Posted by John Behle on November 13, 1998 at 15:47:14:
Low price cash offers 65% or less.
“Paper Trade” offers - Trading notes for properties where the seller is willing to carry at least 70% of the property value in the form of paper.
“Split Wraps”. I borrowed the term from Jimmy Napier - though I was doing it long before I ever heard of him. I called it a “Nothing Down Wrap around”. Split wrap seemed a lot simpler. It involves buying up properties with low rate assumable loans for a low down and then re-selling them again with a low down on a contract. Usually there is very little or no investment and yields above 40% on the paper. “Split Cranks” are another version that involve getting a second for some or all of the downpayment needed.
Rehab deals.
Combination. Where there may be all of the above or two of the elements. For example, a little below market with the seller willing to hold paper and a low interest rate assumable loan.
I trained the agents for several days at the beginning and then in weekly sales meetings. I provided the leads and signed blank offers subject to inspection. I also wrote a computer program that cranked the numbers on each deal and gave them a “go” / “no go” decision on each one. ((Sorry, progam is not available - it burned in an office fire a few years back)).
The more offers you make the better chance you will have of having some of them accepted. I assume this correct. What if i started making offers to purchase on everything in my area. I am not talking about going out to see all of them first. What i mean is to send offers to purchase starting at 65% - 70% of the selling price. Those that call back and want to talk and negotiate, then you go see, the ones that don’t. Not much time wasted. I am just curious as to what some of the experts out there think of this idea for a part-time investor. Would appreciate any and all comments.
Re: What do you think of this idea??? - Posted by Eduardo (OR)
Posted by Eduardo (OR) on November 13, 1998 at 12:29:26:
JLM–
There was a real estate broker in California about 20 years ago who decided to write offers at 20% below listing price on everything in the MLS book at the time. He had a few accepted, but as I recall, he only tried this once because of the immense amount of labor involved. It just wasn’t worth the effort. --Eduardo
Re: What do you think of this idea??? - Posted by John(NH)
Posted by John(NH) on November 13, 1998 at 12:22:05:
The shotgun method has some merits. But you will insult
many sellers and agents if you target way below asking
price. Instead, I would offer close to asking price,
with no-money down (seller carrying financing) and of
course a contingency clause. If the seller accepts,
you have a possible no-money down deal. If the seller
counters, you can get an idea of how flexible he is,
and then you can decide whether or not to pursue it.
This way you still find out the motivation factor and
the seller’s needs without insulting everyone at the
same time.
When I got out of my Robert Allen’s seminar in 1991 I would walk into a real estate office and start writing cash offers at 20-25% below market just about on anything in a certain price range. I upset all the sellers and their agents pretty quickly. For an unsuspecting seller getting an offer like that is an immediate insult.
I learned that I had to prescreen sellers and find out their true motivation before I ever write a low-ball cash offer.
If you are working with MLS there are ways to do that by looking into remarks and ownership fields of the database. John Behle pointed several of them in his articles. There are other ways to spot them, perhaps those that have been vacant for a long time, or owned by lenders, or in need of a lot of work, or grossly underpriced to start with, etc., etc.
Spending time on writing and submitting hundreds of offers even if you don’t go to see the property is an awful waste of time.
If you want to use shotgun approach, one of the easiest ways is by using direct mail. Prepare a letter or a post card and mail it to all the property sellers in your market place with a statement of benefits of selling to you. With modern software it’s easy to get addresses and names from phone numbers in the paper, etc.
Further screen those who respond, and you’ll buy something very soon.
I mail a lot and I buy 1-2 homes a month just from that. Never had to come up with a downpayment, or go to a bank for a loan.
Posted by John Behle on November 12, 1998 at 16:59:22:
I’ve always liked the carefully aimed rifle approach vs. the shotgun approach. You can have the best of both though.
I have a couple friends that have tried the shotgun approach. Bill had his computer download all new listings in the MLS overnight, crunch the numbers, and generate offers. In the morning he would come in, turn the offers over (in the tractor fed printer) and the computer would print the address, return address and a bulk mail permit. The most fascinating part to me is he did this all with a Radio Shack TRS80 Model 1.
The results? Bill now programs computers.
Agents threw his offers away (even though by law they had to present them). He didn’t buy many or any properties.
One of my agents used to work for Mark Haroldsen before he started working for me. For Mark, he would write and present and offer on every property - 70% of value, 10% down with the seller carrying back the balance at 6% for 40 years.
I’m not sure he bought any under those terms - but the focus was on generating counter offers and finding out who was flexible. He bought some great deals as a result.
A friend of mine told me how a real estate agent turned investor and retired. He was drunk in a bar and bet a friend he could sell a million dollars of real estate in a month. He bet 100k. Most of the month went by with little success. Desperate at the end he decided it would satisfy the bet if he bought the real estate. He wrote offers on every property in the MLS and hired some young girls to deliver them. He structured it so that he could use his commissions as the downpayment. He bought a million dollars of properties in just a few days.
As I mentioned, I’ve always found my greatest success with the “Rifle” approach - yet I found limits to my time. I decided one day to use my broker’s license more effectively and hired 8 agents to write offers solely for myself and a couple partners. We bought over a million dollars in property each month. Look in the “How to Articles” section and there is an article where I detailed our approach.
Though there were dozens of offers every day, they were well stuctured offers with good potential of getting accepted. There were 5 basic types of offers and they had close ratios of from 20-33%.
Re: What do you think of this idea??? - Posted by phil fernandez
Posted by phil fernandez on November 12, 1998 at 16:25:51:
JLM,
It’s my opinion that you can’t tell a book by it’s cover. What happens if one of your offers is accepted and you find out the great deal that you thought you got is trashed inside, or needs all new wiring and plumbing and maybe a new furnace. I like to look at the property inside and out thoroughly before I make the offer.
Saying that, you still could implement your plan of making these offers and protecting yourself with offers with a satisfactory inspection contingency included within your offer to purchase.
Posted by Paul Macdonald on November 12, 1998 at 20:03:57:
Mr. Behle,
I’d appriciate your breaking down the 5 basic types of offers you used. Cash or owner take back or note substitutions or more creative styles? Did you have standard “cookie cutter” types?
Posted by Mr Donald on November 12, 1998 at 19:08:24:
You should ALWAYS make your offers contingent upon a satisfactory inspection - unless, of course, you have the time to view each and every one of your target properties BEFORE you bid.