“Sorry Ryan. I know it will be fun, but I can’t go because I don’t have the money.” This was a response to my friends that was far too common. It was about 14 years ago when I was trying to break into the real estate industry. I was working my way through college, trying to buy houses, and wondering what I could afford to eat; there is no way I was going to spend much on marketing.
I always tried to have multiple mediums going at one time to help me find the best real estate deals. My top three ways to find motivated sellers, with little to no out of pocket expense were; calling for cash, driving for dollars, and bandit signs.
Calling for Cash
The biggest thing to understand here is that you will be calling people looking for motivation, or someone willing to talk to you. You ARE NOT trying to buy a house over the phone. Maybe after you become really good at doing this, you can try to buy the house over the phone. However, I strongly believe that this is a mistake, especially when you are just getting started working with homeowners.
The two people I would call are For Sale By Owners (FSBO) and For Rent By Owner (FRBO). The best way to do this is to compile a list using online classifieds, like Craigslist.com. You will also have better results with fewer calls if you age your ads. Aging ads simply means waiting several weeks to call after the add is posted. The reason this works is if the house is still for sale or for rent after a period of time, there is a higher chance the owner is motivated. You will also get a lot of people saying it is already rented or sold, which makes it easier to make a lot of calls fast. Please understand that if you use the aging strategy, you may be losing out on potential deals. People in desperate need will do almost anything to find a solution.
When you start making money you may want to consider hiring someone to go through these for you and put them in a spreadsheet. You can hire this type of employee pretty cheap virtually at odesk.com. If you have not looked into Odesk, you may be surprised at what you can get for your money, and the work is actually pretty good.
Your goal with the call is to find out what you can about their situation and set up an appointment to meet with them. Once you meet with them is when you actually try to buy the house. Don’t make any offers or suggestions over the phone. If you are calling a FSBO, be sure to ask them why they are selling, which will give you an indication of their motivation. If you are calling a FRBO, ask them if they would be willing to sell the home if they received a fair offer. If they are willing to sell, they may be a landlord by default, and you could have yourself a great lead for a lease option or a subject to. If you don’t know what those two buying strategies are, please search our blog to learn more.
Driving for Dollars
This is not totally free, because you will be driving, but I still believe it is a good way to find deals with a small budget. Driving for dollars simply means you drive around certain areas looking for deals. You may want to focus on a few neighborhoods so you are not all over the place. Here is what you are looking for:
- Overgrown yards or trashed houses
- Lots of newspapers or other signs of a vacant home
- Moving trucks
When you see a vacant home, I would write down the address and go put a flyer on the door that you buy homes. When you get back to your office, take all the addresses that you wrote down and try to find the owner so you can contact them directly. I would start with county records. A few other ways to find the owner are through a skip trace service (which can be affordable or can be very expensive) or mailing a letter to the property with a note on the front of the envelope that says “Please do not forward. Forwarding address requested.” When the postman sees this they will put a yellow sticker on the letter with the previous residents forwarding address and return it to you. You can also talk to a few of the neighbors while you are in the area. You have a good chance at a good deal if the property is vacant and there is no effort to sell it or rent it. This normally means the owner has given up or the house is tied up in a divorce, bankruptcy or probate. You could also get a lot of short sale leads this way.
FSBOs can be great. At least you know they want to sell and you know they are not working with an agent. It is great when you see a FSBO open house, because you can go talk to them directly and on the spot. When you see a FSBO, write down the address and the phone number. I would then go and knock on the door, if no one is there, leave a flyer. When you get back to your office you can either call, (which is what I recommend) or you can start a series of direct letter mailers to the address. Once you have a little more money and a little less time, I would send letters. This way if they call you, you are dealing with a much warmer lead and you are not spending too much time talking to people that you will never have a chance to work with.
FRBOs are great too. Everything I mentioned above applies here. The only difference is if you knock on the door you may get a tenant instead of the owner. Also, with FRBOs, you will want to find the direct mailing address of the owner if you choose to send some letters. The way you find the owners address is either use anywho.com and do a reverse lookup with their phone number, or look in county records. The county assessor page online should have the owner name and mailing address.
When you see a moving truck get out of your car and find out what is going on. Is someone moving in or out? If they are moving out, ask them who owns the house and try to find out what they are doing with it. If they are moving in, find out where they moved from and if they owned that house. If you are on a shoe string budget, you are looking at quantity of leads and not quality, so talk to everyone you can.
This one will cost you some money. If you can afford it, I strongly recommend getting professional signs made. I used to buy poster board and make signs. That won’t work as well, but it does work and you will get calls. The idea here is to get your message to as many people as you can with the lowest cost. You will be looking at anything from $.25 to $3.00 per sign and chances are good hundreds of people will see it. That is a pretty big bang for the buck. You will want these in the high traffic areas like off ramps from interstates or highways, busy intersections, around elementary schools, and coming out of busy shopping centers. Putting them up with stakes in the ground works the best, but putting them on poles as high as you can works too. These signs get taken down and torn up often, so you need to be consistent at putting them up or it won’t work.
These are called Bandit Signs because city officials don’t like them, (even though politicians use them more than anyone) and they are considered littering. There is always the risk of getting fines and nasty calls from the city. I stopped using them partly because of the pain and the amount of work it takes to make it work, and partly because the cities don’t like it. It is your choice if you want to use these. I just want to share with you that they are cheap and they work.