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Joe: Hey, it's Joe again. I've got another question here.
"I have a lot of investors who tell me that they'd buy property from me if I can find
them a good deal as a realtor, but when I go into the MLS, the best deals sell in minutes.
The rest of them aren't all that great, especially in this market with the prices dropping. How
can I find good deals for my investors?" - James P. in Madison, Wisconsin.
Joe: You're right. If you go into the MLS, you can probably buy properties all day long,
10-15% under market value in just about any market except in a really, really hot, hot
market which we're not experiencing in too many places in the country right now. So,
you can probably go into the MLS and find properties like that, but not too many investors
are going to be excited about 10% under market value or 15% under market value unless there's
some other type of financing advantage to do it that way.
Joe: You're absolutely right as well if you're looking at properties that are 20-30%, and
you're trying to find those in the MLS. Those are very hard to find. Occasionally, they
pop up but you've got to be quick - I'm talking within hours - and you've got to be able to
make an offer on those types of properties. It doesn't give you enough time to go to your
investors and say, 'Hey, would you like this property?' and then let them make a decision.
You've got to be able to be in a position to make the offer yourself. So that's not
the way we do it. Joe: The other way that you can find properties,
and the way I did it when I first started, was go to HUD foreclosures, and I would get
VA foreclosures and I'd do the fix up thing - I'd do the standard real estate investing
methods of fixing up the property, buying them with credit and putting my money into
them, holding them and then turning around and selling them.
Joe: In the beginning of my career, it was great because the market was going up like
mad - I could buy a property at 10% under market value, which was about what we were
getting on those VA foreclosures at the time, because it was a really hot market in California
back in the late 80's. Then we'd turn around and flip those properties and make a chunk
of money, because they'd go up in value 20-40%, so you'd see a 20-40% increase in value and
you're almost guaranteed to make a huge chunk of money at the end.
Joe: But when the market changed, that all changed as well. Also, there's only a certain
amount of properties that you can buy if you're using loans and if you're using your own money
for down payments and for fix up. You're only going to be able to buy 1, 2, 3, 5 or 10 because
at some point, you're going to get stopped, and usually, it's right around 8 to 10 properties
when you're going to run out of money, that is, unless you go to hard money, and hard
money loans don't always make sense because of the interest rates and the points and all
of the stuff that you have to pay. Joe: So I don't like using loans to buy properties
to fix it up and resell. What I'd much rather see you do is use the techniques that I teach
to go after for sale by owners, to go after expireds, to go after for rent deals, to go
after general people that are out of the market right now looking to sell their homes, etc.
- all of those different techniques, i.e. the organic techniques, the online techniques,
the signs, the classifieds, the eBay, the Craigslist, the different voice blasts and
email blasts - all of those different techniques that we use in the "Push Button Method" to
find these leads. Joe: They'll come to you in droves. You won't
be able to keep up with as many leads as you can get. And if you ever do get to that point,
all you have to do is expand into a different town and expand into a different state. There's
no way that you can possibly keep up with all of the leads that you can get, using the
techniques that I've got. So you'll never run out of leads if you use these techniques.
Joe: And also, when you're working with investors, right now in this market, if you're trying
to find investors that you can work with, a lot of them aren't going to be able to qualify
for non-occupied loans - they have to do full docs now. They've got some stated income loans
deals out there right now, but their interest rates are really high; they're up in the double
digits right now. Joe: That'll change. The market will drop
back down and it'll fluctuate. We sell to people that get loans and we help them find
properties for rental, mainly for passive investing, not active - we sell them to investors
for passive investing that they can keep for the long term, and we've done very well with
that, but I think that you're going to want to focus on finding deals on terms and then
turning around and flipping it to an investor if that's your choice for an assignment fee,
charge them $5,000 to $10,000, or take the equity as a note, or take some money up front
and take some equity as a note. Joe: That way, you're a partner in it with
them but you don't have to manage it and you don't have to take any risk - they can be
the ones that have to make sure the payment's made, and if the payment's not made, then
you can go to them and you can always take the property back if you need to because you'll
be secured by your position and your equity position will be secured by a note.
Joe: So there's lots of great ways to do that, and work with investors. When you start building
a list of investors and start sending them out an email... I've got a newsletter series,
actually its part of the Mentor Program and it's called 'Building A List Of Investors'.
It teaches you how to build a list; it teaches you how to send out a newsletter to them.
I've even given you articles that you can send out to teach them about the process.
Joe: There's also an audio that you can listen to. I think I've told you about it before.
JoeCrump.com/longterm (all one word, all lower case). If you go to that website, there's
an audio there that teaches you about long term investing which you can use to help your
investors. If you can use that knowledge and that information to help your investors understand
why it makes sense to hold property long term, even if it's got negative cash flow (because
negative cash flow is not necessarily a bad thing for everybody) and the tax benefits
and all of the other things that can come out of buying property. If you have that knowledge,
it'll be easier for you to sell it to investors and for you to write your newsletter.
Joe: Now, with the newsletter that you're going to be sending out to your investor list
every week, you're also going to add in properties that you've got for sale. And so as your investor
list grows, every time you get a property, you can send it out to your list, and you're
going to sell it instantly, well, not always, but it's going to be very likely that you
can, and we've certainly done it very quickly. Joe: I've been in a situation where I'll send
out an email and I'll sell an entire subdivision of fifteen or twenty properties in a matter
of a few hours, to where all I have to do is be on the phone, and I'd never even been
to the subdivision - I just got pictures, I got inspections and I did everything remotely
because I wasn't even in the state where they were at. Plus, they're going to be filled
by property managers that we have in place to do it and I was buying properties there
myself, so it gave it a little bit of credibility. So you might want to keep some for yourself,
just to show your investors that you're serious about investing in property as well.
Joe: So, you're playing both sides of it: you're getting the cash flow from the investors
and you're getting the long term wealth from keeping the properties. I hope that helps.