The Sixth Week – Getting Chewed Out

Danny Johnson / 25 comments

These are the results of the sixth week of opening up of my business for you guys to see how my wife and I are building back up to 30 deals a year. If you missed the first post explaining what I am doing, please visit This Post.

These are the things I did this week:

Interviewed an REO Agent
I was able to interview one of the top, if not the top, REO agents in San Antonio this week. It went really well and I think it will be a very valuable resource for anyone wanting to build relationships with REO Realtors.

I’ve got to edit the sound files and then they will get sent out to subscribers. You can subscribe on the right side of the page (just under the video) to make sure that you get a copy. You don’t want to miss the interview.

Sent Postcards
Sent out the 480 postcards to absentee owners. Got my first call the next day. The caller was polite for the introduction of who she was and then just started yelling at me for about 5 minutes. She explained how she fought for years to have the city, mayor, councilman, congress, the president, the mailman, etc. etc. do something about the flooding problem in the neighborhood.

They finally fixed it. “And now you want to come in and get a good deal on it after we did all the work. I will never sell you the house and I feel sorry for anyone that does. You are stealing houses now that we have done all the work! Where were you when there was a problem?”

Wow! I didn’t even know the neighborhood used to have a flooding problem (I sent to a big area with multiple neighborhoods).

After her rant, I politely informed her, “I didn’t know I was supposed to help with the flooding.” She hung up. Maybe it was wrong, but I had to say something after her long rant. I left out most of the words I can’t type here that she called me. I tried to call back to get the address so I could take her off the list, but she would not pick up.

You will get calls from people like this and you must do your best to be polite. I listen to them without saying a word and when they are finally done, I can sense that they regret a little what they had just done without even knowing me or letting me say anything. You never know, one of these callers may call you in the future to sell a property. It surely adds a little excitement. I never got calls like that when I was working as a software developer.

Talked With Realtors
Called some REO Realtors to just keep my name fresh in their mind. This kind of thing takes time.

Put Out Bandit Signs
Had 50 more bandit signs put out. This time the placement was good and bad. Good in that they were placed at intersections like they should be, but bad because most were put in neighborhood that decided to have a sign sweep this weekend. Basically, as my guy was putting the signs up, the neighborhood was coming behind him and taking them down. I know this happened because I got a long message on my phone left by the neighborhood association president. It was a friendly message, but he did inform me they were taking them down and that any they missed may seen by code compliance and I could be fined. This is watch you have to be careful of when putting signs out. This area will no longer see my signs. Others will though.

Drove For Dollars
Went driving for dollars two days ago and got about 40 leads in a little less than 2 hours.

Hidden Iron House Posted
Posted Hidden Iron House

10 Items You Need Posted
Posted 10 Must Have Things To Bring When Viewing A Property

Negotiating Another Deal
I’m still negotiating with on one of the deals from last week. The seller lives an hour away and does not have transportation. I faxed an agreement with the agreed to price to her. I really should have just drove to her and had it taken care of. I’ve followed up for 3 days and she finally called this morning to tell me she was taking it to her attorney.

Geez. I hate when they do that because attorney usually try to negotiate the deal instead of verifying the legality of the agreement and that there is no funny business. This was mentioned to the seller in hopes that she would not call back with demands. Well…she did…several times. I ended up having to pay more earnest money and pay title policy. Then I get home and the signed agreement is on my fax machine. Now it includes me paying all closing costs. NO WAY!!

I immediately called and talked it over. They are not budging, so I informed her that I needed to look the house over again. My gut was telling me to recheck comps as well and I feel I may have been off by at least 5k (house is smaller than I thought). So, Saturday I am going back to view the house again and am going to make my final decision.

You really need to listen to your gut in these situations. Mine is starting to tell me it is no longer a deal. The biggest thing to learn here is to try and stay in control of your deals. I should have driven the agreement to her and had her sign it as soon as we agreed over the phone. You should always be willing to walk away from a deal. I’m not going to try to make this a deal if it really not one. Sometimes it hard to walk away from one that is so close to being a deal, but you have to stick to your numbers. You get into trouble down the road when you don’t. If I don’t buy, I will try and make sure it is someone I know that does.

Marketing

Total Leads This Week: 13 🙂

  1. Bandit Signs – 5 50 signs were put out this week.
  2. Yellow Pages – 1 For a picture of my ad, visit the ‘The First Week’ post.
  3. Buying Website – 4 You can view my website here: http://www.DannyBuysHouses.com.
  4. Drive For Dollars – 0 Nothing sent out for these lately.
  5. REO – 0 Things are slow here. But, I have faith.
  6. Wholesale Deals – 1 Got more leads than this, but this was the only one worth analyzing.
  7. Absentee Owner Mailing – 2 Both leads from absentee owner postcard mailing stunk.

