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Understanding Home Ownership- The Beginning

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  1. Module 1: Understanding Mindset
    9 Lessons
    |
    1 Quiz
  2. Module 2: Understanding What you want your money to do for you?
    6 Lessons
    |
    1 Quiz
  3. Module 3: Understanding The Types of Real Estate Investments
    7 Lessons
    |
    1 Quiz
  4. Module 4: Understanding The Resources
    11 Lessons
    |
    1 Quiz
  5. Module 5: Understanding The Finance
    15 Lessons
    |
    1 Quiz
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Finding Properties

There are lots of ways to find real estate deals, and everyone seems to have their favorite. In fact, many real estate investors will spend years getting great at one single aspect of attracting deals, and will use that method exclusively to build and grow their business. Unfortunately, this idea of putting all your marketing eggs into a single basket can have a massive impact on your business if/when that sole method of deal flow slows down or goes away.

  • The MLS:
    MLS stands for “Multiple Listing Service,” and it’s the place where listing agents (real estate agents who represent sellers) generally market (“list”) the properties they have for sale, and where selling agents (real estate agents who represent buyers, sometimes called “buyer’s agents”) generally search for properties for their buyers.
  • Online / Auctions:
    Over the past several years, marketing and/or selling online has become a huge outlet for distressed property sales. You can find house sales on websites run by everyone from the U.S. government to large auction houses to mom-and-pop wholesalers looking to move a property every now and again. While it would be impossible to cover all the different online property sale websites, I’m going to give an overview of some of the most popular and discuss the types of properties they sell and why you might (or might not) want to consider looking for houses online.
  • HUD Properties (HudHomeStore.com)
    Perhaps the biggest operation for selling houses online is run by the U.S. government’s Department of Housing and Urban Development (HUD). To give some background, if a homeowner buys a house using an FHA loan and later gets foreclosed upon, the foreclosed home reverts to ownership by HUD. HUD then sells these foreclosed houses online to owner occupants, investors, non-profit organizations, etc. Because HUD has so many homes in their inventory these days, many investors will build their entire strategy around buying HUD foreclosures.
  • Home Path & Home Steps
    Two of the most common REO properties are those being sold by Fannie Mae and Freddie Mac, two quasi-government agencies that underwrite and insure much of the conventional lending in the United Stated. When a conventional loan gets foreclosed upon, the property will often revert back to Fannie Mae or Freddie Mac to be sold off, often as an REO.
  • Auction.com & Other REO Auction Sites
    The second major classification of online property website is the “auction” sites. Some of the most popular sites in this category are Auction.com (http://www.auction.com), Williams & Williams Auctions (http://www.williamsauction.com) and Hubzu (http://www.hubzu.com). These sites typically auction off REO properties that didn’t sell through the standard REO channels (meaning they didn’t sell when they were publicly listed on the MLS).
  • Classified Websites
    There are a few large nationally recognized websites where private sellers can list and sell stuff that they own — eBay (http://www.ebay.com) and Craigslist (http://www.craigslist.org) are two of the largest. And many cities — especially the larger ones — will have their own sites specifically geared to local trade.
    These sites are typically referred to as “classifieds” sites, as they are extensions of what used to happen in the classified sections of newspapers. While eBay isn’t a traditional classifieds site, it does have some similarities, which is why it’s lumped into this category.
  • Wholesaling Websites
    The last major category of online property sites are websites that are geared towards allowing investors to sell to other investors. This is typically called wholesaling, where one investor will purchase or take control of a piece of property, and instead of improving the property himself and making a hefty profit, he would rather sell it to another investor to do the work, and take a smaller profit instead.
  • Direct Marketing
    Direct marketing involves communicating directly with your potential customers (sellers, in this case) and can be done through many different means — through the Internet, through the mail, over the phone, in-person, etc. For the purposes of this discussion, I’m going to define direct marketing as a one-on-one direct contact with your customer, as opposed to blanket marketing and having customers contact you via your advertising.
  • Direct Mail
    Direct mail (DM) is still one of the most reliable forms of marketing for real estate deals. Because DM will allow you to target the widest range of potential sellers quickly and at a reasonable cost, many real estate investors spend the bulk of their marketing time and money focused on DM leads.
  • Distressed Direct Mail Targets
    When targeting distressed sellers through DM, you are more than likely going to be targeting homeowners who are underwater on their house; this means that the homeowner owes more than the house is worth, and the most common scenario for you to purchase that property would be through a short sale transaction.
    When focusing a DM campaign on distressed owners, here are some of the most common groups of sellers to go after:
    • Owners who are 30, 60 or 90 days late on their mortgages
    • Owners who have been notified of a pending foreclosure
    • Owners who have listed their house for sale on the MLS but the listings have expired
  • Retail Direct Mail Targets
    While less common these days — because fewer owners have equity in their houses — it’s still possible to find great retail deals through a well-created DM campaign. The nice thing about buying retail (meaning the homeowner is above-water on their property and can sell without doing a short-sale) is that you won’t need approval from the owner’s lender, making the deal much faster and with much less hassle.
  • Creating Your Direct Mail Campaign
    Putting together a direct mail campaign isn’t rocket science, but it will take a good bit of time and effort. Here are the basic steps that go into creating a DM campaign:
    1. Setting up your phone line and/or website for your DM leads:
    2. Finding or generating your target mailing lists:
    3. Creating your marketing letter or card:
    4. Addressing, stuffing, stamping and mailing your direct mail pieces:
  • Advertising
    I use the term “advertising” in this module to mean marketing strategies that are targeted towards large groups of people, as opposed to one-on-one or targeted marketing (like direct mail and door-knocking). The most common forms of advertising for real estate leads are Internet Marketing and Bandit Signs — both attempt to get your message in front of large volumes of potential targets in the hopes that some of them will contact you and you’ll have an opportunity to close a deal.
  • Internet Marketing
    The concept of Internet Marketing is simple — you create a website that is used to capture leads and then you create online marketing campaigns to drive those potential sellers to your site. However, while the concept of Internet Marketing is simple, the real life implementation can be anything but. There are many different ways to drive traffic to your lead-capture site, some “organic” (meaning visitors get to your site via search engines or other cost-free mechanisms) and some paid.
  • Organic Internet Traffic
    The best way to drive organic traffic to your lead-capture site is to create a content-rich website that ranks high in the search engines for the types of Internet searches your potential sellers are doing. For example, let’s say you want to buy distressed houses in Baltimore, MD. People who are interested in selling their distressed house in Baltimore may type the following into Google or another search engine:
    “How can I sell my underwater home in Baltimore?”
  • Paid Internet Traffic
    The alternative to trying to get free traffic to your website is to pay for it. This is generally done by placing ads in various places on the Internet where your potential seller leads might see them. The most common form of paid advertising on the web these days is Google Adwords.

    Google will allow you to pay to place ads around the Internet to drive traffic to your website. The cost of getting your ad to appear varies, based on other advertisers looking to advertise in the same spot at the same time.
  • Other Marketing Techniques
    To name just a few of the other potential ways to find deals:
    • Newspaper/magazine classified ads
    • Display ads in restaurants/bars
    • Radio spots
    • Television spots
    • Billboards
    • Social networking
    • Partnering with professionals who deal with distressed sellers (agents, attorneys, etc)