In another article entitled "Is Real Estate Investing Good In This Economy?" I wrote about whether or not real estate investing was a good idea in this economy. If you read that article then you know that I follow Warren Buffet's stated philosophy of buying when everyone else is selling. That, in essence, is where we are today in this economy in early 2011. Now is the very best time to begin a new career in investing. The absolute best place to start is by wholesaling properties. Even though I explained what wholesaling is in a previous article, I'll briefly mention it here too. Negotiating a low enough deal with a seller to allow the property to be sold to an investor with a profit of at least $5000. You can easily do two or more of these each and every month.
To get started we must make a plan to find sellers and buyers. You will be using the 80/20 rule for both sellers and buyers. You will spend 80% of your marketing off-line and 20% on-line to find sellers. Conversely you will spend 80% of your marketing efforts on-line and 20% off-line for finding buyers.
You have to have a plan to follow or along the path you may lose focus and get diverted by every new method, or course or program you stumble across. I KNOW because it happened to me! You have to stick to your plan until you are successful. Then rinse and repeat. How and what do you plan? Your plan needs to be specific and list the dates and activities you will perform. To start developing your plan, you have to begin with what you expect to earn and then we can back into the plan from the numbers. I'll give you an example and then you can use it to plug-in your own numbers.
Let's say you want to earn $10,000 per month. The average deal happens to be $10,000 so that's one deal per month. Statistics show us that it takes 20 "qualified" leads to produce 1 deal. So that means that you need to attract (marketing) 20 "qualified" sellers each month. The breaks down to less than one per day. So to attract 1 "qualified" lead per day to your website, you will need to gauge your marketing efforts to product that level of activity. Direct mail is the preferred method of marketing and it produces about a 1% response rate.
Now you can start writing you marketing/action plan. When will you do you first mailing? Seven mailings to the same list (removing people who contact you as it happens) will be needed. Have your new phone line ready to accept the calls with you answering live not an answering machine. You must take the calls and talk with the owners to get a real feel for their "motivation" for selling. Honestly, you want people who have "given up" and just want out. You will probably waste your time (in the beginning) by indulging people who just want to see what you have to offer. Don't do it!
After you complete you plan that should cover the first 6 months you begin with day one. Stay focused and concentrate on what you need to do and get it done. Check off items when you complete them - it will give you a real sense of accomplishment to do this. Here are some tips to help you along the way:
Your mailer should be a specific color postcard with specific words targeted to your potential sellers. My recommended target market is absentee landlords who have owned their property for at least 10 years. You can buy these lists online. I can give you that information, along with the post card colors and wording if you would like to partner with me to help you get your first few deals.
You need to use a formula to determine the maximum off you are willing to make for any particular property. The formula starts with the market value if it was all fixed up with no repairs or fixing to perform. The current market value of the property must also be computed. This is another area where you will need to either subscribe to some internet sites to have access to the local MLS (Realtors only) or I can help with this too.
The formula is the current market value - less needed repairs - less buy, sell & holding costs - less your profit of $10,000 - less the retail profit (for your end buyer) of at least $25,000. The result is the MOP - the Maximum Offer Price. You will never allow yourself to offer more than this amount. I said never!
Finding buyers is a parallel activity that starts at the same time you start your planning. Without buyers, you have no business. Your buyers list is your gold. In the beginning, you can pay to use other investor's buyers lists or you can wait until your's builds up. To build your buyers list you must market to them. 80% of your efforts should be on-line as previously mentioned. The on-line marketing is a bit unique. I'll give you a brief overview.
You will have a webpage called a squeeze page. You will drive "traffic" to your squeeze page using various traffic building techniques. The squeeze page will get their name and email address and automatically put them into your buyers list with your auto-responder service. If you don't know what this is, don't worry it's nothing technical and only runs about $19 a month. The auto-responder will auto-magically send a thank you email to everyone that joins your buyers list. You will also schedule other auto-sending emails over time to keep in touch between sending property blasts to your buyers.
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