Response to frustrated investors - Posted by Farlee

Real Estate Investing Billboards
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Posted by Gary-IN on February 18, 2004 at 12:41:58:

Del,

You mention that you use no other advertising except business cards. I don’t market nearly as much as some people, but I do have a few pole signs and a newspaper ad that runs constantly ($90/mo.) I have enough deals to keep me busy with my full-time job, but I am interested to know what you do with the business cards to get the deals coming in so consistently and quickly. We are averaging about 2 deals/mo, and that is plenty for now, but when I quit next year, I want to crank that up. I also live in a smaller city (45,000) which limits the number of deals out there.

Any advice or insight would be helpful.

Good INvesting,
Gary

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Response to frustrated investors - Posted by Farlee

Posted by Farlee on February 17, 2004 at 12:07:39:

Hi everyone,

I posted this response to an earlier thread entitled “frustrated”, where someone has spent a year and almost $6000 making offers but not closed a deal. I am not trying to be negative, but rather realistic.

I’m just curious as to whether anyone has any comments, because I’m finding that there just aren’t that many “great” deals out there for a beginner unless you’ve got some great connections.

PRIOR MESSAGE:
I do not in any way mean to sound disparaging, but I think it is important to be realistic.

If you’ve spent nearly $6000, and a year’s time, making offers but have not yet closed a deal, you’ve got to rethink your strategy. It’s not working.

You’ve actually hit upon one of the biggest problems people have when investing in real estate, and why 90% of the people really don’t make much money in it (note: I said 90% - I know there is a 10% out there making a lot of money). There are a lot of people out there not making money, or making it over the LONG term (10-20 years). It’s because they don’t count the total cost (in both time and money) against total gain (in post-tax profit).

The reality is that you can’t limit yourself to “great” deals, which is what everybody likes to brag about. You have to understand that there are A LOT of people out there who have a low margin, high volume investment strategy.

That is, they make $1-2K per deal but do 50 or more deals a year. Granted, if you take out the cost of doing business and the hours they spend, they are only making about $15 an hour. But, it’s still better than the $8 an hour they were making before. Thus, they are very happy with this strategy and they make a living. These are the people that are probably stopping your deals from working.

You have to understand that there are many, many people out there who are competing against you on EVERY deal. For every offer you make on a property, there could be 20 or more other investors (or home buyers or even agents) looking at the same deal and making offers (especially with short sales and foreclosures). Many of them will be perfectly happy making $1-2K per deal, and will offer far more than you may be willing to offer. In addition, there are just some bozos out there who lose money on deals because they don’t pay attention to the numbers. You are also competing against these people on every deal you make.

Thus, you need to understand that you may not be closing on any deals because your earnings expectations are too high, and you may want to accept the fact that full-time investing is NOT going to work for most people, and your approach may be best to focus on LONG-TERM investing. I’d keep the day job as long as possible.

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Re: Response to frustrated investors - Posted by Diresu

Posted by Diresu on February 18, 2004 at 17:27:37:

Just one more thing. If this guy really is rehabbing homes for $1,000 a pop he’s nuts. That’s real work with loads of risk!!! One small mistake could cost him $5,000 (the next 5 deal’s profit) easy. He might as well do sandwich Lease Options. He’d make just as much up front for a lot less risk and work. I mean honestly… this guy is a nut-job if that’s what he is doing.

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Re: Response to frustrated investors - Posted by Diresu

Posted by Diresu on February 18, 2004 at 17:21:57:

Ok, I’m a newbie investor so take this with a grain of salt but I don’t think this guy was on the level with you. He’s making more and just trying to scare you off. He’s gotta be making at least $5,000 or so. I say this because nobody is so smart he can figure out right down to the last $1,000 what every deal is going to cost him. Impossible. He has to plan for more profit because he’ll run into things going wrong he hadn’t/couldn’t plan for on every deal.

my two cents,

Diresu

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You might as well become… - Posted by Barry (FL)

Posted by Barry (FL) on February 17, 2004 at 13:54:55:

a real estate agent if you want to work for tips!

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Re: Response to frustrated investors - Posted by Kristine-CA

Posted by Kristine-CA on February 17, 2004 at 13:21:59:

Farlee: I’m wondering if you can back up your statement about investors making 1-2K per deal and doing 50 deals per year. Do you know anyone doing such a thing? And if so, what are they doing that they are making only 1-2K per deal? The only time I’ve made that little is when the deal presented itself and I decided that a little paperwork and a few phone calls was worth the 2K.

Again who are these people happy making 1-2K per deal on a SHORT SALE? I think you might be assuming some things here. It’s possible that the competition does things differently, for sure. But it doesn’t mean they are willing to make less than agent wages.

