The First Week

Danny Johnson / 109 comments

This week begins the opening up of my business for you guys to see how my wife and I operate our real estate investing business. If you missed the first post explaining what I am doing, please visit This Post.

Let me mention something upfront. You may notice that I pass up on some deals that other investors would go after. This is because I really am only interested in the better deals. I do not want to get busy rehabbing 5 dumps in war zones and miss the homerun deal that would make more than all 5 of those houses combined (and not have to worry about getting mugged in the process). I do make money from some of these junkers and I will show you how.

Edit: Now that I’ve completed this post for the week, I realize that this can become a monster very fast. I’m glad I explained the leads that I did not go to see, and the ones that I just passed on completely, so that you get an idea of how and why to filter your leads. From now on, I am planning on just showing the stats of where the leads came from each week and then only analyzing the ones that I go out to see. Please leave comments if you have any other suggestions.

These are the things I did this week:

Marketing

Total Leads This Week: 8

  1. Bandit Signs[Leads This Week: 5]As you can see, BANDIT SIGNS KICK BUTT! Had my contractor put out 40 bandit signs in a certain target area of mine.  I target houses that retail (value they should sell at after repairs are made) for between around $85,000 to $150,000.  I choose these price ranges because they are where the majority of qualifying people in San Antonio are buying.I paid him $2 per sign to put them out at busy intersections along the main thoroughfares.  If you are just starting out, putting them out yourself the first couple of times will give you a good idea of where the best locations to place them are, and will quickly show you why it is worth it to pay someone else to do it for you.I use the 24×18 horizontal flute (so that they do not bend in the wind) corrugated plastic signs, nailed to posts (disclaimer: check for local restrictions regarding these signs).Here is a picture of the signs I use (I use roofing cap nails post them):


    I changed the phone number in the picture. I wish I had that number.

  2. Yellow Pages[Leads This Week: 1]I’ve had a dollar-bill-sized ad in the yellow pages for the past 4 years. This form of marketing isn’t the cheapest, but it does pay for itself. Every year I question whether to keep it, because of the near $1,000/mo price tag. But, after looking at my results for the year, it is always a no-brainer to keep it.Here is a picture of my yellow page ad (again, changed phone number):
    Maybe it’s a little over the top, but it sure does grab your attention. I decided to set myself apart from all of the other ‘We Buy Houses’ ads in the phone book.
  3. Buying Website[Leads This Week: 1]My buying website pulls a decent amount of leads every month. Well worth the investment of about $120 (per year) to host and the pay-per-click advertising with Google AdWords (only pay for when someone clicks your ad). I was a software developer when I had a J.O.B. so I set it up myself. I usually include my website in my other forms of marketing (not bandit signs – you want them to call you immediately from the signs).You can view my website here: http://www.DannyBuysHouses.com. [UPDATE: I am now offering websites for real estate investors just like mine. Check out LeadPropeller.com to see how you can generate more motivated seller leads.]
  4. Drive For Dollars[Leads This Week: 1]FROM A LETTER SENT TO THE OWNER OF A VACANT LOT THAT I MAILED TWO YEARS AGO.
Bonus: Click Here to Download My Top 5 Motivated Seller Marketing Methods Guide pdf that will show you, in awesome detail how to use 5 different marketing methods to generate great leads consistently.

Leads Analyzed

  1. Two Rental Houses[Source: Yellow Pages]Received a call from a landlord with two rental houses he wanted to unload. Both houses were 3/1’s and in a “run down” part of town (not quite a war zone, but close). Tenant in the first house has been paying $575/mo and paying his own utilities and has been living there for 12 years. He said the rents in the area support $700/mo. I love hearing that one. If they support it, why didn’t you get it? The other gets $625/mo and has only been there since January.He wants $6,500 down for the first one and will allow someone to buy the house subject to the existing mortgage with Chase ($24k principal balance at 8.5% – $384/mo payment). The other he wants $8,000 down and take over another Chase loan ($22k balance at 8.5% – $350/mo payment).These look like decent cash-flowing properties. They do need some repairs. I did not go and seem them and I will tell you why. At this point in my life, I do not want any more rental properties, unless they are in better parts of town and can be bought super cheap. I’d rather be buying houses and making money with my time, than constantly chasing people and demanding rent all the time (not to mention the constant demands for repairs).

