(This is the second part of my interview with Danny. You can read the first part here)
Finding Motivated Sellers...
Fast forward to the present and Danny has been steadily doing real estate investing deals for the last 10 years and he's been making a full time living at it. But the thing that most caught my attention of Danny is that he is not chasing foreclosures and bank owned properties like I was.
Since Danny started flipping properties before the recession, before there were distressed properties everywhere, he had to develope the systems to find properties that would make good investment sense. This basically means looking for motivated sellers. Finding homeowners that for some circumstance in their lives, need to sell the house even if it is at a steep discount from market values.
Here is where I believe Danny has excelled because as I have come to learn this is a very specific and hard skill to develop. No matter what the TV gurus tell you about "easily finding discounted properties" this is hard!
Danny has developed several marketing channels to attract motivated sellers. He uses a multi-pronged approach to attract and capture leads. Here is a summary:
- Website - not just any website, but one that is built the right way so that it ranks highly with the search engines so that it shows up when motivated sellers are on the web looking to find someone to buy their house.
- Yellow Pages - he places a medium sized ad about "selling your house now"…
- Bandit Signs - these are just cheap signs that say "We Buy Houses" with a phone number and they are placed in key areas of his territory. These are very effective for him and always get his phone ringing.
- "Driving for Dollars" - this is nothing more than driving through his target neighborhoods looking for ugly or vacant houses which can then lead to finding motivated sellers.
- Referrals - whether it be real estate agents, other investors or anyone that knows of a motivated seller and tells him about it.
- Direct Mail - he buys lists of out of state owners, people behind on their payments, probate, divorce and more. Then he mails them a postcard or letter letting them know he buys houses for cash and quickly.
The bottom line of all these channels is for him to find property owners that need to sell. All these efforts get his phone ringing…a lot! Once he starts talking to motivated sellers he then has to weed through all the potential deals.
He will talk to property owners that really are not motivated, some that are motivated but are asking too much for their property, others that do not want to sell at the price Danny offers right now but come around in a couple of months after they still have not been able to sell their house and others that need to sell NOW.
This approach has allowed Danny to do a lot of deals over the last couple of years. By deals I mean taking control (not necessarily ownership) and making a profit by doing one of the following:
- Flipping - if a house is in a good area and he can increase it's market value by fixing it up then he will tackle small to moderate size rehabs, stage it and list it on the open market with a realtor.
- Wholesaling - for houses that make good rental properties and/or that need more rehab than he wants to do or are outside of his area he will then sell them at a low price to another investor. Smaller profit but a quicker deal.
- Bird Dogging - if the property is not in a good area or is one that he does not want he will forward the lead to another investor and he will get a fee for the referral.
- Selling on Owner Financing - buying a property cash and then reselling to a new homeowner where Danny provides the financing, basically he becomes the bank and the homeowner makes payments to him.
- Rentals - although he owns a couple of rentals this is not his favorite investment strategy and thus is not interested in increasing his rental portfolio unless he finds a deal with outstanding potential
So you will notice, like I did, that the key part in his process is finding those motivated sellers. If his phone does not ring then nothing else happens…
But Danny emphasizes that there always have been and there always will be people that for some reason HAVE to sell. And many times he is their best alternative, he turns out to be a great deal of help to them because for many of the people that call him that property is a real burden.
What got me the most excited about what Danny does is not just the amount of deals he does but the fact that he lets you see very quickly that being a full time real estate investor makes for a very good lifestyle. The freedom he feels of not working in a cubicle and not being an employee is contagious.
I hope that you find my exchange with Danny helpful and that it gets your wheels turning about the numerous possibilities of making money in this business. You can get a lot more details of what Danny does and how he does it in his very awesome blog flippingjunkie.com.