The deals for beginners, and for everyone, are what you make them. I had no connections whatsoever with anyone on my first deal. I didn’t know a single person that lived within 150 mile radius of where I started farming. I think it might be wise not to assume anything and back-up your comments with personal experience and facts. Sincerely, Kristine

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Finding the deals… - Posted by Sean

Posted by Sean on February 17, 2004 at 12:31:15:

Finding the deals, the number one thing that needs to be done by any successful investor…

I’ve seen newbies claim, only people with connections find them (not true, but being connected definately helps)… There are no deals in my market (not true, but its a good pre built in excuse for failure)… etc. etc. etc… there are a multitude of excuses and gripes from newer investors.

I will attempt in a limited message to address this:

#1) There are deals in every market, I don’t care what market it is. Yes, different markets have more competition than others, different markets have different parameters as to what a “deal” is…some techniques work great in some markets and are worthless in others… All these things are true… but ALL markets have deals.

#2) Only the people with connections get deals… Absolutely NOT TRUE. Do people with connections find deals easier? Sure, in the general case… but this is true of all businesses… who do you thinks got a better chance of getting the business of a new client (regardless of the business) the company that’s been doing it for 20 years, or the new guy just starting out? THis is life people, stop whining about it, and get over it. The fact is, if you don’t quit and work hard in a while you’ll find yourself one of the connected… you probably won’t even realize it when it happens to you… it will just happen.

There are deals in EVERY marketplace… the successful investor in the one who can rapidly recognize them and capitalize on them. If you are lolligagging taking weeks from seeing a potential property to getting a offer in on it, and its gone by the time you offer… that’s not a problem with your market having too much competition… that’s a problem with you not being a serious competitor.

The typical time between me seeing a property (visually inspecting) and putting an offer in on it is measured in minutes to hours in most situations. If you are taking days to weeks or more… you probably are dead.

THere are billboards, and bandit signs all over my territory for all sorts of other investors… my marketing consists of a few small ads and a web site… I still find more than enough potential properties to look at and offer on. Do I get them all? Of course not, but I do make sure I get an offer in on them.

You need to get to know your marketplace, what works and doesn’t work there, and how to capitalize on the opportunities it provides. What I do, I am certain would be much harder in other markets… and what others do that works well in their markets would be difficult if not impossible in mine… if you are a student of this business you will rapidly figure out whats what, by simply pounding shoe leather and getting to know others in the business in your area.

Finally, determination is far more important than anything… looking for that quick flip wholesale deal that’s going to net you 20k+… hey that’s great, and there are people that have done that first try… but like the guru’s infomercials say “UNIQUE EXPERIENCES, YOUR RESULTS WILL VARY” in that very small print under the testimonials… these are the exceptions not the rule.

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Re: Response to frustrated investors - Posted by tmofa-IN

Posted by tmofa-IN on February 17, 2004 at 12:29:44:

Hey Farlee,

I did not read the previous post you mentioned.

First off, something I’m sure you are aware of is risk/reward. Was the potential reward(s) worth the $6K? Only you can decide that. If it was welcome to investing.

I think you are correct that some people refuse deals that have profit margins that are wide…others don’t, YOU have to decide for YOURSELF what you are comfortable with, again, welcome to investing.

But even more important than what you have typed here is what you haven’t typed. This business is about people.

Does your inability to close a deal seem to fall apart at about the same place? Or for the same reasons? Did you try to find out why the deal didn’t go through?

Are you out the $6K because you aren’t using CYA clauses or forms, doing your due diligence?

What are you doing to have the elusive “motivated seller” to contact you?

When you make calls are you finding out the sellers “problem” to figure out if they are truly motivated? Are you even making calls?

What area(s) are you focussing on? (Rehab, sub2, L/O, (pre-)Foreclosure, etc)

Do you accurately know the market you are working in?

Are you appropriately marketing yourself to the sellers? Are you coming in wearing a suit and carrying a brief-case to junkers or blue collar workers? Are you using your fancy lingo/ text book words and definitions, or are you speaking to the level of knowledge of the sellers?

There are more questions but lets start with these.

Peace,
Teddy

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Re: Response to frustrated investors - Posted by Nike

Posted by Nike on February 17, 2004 at 12:27:20:

C’mon Farlee,

You’re buying in to the cannard that there’re no deals-that only the insiders are getting deals. You counsel Barbara yet you’re suffering from the same self-defeating attitude. Brabara revealed her problem when she said she’s been trying to build her business for the last year- and that she has made- “a few offers”. That’s her problem. She/you need to know your market and make offers- a lot of offers.

Be sure you’re looking for deals in the right areas- lower to middle income neighborhoods. Pick two or three zip codes to start- get the MLS listings for the areas- arrange from low to high and drive the neighborhoods. Start making offers on deals where there appears to be a motivated seller.

Have you joined your local investment club? Where are the locals investing? That’s where you should be too.

You can do this. Good luck.

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Re: Response to frustrated investors - Posted by Farlee

Posted by Farlee on February 18, 2004 at 11:06:04:

Hi Kristine,

As I mentioned in my earlier post, this comes from my use of our County Auditor’s web site, a software program I use for RE investment analysis, and numerous conversations with other investors, brokers, banks, etc.