    I don’t throw them away either. I call a landlord/wholesaler that I have built a relationship with and let him run with it. If he buys, he pays me a birddog fee (usually $1,500 and up, depending on the deal. This is always discussed upfront). All I do is get the lead and pass it on. I am looking at a check on my desk right now that he dropped off for me today. All I did was send an email with the details to him several weeks ago. He contacts them, signs up the deal, closes and sends me a check. Why let anything go to waste? Don’t throw away those leads you don’t want!

    I’ve already rambled on long enough about this one, so I will tell you about the super easy way I evaluate rentals for myself on another day. Remind me if I forget, and you really want to know.

  2. Newer House In Older Neighborhood[Source: Website]This one was a 3 bedroom, 2 bath newer house built in the middle of a neighborhood of older, run down houses. Here are the numbers:
    Asking Price:$Wanted Me To Make Offer
    Amount Owed:$30,000
    Repairs:$Unknown
    After Repaired Value:$75,000
    Max Offer:$48,750 (65% of After Repaired Value) minus Repairs

     

    You can tell there are some gaps in that data. It’s because, as you get more leads coming in, you have to be able to filter the time wasters from the true prospects. This seller would not name a price and generally seemed like he just wanted to see if he could get full price. When this happens, I just determine the basics and call back with a ballpark. This really weeds out the time wasters.

    With this one, based on what he told me about the condition of the house, I told him I would probably be able to offer somewhere between $40,000 and $45,000 cash. Usually I am not so conservative when giving the ballparks because I don’t want to scare the seller off too easily. If I have to negotiate it down, it is easier done face to face with the seller. So, if they really have any motivation at all, they will allow me to come and look at it to give them a firm offer. If they don’t, they simply weren’t motivated enough. I do call and follow up after a week or so to see if they had thought anymore about selling at the lower price.

  3. Another House In The Semi-Hood[Source: Bandit Signs]This one was a 3 bedroom, 1 bath run down house, only 912 square feet, near the two rental houses above. Here are the numbers:
    Asking Price:$40,000
    Amount Owed:$10,000
    Repairs:$Unknown
    After Repaired Value:$50,000
    Max Offer:$25,000 – Repairs

     

    This is the same sort of situation as the last one. The Max Offer is lower than 65% because I have a minimum of $25,000 profit required for any deal I do. 65% would have only allowed a $17,500 profit. I told him $15,000 to $20,000 would be my ballpark. He was not interested. I will follow up with this one. If the motivation develops, I will pass it along to a wholesaler and make a quick buck.

  4. Small House but Decent Area[Source: Bandit Signs]This one is the kind of lead I am looking for. This one was a 2 bedroom, 1 bath, 1.5 car garage, 907 sf, house built in 1995. Here are the numbers:
    Asking Price:$30,000
    Amount Owed:$5,000 (taxes)
    Repairs:$10,000
    After Repaired Value:$70,000
    Max Offer:$32,000 ($42,000 (60%) – $10,000)

     

    What I like about this one should be obvious. He was asking a very reasonable price from the get go. He inherited the house and only owes the taxes. He didn’t want the house and he really doesn’t need the house. This happens a lot with inherited properties. A lot of people just don’t want to deal with the hassles of selling a house that is not in good shape. He wasn’t exactly sure of his asking price. (He says he still needs to file taxes)

    You may have noticed that I chose 60% of After Repaired Value for my max offer. This was because the house is a small 2/1 (do not sell as well as the standard 3/2) The Comps used were 2/1’s also, so the After Repaired Value is correct. Just accounting for longer days on market.

    I immediately scheduled to see this property and made an offer of $25,000, on the spot, after walking through it. (See how I did not offer my Max Offer. You need room to negotiate. You can always go up on your offer, but rarely can you go down.) The seller wanted to talk it over with his wife that evening. He called me that night and accepted. I got the house under contract this morning and will close mid April. 🙂

    Here’s a picture:

  5. Weird Conjoined House[Source: Bandit Signs]Two houses on separate lots…joined together by a previous owner. Both houses had 2 bedrooms and 1 bath, combined for total of 2300 sf with two kitchens. Here are the numbers:
    Asking Price:$65,000
    Amount Owed:$0
    Repairs:$Unknown-A LOT-HOUSE ALMOST TOTALLY GUTTED
    After Repaired Value:$75,000
    Max Offer:$45,000 (60%) – Repairs (Estimating at least $20k) – $10k wholesale fee

     

    This house was gutted and destroyed by vandals. The seller says the wiring was ripped out of the walls, the sheetrock tore off the studs throughout, and other miscellaneous damage from vandals over the last 5 years. Due to the hassles with this one, I know I would need to get it super cheap because I would wholesale it to a rehabber that would need it super cheap. So I offered $15,000. He wasn’t having it. Next.

