The odds are, you’ve heard the phrase, “It takes money to make money.” However, if I bought into this way of thinking, I would never be a real estate investor working the hours I choose to work, traveling where I want to go, doing what I want to do — when I want to do it. Instead, I probably would have ended up working in a cubicle in some big building downtown, working my butt off to make other people rich.
I talk a lot about how you can buy real estate with little or no money, and sometimes I talk about how you can find these deals. This time, I want to focus more on the strategic side of finding deals. I’m talking about the ability to find deals without spending money. In the first few years of my investing career, I didn’t have any money to spend on marketing. Heck, I could barely scrape enough together to buy dinner. I had no choice but to look for inexpensive or free ways to generate leads. But before we get into how I managed to do that (and how you can use the same strategies), let’s talk about motivated sellers.
What Are Motivated Sellers?
A motivated seller is a homeowner that wants or needs to sell for a specific reason. For example, maybe they’re facing a looming foreclosure, they’ve recently lost their job, or they’re going through a divorce. Whatever the case may be, as real estate investors, our job is to find these sellers and provide a solution to whatever situation they’re in by purchasing their house.
Why You Need To Find Them
By finding motivated sellers, you’ll eliminate much of your competition. If you can speak directly to the seller, you’ll have a competitive advantage over other investors. By speaking with them, you can discover their personal needs and offer them a solution that benefits them. For instance, by speeding up the homebuying process, you could help relieve their financial burden in return for getting a great price or generous terms. Finding sellers motivated to sell is the most effective way to identify deals requiring little to no down payment.
Understanding The Seller’s Motivation
The following are some specific situations that will cause motivation for a seller and an opportunity for you.
Change In Income
As unfortunate as it is, the loss of employment is one of the most common reasons homeowners look to sell as quickly as possible. The loss of income often makes it challenging to make their mortgage payments, which means that the owner will want to sell as soon as possible to avoid going into more debt and eventually losing the house to foreclosure.
Owners aren’t always forced to move due to dire circumstances. I have purchased several homes from people who needed to move due to a job transfer. In such a situation, they need to sell before they move — not doing so can spell disaster. An unsold home that becomes vacant will be a liability risk, be more exposed to potential vandalism, and require ongoing, unwanted maintenance. For most homeowners, it’s just not worth the hassle. Not to mention that they will most likely have two mortgages to deal with if they fail to sell their first home before buying their second.
The Need To Upsize Or Downsize
I once bought a house from a couple because the wife wanted to live in a newer, larger neighborhood. This family was well off and could easily afford it, but they needed to sell their current home first. The pressure on the husband must have been intense because he was willing to sell to me with fantastic terms to have the problem handled in under a week.
Any number of events will cause financial pressure and motivation. Divorce is a big one, but others could include health issues, deaths, problem tenants, other investment opportunities for the seller, or foreclosures. On the other hand, couples may look to upgrade if they’re expecting another child and need more space.
6 Foolproof Steps To Find Motivated Sellers
Now that you know to look for motivated sellers, the question becomes how do you find them? And how do you find deals that other investors don’t know about without spending a dime? The following are six effective ways to find motivated sellers for free:
1. Call For Cash
Calling for cash has been, by far, my favorite way to find deals on a budget. The goal is to speak directly to sellers who want to sell you their house. So what better way to talk to someone than to pick up the phone and call them? Yes, you will likely speak with lots of sellers who aren’t motivated enough to negotiate with you. But this is a numbers game, and the more you call, the more likely it is you’ll eventually reach a motivated seller.
You can get lists of sellers to call from ‘for sale by owner’ websites, ‘for rent by owner’ sites, and online classifieds such as Craigslist. Sometimes, you may be able to find phone numbers in foreclosure listings, which you can get for free at the county trustee office. You can also get lists from title companies for a small fee, although some may give them to you for free. Finally, you can always drive, bike, or walk through various neighborhoods to get phone numbers from ‘For Sale By Owner’ or’ For Rent’ signs.
2. Go Door-To-Door
Although I prefer making calls, going door to door may be the best way to land the most profitable deals. I like making calls better because I can reach more people within a shorter period. However, if you have the time, I recommend knocking on doors. I know several investors who end their workdays by knocking on five to 10 doors on their way home from the office. They also happen to be some of the most successful investors that I know. Knock on the doors of homes that you would suggest mailing to. Targeting homes experiencing foreclosures, evictions, probate, and code violations is an effective strategy when visiting in person.