Leads Analyzed

  1. Divorce Situation

    [Source: Yellow Pages] 

    Homeowner wants to get rid of a 3 bedroom, 2 bath house has a partially converted garage. House built 2004.

    Here are the numbers:

    Asking Price:$What is Owed Plus Something
    Amount Owed:$64,000
    Repairs:$Unknown
    After Repaired Value:$80,000
    Max Offer:$52,000 minus repairs

     
    Seller cannot afford the house payment. This seems to happen a lot with divorce situations where they could afford the house with two incomes, but cannot with just one. She mentioned that the garage conversion was never completed. This is a newer house that was built in a junky older neighborhood when the real estate market was really heating up. Not such a good buy now.

    Too much is owed and I really feel this would be pretty hard to sell.

  2. Owe What It’s Worth

    [Source: Bandit Signs] 

    Homeowner wants to get rid of a 3 bedroom, 2 bath house in decent part of town. Got married and now have two houses. This house is the vacant one. Left alone, cold in the rain. They owe what it’s worth though. Nothing I can do.

  3. Facing Foreclosure In One Week

    [Source: Bandit Signs] 

    Homeowner facing foreclosure on a newer house with 3 bedrooms and 1.5 baths. Said only thing it needs is AC repair. The after repaired value is about $75k and they owe $55k. With the repairs and short fuse, this is not a deal for me. I birddogged this one to another investor in hopes of making something work.

  4. Another Owing What It’s Worth

    [Source: Website] 

    I think I spoke too soon in talking about how lucky I’ve been that there has been a lot of equity in the houses lately. Seems most calls now owe what they are worth. Same for this 4 bedroom 2 bath house that was built just a couple of years ago. Military family needs to sell before transfer. I wish I could help them.

  5. Here’s The Situation

    [Source: Bandit Signs] 

    Homeowner wants to get rid of a 3 bedroom, 1 bath house in an older neighborhood.

    Here are the numbers:

    Asking Price:$What is Owed Plus Something
    Amount Owed:$42,000 Home Equity Loan
    Repairs:$Unknown
    After Repaired Value:$65,000
    Max Offer:$40,000 minus repairs

     
    This seller started with the very common, ‘Here’s the situation. Let me start from the beginning.’ This usually means, grab a bag of popcorn and put your feet on your desk, you’re going to get the full story. 🙂

    So here’s the situation. Seller lives in Corpus Christi (on the gulf coast) and owned this house in San Antonio. When he moved, he signed the house over to his mom. She passed away and title went to caller’s brother. Brother got a home equity loan on the house (August 10, 2009) and then signed the house back over to caller (August 14, 2009). The lender was not happy with this, but is happy enough with the payments being made, that they have not done anything about the title transfer (due on sale clause should have been triggered). This is like what happens with Subject To investing where the bank could care less as long as the payment is being made. [I checked the Bexar county clerk’s website to comfirm deeds, deed of trust and dates.]

    Too much is owed for me to mess with this one. The house is vacant and they are motivated, so I passed this one on to another investor to see if I can’t get a birddog fee for it. The investor I sent it too called back to tell me the guy was ‘kuckoo crazy’!

  6. Works For Government and Transferred

    [Source: Website] 

    Homeowner wants to get rid of a 3 bedroom, 2.5 bath house in a newer neighborhood. Built 2001.

    Here are the numbers:

    Asking Price:$106,000 (then down to $70,000 when asked least they would take!)
    Amount Owed:$68,000
    Repairs:$Unknown
    After Repaired Value:$100,000
    Max Offer:$65,000 minus repairs

     
    This one is in an area that I really don’t like to buy in. Days on market is high and there are a lot of foreclosures to compete with. Add that they owe just over what I want to buy for and I just don’t want to do it. I’m sure another investor will be interested and so I passed this one on.

  7. Giant Historic House

    [Source: Bandit Signs] 

    Homeowner, facing foreclosure, needs to sell a 5 bedroom, 2.5 bath, 4300sf house in a historic neighborhood.

