but you will after you’ve done a few! You’ll learn the rules and they won’t scare you anymore. You will become an expert in bankruptcy buys, especially when you learn the art of the short sale from Jeff Kaller’s boot camp or my new course on CD’s.
Method Number Three: Call Ads
I know this doesn’t sound appealing but if you’ll do it my way, you’ll probably grow to love it. You see, I don’t want you to call ads, I want you to get someone else to do it for you. Someone who will do it every night because it’s their job and you’re paying them. Here’s how it works. It’s so simple.
Get the Property Information Sheet out of my course or one of my Boot Camp manuals and have someone call all of the Sunday FSBO ads every Monday night between 6-9 p.m. Have them fill out the basic information you need to determine if you want to call the seller back.
Frankly all I need is the asking price, the estimated value, and the loan balance, condition of the property, name, and phone number, address and whether or not it’s listed with a Realtor. With this information, I can prescreen the prospect sheet in 5 seconds and make my decision to follow up or not. I can’t get into prescreening here so if you don’t know how to do this, I’d suggest you fix that before getting real serious about generating leads on houses when you can’t spot a deal when it appears.
If you pay this person $2 per script, they’ll make $10-$20 per hour and you can eliminate talking to a bunch of dead-end leads that don’t want or need to sell.
Your job is to take the big pile they create and reduce it to a little pile of prospects that appear motivated and willing to give you equity. That’s it! You can make a few calls a week to good prospects that have been sifted and sorted before you talk to them. This method alone could easily make you half million a year! It’s really that simple if you can recognize a deal and follow up to get it done.
If you’ve paid someone $50 for 25 scripts, and you’ve bought one house that made you $20,000, wouldn’t it be worth the $50? Yes, you say! Then get to work buckwheat! By the way, don’t even think of doing all that prescreening yourself. You’ll last about an hour. Let someone else do it. No exceptions!
Well there you have it! There’s enough info to make you rich! The question is – are you going to do anything with it?
Get out there and do it … TODAY!