How To Sell Your House In 5 Weeks Or Less And Make An Extra $19,000 In Today's Market - Part 2 of 2

Begin With The End In Mind

One thing with real estate investing is that you should never just go for a deal because you found a deal. If, after analyzing 100 deals, you come up with a half-dozen or so that look really good – you have to know how you are going to get paid for each one. Basically, you need to know your exit strategy for each deal, and you should really plan for at least 3 exit strategy options you can use to move a property (i.e. – wholesale to another investor, rehab and retail, or rent). As a rule of thumb, you should always plan for contingencies, as they almost always occur. I will give you my number one concept (and it really is pretty simple) to sell you house for above the FMV, in the “numbers” section of my report.


A Brief Word About Partners

One other thing that may seriously help you catapult your investing career forward is the use of partners. I love to work with partners, whether brand new friends to the real estate investing world, or seasoned investors who are willing to let me in on a deal for some sweat equity and a portion of the profits. The great thing with seasoned partners is that you also can learn as you earn. The great thing with newbie partners is that you can teach others, and it makes you more accountable to find great deals instead of mediocre ones, and you can develop an investment partner for the long haul. Shared risk and multiply potential reward using partners. All you need to do is start asking friends, family and acquaintances, and even people you just met (another good reason to belong to a local REIA).


Marketing

How can I move this property and move it quickly? This must be a part of everyone’s exit strategy and project budget – your marketing costs (which don’t forget are tax deductible). Here are a few strategies that, when used together, will combine to produce more calls than you probably can handle.

1) Get a customer yard sign made with a local sign company – black, white and red, or black and yellow are best – that says “For Sale or Lease Purchase – Call ###”. Make sure it’s your phone number in there – with the area code. This should run about $40-50 depending on the sign, but I recommend metal as they will last longer and look better.

2) Get a few hundred copies made of an 8.5” x 11” full page flyer that says “WANTED: GOOD NEIGHBOR, REWARD: $500” then list property address, brief description and your phone #. Distribute these flyers around the neighborhood your home is in, or pay someone to do so. 80% of home purchases are made by people who know someone, or are related to someone, or are a friend of a friend of someone who is already living in that neighborhood.

3) Classified Ads. Should state in the headline “A BEAUTIFUL 4BR/2.5BA HOME, (describe key amenities), Only $189,950, seller financing or lease purchase avail. Call ###”. You want to include the area code in your phone number. Also, you MUST put this ad online with your local newspaper AND for free with craigslist.com (so that you can also set-up Google Ad Words for each online ad).

4) Partner with a local Mortgage Broker (not a bank) who specializes in mortgages in the secondary market and ask them to also put up a yard sign beside yours that states “0 Down Programs Available” and that has a place for flyers in it with your homes address and sales price on it, and a few examples of financing #’s for that price range. Consider doing a couple open houses with your mortgage broker to bring folks in and get them pre-qualified while visiting. Ask a friend to even help you out if you expect more than 20 per day (you should not do open houses for longer than 3 hours per day – squeeze those prospects in together).

Now the real key to the entire process is your marketing and exit strategy. In today’s market, you must have as part of your exit strategy to be able to provide some level of seller financing or a lease purchase. You will make money doing this, so don’t worry. You also need a solid integrated marketing plan as outlined above – this total should be around $350 - $500 per property (after a few of your initial start-up costs) – unless it is higher than $200,000. Let’s first talk advertising words. There are words to use, and words not to use. Stay away from “motivated seller”, “cute”, “must sell”, “price reduced”, or “ranch house”. Do use “beautiful”, “landscaped”, “move-in ready”, “must see”, “home” and mention the availability of creative financing options. The words on the don’t list will drop your price by at least $10,000 easy and slow down the sales process, while the words on the use list should add $10,000 or more to the perceived value of your property. One word of caution in classified ads – do not exceed 7 or 8 lines of text. Briefly discuss key features (hardwood floors, fireplaces, newly remodeled, etc.).

One last marketing technique that helps tremendously is your business cards. You can even use blank card stock from your local office supply store and simply put the home address and basic info on one side and then $500 reward – call to find out more – your ###. Just hand these out to people you come across, friends and family. Who knows, they may even help you find your next good deal.


The Logic and The Numbers

Okay, well this has turned out to be a little more informative than I expected up front. So I hope I’ve at least wetted your whistle to find out more. One last thing I am going to do is explain my exact scenario, which was a combination of most of these strategies, and briefly why they worked.

