When it comes to the subject of finding motivated sellers, we can ALL benefit from finding new ways to do business.
If you're familiar with this blog – you probably know that I've always turned to things like direct mail and internet marketing to find motivated sellers and while these methods can do a phenomenal job of reaching the masses – they offer significantly less control in terms of pursuing specific properties that you might have your eye on. Given this, I wanted to use this post to focus on a realm of marketing that I have very little experience in, but is worth having on your radar nonetheless.
Today's post comes to you from Chris Feltus, an expert in Driving for Dollars. This is a unique method of reaching out to property owners in a more intentional, targeted way. Let's turn to Chris and hear more about this innovative method.
Let’s start with a brief overview on Driving for Dollars.
To put it in simple terms, it’s the act of driving through a given subdivision and taking note of properties that appear to be distressed and/or abandoned. Once these leads have been discovered, your goal is to reach out to these property owners in an effort to find new investment opportunities. This strategy is great whether you are looking to flip, buy and hold, wholesale or even “bird dog”.
A Goldmine Waiting To Be Tapped
As real estate investors, we are looking for both equity and motivation in every potential deal, because both of these things are necessary components to structure a traditional deal in real estate. However, many real estate investors in some markets can find themselves trying to market to the same lists of property owners. This can lead to over-saturation in the market, a lower response rate, increased competition and ultimately this results in fewer deals and lower profits for YOU.
As a general rule of thumb, the more work you have to do to obtain a lead, the less competition there will be for you in the end (and in turn, this can results in some potentially larger profit margins). This is one of the key reasons why driving for dollars is a great way to generate quality leads with little competition.
One of the strongest benefits of driving for dollars is that it can give you the ability to find “red flags” that may potentially indicate a motivation seller. For example, vacant and distressed property is a clear and visible “red flag”, which means that there will likely be motivation now (or at some point in the future) for them to sell at a discount – but it is critical that you continue to mail them throughout the year. This is necessary because time and circumstances change over time and you are waiting for this potential seller to have a trigger event that causes them to pick up the phone and call you.
There are very few drawbacks to this method, but the only investment it requires is TIME and a nominal amount of money for marketing (a few envelopes, letters and stamps). If you are short on cash for a marketing budget, you can begin to build your lead generation engine by spending as much TIME as you can driving for dollars. Even if you are seasoned and your marketing budget is not bootstrapped, this is still a great strategy to implement since this can be done before or after an appointment. Therefore, the leads that you can acquire through driving for dollars typically have both EQUITY (after you research) and MOTIVATION.
Driving for Dollars in Action:
Driving for dollars is simple to do. All you will need is a camera and a notepad to jot down addresses. When you are spending the day driving for dollars, there are some key factors to look for, such as:
- Differences in grass between yards
- Mailboxes with no doors on them, and no mail inside
- Newspapers piled up on the front porch
- Obvious code violations on the house
- Boarded up and/or broken windows
- No realtor or bank-owned property signs in the yard
If the neighboring properties are even halfway maintained, these sorts of properties will stand out like a sore thumb. When you come across a property that exhibits these features, jot down the address. Drive as many or few subdivisions as you'd like – just make sure the subdivision you drive suits your needs. For instance, if you are looking to make high equity plays, it probably doesn't make sense to drive through a subdivision that was built in 2010.
When you are finished proceed to the next step.
Now we will research the properties we jotted down. Simply go through these addresses, one-by-one and examine them on your local appraisal district website or with a service like AgentPro247. You want to make certain the property is not bank owned (you should be able to find the name of the individual(s) or entity that own the property). If the property happens to be bank owned, scratch it off your list. In addition, verify that the property has equity of some sort. You can do this by checking with various list providers that have indices like LTV (loan to value). I like to keep it simple – if the deed date is at least 10+ years old, I will keep it and mail to them.
Now that we have refined our list, it's time to compile it and keep track of it. Again – I like to keep things simple, so a basic excel file will do just fine. At this point, it’s up to you on how you would like to begin marketing. Some investors prefer yellow letters, some like postcards. However, a trick that works great for me is as follows…
Remember how I told you to take pictures of these houses? Utilize this in your letter and print out an image of the house in the body of the letter. Many times these properties are absentee-owned, which means that the owner does not occupy the property or use it as their personal residence. As such, sometimes the last time they viewed the property was 5+ years ago. Sending them a picture will paint a fresh picture of just how bad of shape the property is in and really drive home that their house needs to be sold at a discount. You can also print out a small thumbnail image on the upper left quadrant of the envelope. I have found this to really help increase my response rate. An example of this marketing method is illustrated below.
To succeed at this technique over the long term, you need to work your leads, follow up with people, and if you haven’t received the response you were hoping for, that's okay!
We are going to market to these same people continuously throughout the year. I would suggest once every other month, or every 3 months for a 12 month period. You've already spent the effort researching and driving these properties, so you might as well spend .34 cents on a stamp and an envelope and continue to market to them!
Special thanks to Seth for allowing me the honor and privilege of guest posting on his blog. Thanks for reading and if you have any questions feel free to leave them in the comments below and I will do my best to address them!
Chris Feltus is the owner of Feltus Family Homes, a single family residential real estate group based in DFW, Texas and assists home owners that need to sell their house quickly “as is”. With the right amount of care, ugly houses can be beautiful too!