On the other hand, you could just visit a neighborhood you like and knock on every door. I have actually done this with some success. I simply tell the owners that I am interested in buying a house in the area and ask if they know anyone wanting to sell. Although I thought I would find people who would want to sell me their home, I ended up getting gossip about neighbors. While this may not seem very beneficial, I ended up getting to know who was in trouble financially and might need to sell.
3. Post Flyers
There are many ways to use flyers without it costing you money, aside from what it costs to print. There was a time when I would walk around neighborhoods and drop off flyers at every house myself. Not only did I see it as an opportunity to get some exercise, but it was also a great way for me to meet the neighbors and get to know an area.
You can also hang flyers on community boards found in grocery stores and coffee shops. Again, doing so is free, so even if it may not end up working well, you should still be doing it. If you are hanging them on community boards, be sure to include a picture of yourself. Doing so will make your ad more personable, and people will be less likely to dismiss it out of hand.
The only expense involved with networking is the cost of making your business cards. You could always forgo business cards if you’re really on a budget, but I don’t recommend doing so. They make it easy for people to remember your name, what you do, and how they can contact you. Business cards are cheap, so get good ones.
Networking tends to be easier at networking events, but you could find an opportunity to tell somebody what you do and give out a business card almost anywhere, whether it’s at a ballgame or even while riding the bus.
While I think you should let people know that you are willing to pay them a large referral fee, I have found that the best deals come from people trying to help out someone they know instead of being motivated by money. As such, when you explain what you do, focus on the problems you can solve instead of the rewards you can provide.
5. Post Online Classifieds
Online classifieds are often free, so I suggest posting ads online. Odds are you’ll be on these sites looking for phone numbers to call anyway, so you might as well go ahead and post a free advertisement while you’re at it. This strategy works best if you refresh or post a new ad every few days. You can post in the “services offered” sections and the “for sale by owner” sections. Think about it: if you were a motivated seller, wouldn’t you go online to see what other houses in the area are selling for? Motivated sellers are always doing research online, so post ads to help them find you.
6. Send Out Direct Mail
Direct mail can be a really creative way to get your message out there for free. For one stamp, you can send up to six pages. You could even partner with other advertisers and have them pay for your campaign. You can do this by putting together everything (including the list you want to market to) and making that the mailings go out. Then find four to five other non-competing businesses that are interested in marketing to the same list. They each pay a portion to participate, and you end up getting the campaign for free. Being the only message in the envelope is best, but this is an excellent way to get your message out there for free if you are strapped for cash.
Using Other Sources
Although these six strategies are my favorite and have helped me locate many motivated sellers, there are other avenues you can explore. Pretty much everyone is on social media, which means that it could be a fantastic platform for spreading your message. Most social media networks may limit you to your own personal network unless you pay for advertising, but it is free, and people that care about you will read your posts. In fact, the first motivated seller I purchased a home from was through my network, so I know it works.
Know How To Talk To Property Owners
You must have a script when speaking to motivated sellers. A good script will help draw out their motivation, so you’ll find out if it is worth the time to go out and look at a property. A homeowner who is interested in selling but can’t tell you isn’t a motivated seller. Sellers that aren’t motived will be expecting a price higher than you can pay. The most powerful question in your script is, “Why are you considering selling?” If there is a definitive deadline, like a foreclosure sale date or a job transfer, you know there is motivation. If there is obvious financial pressure, like a bad tenant or a divorce, that would be a strong indication as well. Finally, problems with the property itself could also indicate that the seller is motivated.
Frequency And Consistency Trumps Your List Size
Despite being free (or close to free), each strategy I discussed takes effort. Many investors expect this business to be easy, like they see on TV or what they heard at the last seminar they attended. It doesn’t take a lot of capital, but this business does require effort to succeed, especially in the beginning.
If you have money but little time, you can always find ways to get marketing done with little to no effort on your part. But if you are thin on capital, don’t expect this to be easy. You’ll need to put in the work. If you want this bad enough, you can find a way to make it happen. You will also need to be persistent. Don’t give up!! As long as you hustle now, you can begin sculpting the life you’ve dreamed about.