  6. Duplex Close To Downtown[Source: Bandit Signs]Vacant duplex in a neighborhood that I do not invest in. I passed this one on to a wholesaler.
  7. War Zone Full Value House[Source: Bandit Signs]You will get a lot of call from people that want to, and in many cases need to, sell their house at full value. This one was in a bad part of town and owed what it was worth. This was quickly determined by the fact that they had just bought the house (with owner financing at 12%) a couple of years ago (only $1,000 paid towards principal). You should not spend a lot of time of the phone with these sellers. It’s always tempting to try to help them because you feel bad, but there is not realistic way to do that. Do not waste your time or theirs. Get off the phone.
  8. Vacant Lot (mailed to 2 years ago)[Source: Drive For Dollars]This is proof that your marketing builds and the leads you get in now are a result of what you did in the past. The leads don’t always come right away. This seller received a letter from me over two years ago about this lot. He seemed a little motivated, but was trying to hide it (this always shows when you do not seem interested in their property). The lot is in the middle of an older neighborhood. It has utilities. He wants $18,000 for a lot that is probably only worth about $12,000 to $15,000.Lots are nice in that holding costs are minimal and you really don’t have to go to the property to let anybody in. There weren’t any comps for lots in the area for the last 2 years that I could find. I had sold one over there that was bigger about three years ago and figure my estimate is fairly accurate. Without solid comps, I would not want to buy this lot for more than $3k-$5k. It would be pretty hard to screw that up. He was not interested at all. He responded with, “you cannot buy a lot for that amount anywhere in the country!” I could have debated that very quickly, but thought better of it.

Summary

I am always amazed at how quickly a small investment in bandit signs produces results. Signs went up and a deal was put under contract within 5 days. It’s really that easy.

Another thing that I hope is taken from this week’s post is that you really need to learn how to quickly filter out the non-deals. Don’t get caught up in trying to make deals out of non-deals. This happens when you do not have enough leads coming in. Work on getting more leads and get used to saying, “Next!”
Plans For Next Week

  • Get list of 500 absentee owners.
  • Drive for dollars in target neighborhoods. I am going to provide a primer on this.
  • Distribute $20 marketing cards everywhere I go.

Please do not hesitate to leave feedback on the format I am using for these posts. I am trying to figure out what works best.

If you have not subscribed, please do so on the right side of this page. This way you will be notified when my new posts are put up.

Stay tuned.
Danny
You say, “I want to sell my house fast.”
We say, “We buy houses for cash, in San Antonio.”

Bonus: Click Here to Download My Top 5 Motivated Seller Marketing Methods Guide pdf that will show you, in awesome detail how to use 5 different marketing methods to generate great leads consistently.

Leave a Reply to Betty Cruz Cancel reply

Your email address will not be published. Required fields are marked *

109 awesome responses to “The First Week”

  1. Cody on

    Also, I’m curious of other methods (besides Adwords) that you may use to drive traffic to your DannyBuysHouses website.

  2. Cliff Skinner on

    I am new to this and would like to know how to start. I have ran into a lot of guys who are willing to help but it always comes with a up front fee attached. How do I go out and get that first deal?? I feel that once the first one is done I will be on my way to creating a great and strong business.

  3. Geoffrey on

    First, thanks for sharing. much appreciated.

    Second, aren’t all deals for “CASH!”? (except for owner financed) Saying cash seems so pivotal but regardless of who buys it, the seller is going to get cash. either from the buyer directly or their bank. It may signal speed of transaction but that’s it. am i missing something? i always laugh when someone says they’re “willing to pay cash for a car so the dealer dropped their price”. really?

  4. maryanne on

    always great information, your an inspiration…Ive started the process, business cards, different phone #, a p o box,… new to this and would like to succeed eventually, if i could just burst out of this shell…

    #singlemomproblems

  5. Brian on

    Excellent share. Thanks. You add so much value that buying your product just made sense.

  6. Betty Cruz on

    Awesome post!