So here’s the scenario. I was asked by a seasoned investor in my local area if I could help him sell an investment property and he’d cut me in as part owner of the deal. At this point I have no money in the deal and am getting paid to learn from a seasoned investor. He had purchased a 4BR/2.5BA home for around $137 and had invested close to $15K in repairs. When I looked through it, I felt as though it needed to “pop” a little more, so we worked out an ownership deal and I offered to put the finishing touches on it, stage it, advertise and sell it for a flat amount up to the fair market value and that we would split any profit above the FMV. We had some real estate agents say the house was worth $159,950 and others say $169,950. We found recent comps to show it was worth around $175, so we priced it at $179,950 to give some wiggle room as needed. This particular market was about average, and had appreciated a little over 8% the previous year.

As we were completing the initial finishing touches, I immediately switched to sales mode and put up our sign in the yard, as well as my mortgage broker’s sign, and ran an ad in the newspaper for open house. We initially priced it at $179,950 and had over 40 visitors come through the first weekend. After the second weekend, with tons of calls but no offers, I removed the ad and we went back through the house. I spent about $3,000 more in personal funds (which you can use from credit cards, tax returns, personal lines of credit) to put the window dressing and curb appeal on, and advertise as I stated in the entire article above. My partner also finished a few other minor rehab items I felt strongly about (new landscaping mulch, painting the downstairs wood siding white, and new carpet in the family room). Another good cleaning and with a new brass mailbox and flag pole out front – 2 weeks later we went for it again.

This time we put the ad for $189,950 and offered seller financing. I called the previous prospects back to see if they were interested in looking a second time. Some were. We also asked our realtors to come back and a few said we might get $170 to $175K, and one said they thought the house was over-priced. We had checked the local market and knew how much other similar homes were being list at and they were all over the board, from $149K to $189K. We decided because we were OFFERING creative financing we could ask more – plus the house look great (it wasn’t the best house in the area, but maybe the 2nd or 3rd best).

Now listen, we OFFERED the creative financing, which made the perceived value higher, especially for those who cannot get traditional financing. There’s a market share of about 40% potential home buyers who have decent down payments and decent monthly income, but marginal credit who you can help. These folks want to own homes and will pay a little extra to get the opportunity to have a home. The other thing is you do not want to be a landlord, so by doing seller financing or a lease-purchase, you can have tenant-buyers who are responsible for all maintenance, but will pay a monthly premium above rent and a nice up front, non-refundable, purchase option fee to get that chance. Now they are committed to keeping the home up and paying their payments on time, or they loose the option fee (which should generally be 3-7% of the agreed upon purchase price).

So the next weekend, we had a couple look at the house while I was showing it to another couple. This particular couple called me back the next day and asked about the lease-purchase program. I set the up with my mortgage broker to ‘pre-qualify’ them, which we do for all potential customers, and found out they needed about 3-4 months to have their credit ready to buy the house. They had $8,000 for the up front option fee, and could afford the monthly $1,400 per month. We sold the house at $189,950 on a 12-month lease-purchase at an annual appreciation of 5%. Our monthly costs are around $900 and when this couple closes with us, it will be for an agreed price of $199,450 – or approximately $19,000 above the FMV. Now there’s more profit in this deal than meets the eye, but I think you can quickly see the value here of the exit strategy. When you are working with motivated buyers and have a good property that is properly marketed, then there are no quibbles about the sales price or financing programs, as long as they can pay the up front money and the monthly payments. By the way, we gifted them with about $500 worth of extra work they wanted before they moved in and offered to help them with the closing costs at the time of sale by adding them to the loan value when we finance it, so they don’t have to pay another down payment in 12-months. Is this a good deal for all involved? I think it is. And we can all learn from this deal, as I am ready to do the next one – aren’t you.

So until the next article, I hope you were able to glean some good out of this, and if anything, it may have refreshed your memory on combining some powerful tactics. Just like a good carpenter has many tools for different jobs, some hand tools and some power tools. We as sophisticated real estate investors can use multiple strategies for acquisition, marketing and selling to make win-win-win situation for ourselves and all of our customers in the future, and make a buck or two for our hip national bank. If you are interested in more information regarding sales for investors and lease-purchase strategies, sign up for the 12-week teleseminar series with www.reimostwanted.com and get the latest, cutting edge real estate investing training available. Happy selling and the best of success in all your endeavors. CD

This is part 2 of a 2 part article by Charles T. Dudley, Sr. - Real Estate Agent, Investor and Coach - Executive Director of the Roanoke, VA Regional REIA and Founder of the real estate inveting training company, REI Most Wanted (www.reimostwanted.com). For FREE teleseminar training, go to www.reimostwanted.com or email reimw@cox.net for more information or to schedule a free consultation.