My comments were based upon both foreclosures and short sales. I’ve diligently run the numbers (real numbers) and come up with realistic return values on the property. I made offers and/or set offer prices at the absolutely highest amount that I thought would make a deal work and be worth my time.

Needless to say, there have been situations where my numbers indicated that $90K was the absolute top price I thought it made sense to pay, but over 20 offers came in over $100K. Since I casually know one of the investors who beat me on around ten of these deals, I spoke to him.

He basically told me that he only plans on making around $2K profit on each one, but he does about 20 offers and 1 deal per week. He also has a classified ad every day, a phone line, etc. etc. Thus, after expenses, I doubt he is making over $1K profit on any single deal. But, over the year, he makes around $50K.

Once again, not a good hourly rate but better than the $28K he was making working for the county maintenance crew. So, he’s happy and stealing all my deals. Such is life. I’m only bringing it up because many new folks think they are always going to make $5K - $10K per deal, and they just won’t in my market.

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Re: Response to frustrated investors - Posted by Tim

Posted by Tim on February 17, 2004 at 17:30:24:

I don’t know anyone that is willing to settle for 1-2k per deal & is doing 50 deals a year. I do know that in my market there are a lot of people that are willing to take on deals that don’t make any sense to me. I am not a beginner & I keep a close watch on the local market, I see a lot of homes bought, rehabbed & resold with very slim margins. I am competing(sp?) with people who think that if they can buy a house for $100,000, put another 10,000 into it & resell for 118-120,000 they are doing well. The margin hardly covers their holding costs, but there are so many wannabe’s here that they do these deals anyway.

I have not done any short sales, but I do keep up with local foreclosures. The vast majority of these go back to the bank, are listed with a realtor & end up selling for very close to the loan amount (not counting late fees). Just like any area there are people here that are making money in REI, but it is not as easy as it was several years ago.

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Re: Response to frustrated investors - Posted by Barbara

Posted by Barbara on February 17, 2004 at 14:58:46:

Thanks Nick and everyone else who pretty much said the same thing to me - refocus all your energy on BUYING PROPERTIES. In other words if the activity isn’t going to bring in a property, re-think doing it. This may be just common sense to some and yet it’s been very helpful to me.

As for the $6,000 spent, I’ll think of it as tuition well spent, rather than wasted money. It has gotten me thinking of better, more efficient ways to market my company and product, and other ways to learn the process of getting a deal done.

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Re: Response to frustrated investors - Posted by Kristine-CA

Posted by Kristine-CA on February 18, 2004 at 11:30:39:

Farlee: you may want to consider looking for deals where no one else is. There is always a niche that’s being overlooked. Even in hot markets. Even in places like Atlanta where newbie investors are crowding the sidewalks and courthouse steps.

In my opinion someone making 50K and doing 20 deals per year is working hard, but not necessarily smart. I have never heard of such a thing–blows my mind that people can be involved in that many deals and not find some with more than 2K in equity? Well, at least I wouldn’t do it. But to each their own.

Sincerely, Kristine

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Re: Response to frustrated investors - Posted by Chris

Posted by Chris on February 17, 2004 at 17:58:06:

Barbara-
I know two people who are extremely successful in this biz. One had to make 70 offers before his first deal was accepted and the other had to make 33 offers. It’s a numbers game, if you aren’t making a lot of offers, it’s tough to get deals.

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Re: Response to frustrated investors - Posted by Del-Ohio

Posted by Del-Ohio on February 17, 2004 at 15:41:34:

One of the truest statements I have ever heard, I believe comes from Robert Shemin, THE PERSON WHO WRITES THE MOST OFFERS BUYS THE MOST PROPERTIES, it may not always be true, but what is true is you will not buy properties if you are not MAKING/WRITING OFFERS.

We buy a lot of properties and always run into people who say it cant be done, there are no deals. My question is always how many offers did you write today, this week, this month. The corrolation is incredibely strong.

The $6,000 in attempting to buy property reminds me of the slogan that goes something like STUPIDITY IS DOING THE SAME THING OVER AND OVER AND EXPECTING DIFFERENT RESULTS.

We have not spend any money on marketing or advertising, except business cards. We find deals as fast as we can do them. Whenever we need deals we start writing offers, we have it focused now where we can pretty much find a deal within a week. This may not work in every area, but it has worked in every area of north east ohio that we have tried.

My experience

Del-Ohio

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I’m intrigued - Posted by Gary-IN

Posted by Gary-IN on February 18, 2004 at 12:55:25:

Del,

You mention that you use no other advertising except business cards. I don’t market nearly as much as some people, but I do have a few pole signs and a newspaper ad that runs constantly ($90/mo.) I have enough deals to keep me busy with my full-time job, but I am interested to know what you do with the business cards to get the deals coming in so consistently and quickly. We are averaging about 2 deals/mo, and that is plenty for now, but when I quit next year, I want to crank that up. I also live in a smaller city (45,000) which limits the number of deals out there.

Any advice or insight would be helpful.

Good INvesting,
Gary