    Here are the numbers:

    Asking Price:$300,000
    Amount Owed:$275,000
    Repairs:$Unknown
    After Repaired Value:$350,000-400,000 (depends on the quality of the rehab)
    Max Offer:$225,000 – repairs

     
    Talk about a short fuse. There is just 7 days before the auction. This is a lot of money to scrape together that fast. I love these older houses, but they can be huge money pits. By the way, if you have never seen ‘Money Pit’ with Tom Hanks, you really should. This house also faces a very busy road and it makes me question my ARV. This would only work if the foreclosure was postponed and a short sale worked out. The work involved to even try it, is keeping me from wanting to do this deal. Too much risk.

  8. Wholesale That Missed the Mark

    [Source: Wholesale] 

    Wholesaler pushing house that needs 12-15k in repairs.

    Here are the numbers:

    Asking Price:$47,500
    Amount Owed:$?
    Repairs:$12k-15k not confirmed
    After Repaired Value:$75,000
    Max Offer:$45,000 – repairs

     
    This is just across a busy street from an area I buy in. The area this house is in has a lot for sale and they have high days on market. I was told the ARV was around $92,500 but think that is just flat wrong. If it were correct, I’d go and see the house. But I’m fairly certain, well certain enough, that it is not, so I did not go and see it.

  9. Bad Part of Town

    [Source: Bandit Signs] 

    Homeowner with a house in poor condition, in a bad neighborhood. I do not buy in this neighborhood. The sellers were only asking $16k + couple grand back taxes so I passed this on to a wholesaler that has buyers in the neighborhood.

  10. House In My Father’s Territory

    [Source: Website] 

    Homeowner selling house in a town outside San Antonio, where my Father lives and invests. I passed this one on to him.

  11. Rental Property With 8 Year Tenant

    [Source: Absentee Owner Mailing] 

    Landlord (used to be their primary residence) has a 4 bedroom, 2 bath, 2000sf house they might sell.

    Here are the numbers:

    Asking Price:$Make an Offer – Strike One
    Amount Owed:$? – Wouldn’t Say – Strike Two
    Repairs:$Maybe a Roof
    After Repaired Value:$145,000
    Max Offer:$94,000 (65% ARV – repairs)

     
    This is the issue with some of these types of mailings. This is from the absentee owner postcard I sent out. You will get a lot of unmotivated sellers calling you. This one is a tire kicker and I did not spend a lot of time analyzing. I gave ballpark in the 80’s and they were not even remotely interested. Their tenant has paid religiously for 8 years. They don’t need to sell.

  12. Rehabbed House

    [Source: Absentee Owner Mailing] 

    The house was just rehabbed and is going on the market. This is where absentee owner stuff does not work as well because I have never seen the property. Just not a good lead. Wants full market value obviously.

  13. First Russian Property

    [Source: Website] 

    WOW. Got a lead from Russia. Need I say anything else.

    Update. This turns out to be from a software developer in Russia that has been given the task of designing a site with the same functionality as mine. He was entering info in to see how it worked.

Summary

Still trying to put another one under contract. I did close another one this week, but it was one I had put under contract before starting this ‘follow my journey’ thing. It will not be included here as I only want to have what I’ve gotten from the start.


Plans For Next Week

  • Call more REO Realtors.
  • Check on rehabs.
  • Get probate leads from the courthouse.

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 posted. Besides, don’t you want to read about the crazy adventures you can experience as a house flipper? Flipping houses is the best business to be in, bar none.

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25 awesome responses to “The Sixth Week – Getting Chewed Out”

  1. Bilgefisher on

    Angry calls are never fun, but as you say, part of the business. My very first direct marketing call was an angry call from a probate letter. Those are tough pills to swallow when it involves the death of someone.

    Very interesting to see your call backs. If you have the time, would you mind posting the cost of your marketing on next weeks blog?

    Jason

  2. Raymond B. on

    Danny,
    Thank you for sharing.
    I appreciate it.

    Raymond

  3. Mat on

    Thanks Danny!

    As always some great posts.

    At what point do you forsee, or are you ever planning on having your marketing handled by someone else on your team?

    In a prior post, you mentioned that once you get busy with the rehabs that your followup tends to wane. How do you plan on keeping that from happening in the coming weeks as you get more projects going in the pipeline?

    -Mat

  4. Ken Brand on

    Wow. That is TONS of GREAT information. Seriously, thank you.

  5. Clay on

    Great stuff Danny – just started following the blog and its great to get a ‘behind-the-scenes’ look at things. I like the A&E show’s, but this version of Flipping is much more realistic.

  6. John on

    Danny,
    If you plan on doing 30 deals this year, that’s about 2-3 per month. Do you feel you are on pace??

    John

  7. Chris on

    Danny,

    First-off, good-job on this site because it’s a gem. I’ll try to keep this short, sometimes I post way to much text. I have a couple Q’s, feel free to answer as few as you’d like.

    A) When you check-in with REO realtor’s, exactly what are you saying? I just listened to your interview and from what she says they want to work with investors but don’t want to be annoyed either.

    B) You state that certain areas have properties that have too long of on-market periods before they sale. Where exactly are you getting this info.? Zillow? I know agents often re-list properties so they wont look as if they’ve been on the market for so long, but am curious to how you find this info. out in an efficient manner.

    C) Have you ever asked your sellers exactly how they’re finding your website? I know this can be seen as a dumb question (google, SEO), but in my mind it is hard to imagine someone using google to find me, an investor, to purchase their house. Maybe you should have a short article on SEO and online marketing.

    Thats all for now, sorry for such a long post, I will keep it shorter in the future.

  8. John on

    Danny,
    Have you thought about having someone else take calls, look at houses, make offers, etc?? You would just make sure marketing is going and do deal reviews. Seems like you are doing all of the day to day low dollar activities.

    John

  9. Brooks on

    Danny, Good Stuff. Not getting emotional about a deal is honestly one of the toughest things that I find about investing. That decision can end up being the difference in profit and bringing money to the table to sell (has been for me at least!)

    Great website for generating leads! Do you do any specific paid advertising with your site or do you just have the site on all marketing pieces and let the chips fall as they may?

  10. Bailey on

    Tracking your leads:

    Check your web hosting. Click on AW Stats. It’ll show you all the stats you want.

    B

  11. Allan H on

    Hi Danny,

    My name is Allan and I’ve really been inspired by your site. When I was much younger (and I’m only 19 so this was a LONG time ago), I saw this show where a guy fixed this ugly, UGLY house and resold it for 700,000 dollars. Don’t remember the buy price but that sell price has always stuck in my mind. I mostly got out of this show that I am interested in buildings and designing them and that I wanted to pursue architecture in school.

    However the idea of home flipping has always been at the back of my mind and today I was suddenly motivated to look up some information about it. Most of the stuff I found were just gurus making it seem a lot easier and less expensive than it is, and I already knew that because I do all the repairs and additions on my house personally. Not enough money to hire people, and parents don’t have time and are too old 🙁

    However I came across this diamond of a website in the rough world of the internet and it’s really been sending my mind into a frenzy. Just reading through ONE of these pages answered 97.58% of my questions that SEVENTEEN other sites couldn’t. Yes, I went back and counted. All to show you how much I appreciate your and your wife’s efforts on this site.

    So I just wanted to say thank you for really being the one to introduce me to what I see as a really fun hobby (not sure if that’s the right word) that I will be engaging in on the side once I am out of college and settled in to a career. As in maybe 1 or 2 a year. Nowhere near your level hahah

    I wanted to ask though if you knew of any good forums or networks where I could find a local home flipper. I wanted to see if there was anyone around that I could volunteer my help to. I’m not going to be doing this for years, but I wanted to try to get some experience and really see all this stuff in action. You know, learn some tricks of the trade and whatnot. 🙂

    Allan

  12. Allan H on

    By the way, sorry about the huge, make-your-eyes-hurt post. I’ve been having some trouble finding an email address for the website.

  13. David on

    Hello Danny,

    Thank you for such an informative blog. Not often do you see such details to be shared by true professionals FOR FREE. I am sure you have other things to do than spell everything out to newbies here, but yet you take your time to answer all the questions. You deserve a high praise!

    I have two quick questions:

    1. First is about the closing costs on your “Negotiating Another Deal” above. Do you not offer to pay all the closing costs when you write the offer? If not, have you ever lost a deal to another investor who offered to pay all closing costs (including the seller’s)?

    2. And the second is about the extra repairs which run over the original estimate. I am sure you got it down to the science, but have you ever had a repair cost baloon way above your estimate for whatever reason? If yes, how do you approach it from the money standpoint? You obviously do not go back to your PML for more… Do your cash reserves come into play at that time?

    Thanks,

    David

  14. jessica on

    Hi Danny, since you do a lot of letter mailing to absentee owners, I was wondering if you have ever tried to get in touch with a home owner before a tax sale on their property? Or is that a very difficult situation? I ask because we are in a similar situation right now but I am unsure if there is a way to get in touch with the owner, get the house for a great deal and pay off whatever tax liens they have before this county sale and if it is ok to do that???