"Better Framing" Is Not Just What Better Carpenters Do...

Shark Bait Marketing | Sub2 Deals

LANGUAGE WARNING

Only For Shark Marketers...

My "Five Point Solution" to marketing for profit...

I can't quote Frank Kern here, because this is a "G" rated blog. However, I'm heading into "R" territory for the purpose of clarity and emphasis of relating what one of the most respected marketers told me yesterday.

Meantime, what Frank taught forced me to rethink my marketing. Before I get to that, there are four marketing keys that are missing from 90% of the marketing I'm seeing. I am guilty of missing a couple of them myself, which makes this post important to share. Yes, my blog has content!

Very quickly the four keys are...

1. Headline must easily and immediately expose a "need" in the prospect.
2. The offer must easily and most likely appeal to a certain prospect.
3. The prospect must easily and effortlessly take advantage of the offer.
4. The prospect must benefit from what we have to offer, opposed to other offers. Easy, huh?

Well, if we can translate those four keys into our advertising of houses, apartments, or whatever, then we'll almost own our market. I say "almost," because Frank got me thinking about this one fundamental marketing question to ask regarding my message to market advertising.

That is, to ask, "What is my prospect's biggest, 'Bad Ass Problem'?" (B.A.P.) I told ya Frank has an "R" rated style. The answer to that question is foundational and fundamental to making money. All profits flow from the quality of that answer.

Meantime, my prospective buyer's B.A.P. is not being able to buy their dream home with conventional financing. So, my "bad ass solution" is offering financing on their dream home. Now, as you'll see in a moment, there has to be a distinction between what I offer and what someone else might. What is that?

Well, I don't do credit checks for one thing. And for another, I don't qualify them. If they've got the cash, and can fog a mirror, they qualify. Simple, yes.

I'm out of room here, so let me summarize the formula I'm now following (hopefully they're self-explanatory).

Five Point Formula...

1. Determine the prospect's biggest need.
2. Headline the need.
3. Appeal to a specific prospect with that need.
4. Offer an easy solution to that specific prospect.
5. Highlight the advantage of your solution over every other.

Much more can be said, but that'll get you thinking.

Uber Junk Mail Copy

Recently I read a long report on how to do direct mail correctly. The author explained that bulk mailers will "do anything" to get you to open their mail piece.

As a result, he informed us that we should do the same thing. I disagreed. If everyone else is doing the same thing, how do we stick out from the crowd. Well, we don't.

If everyone is mailing "yellow letters" to pre-foreclosures in our farm area, does it makes sense to mail yet "another yellow letter" to the same prospect? Well...? If so, what sticks out here? We're just another yellow letter.

Imagine, however, getting "yet another letter" from Publishers Clearinghouse... Do we open those? Do we? My grandma does. Why...?

Because hope springs eternal, and the envelopes are gaudy, messy, urgent sounding, and unique.

Just being gaudy, or messy, or just urgent wouldn't do much in my opinion. All my other junk mail fits that description. However, "uniquely" gaudy, messy and urgent sounding is what separates the sheep from the goats, as far as I'm concerned.

Meantime, again, Publishers Clearinghouse does a fantastic job of overcoming the din among fellow junk mailers by being uniquely gaudy, messy and urgent.

So the question remains... "Why does Publishers Clearinghouse" have to go to so much effort at standing above the crowd?"

The answer is that they really are sending "junk mail" and it looks like it. So, they've got a deforming handicap, as it were. Something must be done to overcome or disguise that problem. What might this be exactly ...and why again?

Let's take a woman who needs to take attention away from her gigantic nose.

What might she do to "hide" her nostril-laden features? She might wear big glasses. If that isn't enough to do the job, she might wear huge glasses with all sorts of distracting "jewels" glued on them. Think Dame Edna. Now, of course wearing huge, jewel encrusted glasses is not to flaunt wealth... No, it distracts attention from her anteater features.

It's the same with Publishers Clearinghouse bulk-mailish appearance. They need a way to keep your mind's eye off the fact that there's NOTHING inside that doesn't require a purchase, or worse ...there's nothing we actually want.

So, how's this fit into our direct mail efforts, you might ask.

I say, don't mail what everyone else is. Stick out. Be organic. Don't mail Click2Mail for example, or use any other "bulk mailer." Why? Because we'll have to work overtime, overcoming the "bulk mail" look that cause most recipients to file our mail in the trash.

So, what actually works, you ask. I say, "whatever that is not being used by the majority of competitors. That's what works." I'll add, "Be unique. If everyone is mailing handwritten "birthday cards" to prospects, then it's time to send "checks" in the mail."

If everyone is doing "checks," then we send DVD-size mail. If everyone is sending DVD-sized mail, then maybe it's time to send Zebra-printed postcards. If the zebra thing is getting over-sent, we try pictures of ugly, run down houses with a housewife standing on the front lawn in curlers with a caption, "If you're still doing open houses ...call me."

Of course this doesn't address having high quality mailing lists in the first place, regardless of the mail piece. However, that's the other secret of successful direct response marketing; having a good list.

If you would like to discover a way to make money without a job or credit, check out the free video presentation below...

No Job! No Credit! No Problem!

"Why Sub2 Investors Give Up..."

The real estate business is always making room for those who are not afraid to work. The fact is the harder one "works" in real estate, the more one learns, the more distinctions one makes, and eventually ...the more money one makes. It's just the law.

Of course, we see the pros make this business look like a walk in the park. And all the gurus tell us that if we just follow their prescription that we'll be just like the big boys in no time. Well, that's true that gurus do offer meaningful short cuts and systems that help us get traction very fast. However, just because somebody has the gold mine, doesn't mean they're committed to mining it.

I've witnessed students buy my Sub2 course, which is specifically geared to bypass as much wheel-spinning and frustration as possible, and then do practically nothing with it. Here they've got a tool that could help them buy their own dream house, or dream car, and instead they put the tool on the shelf "until they can get around to using it." How long do they want to wait to live prosperously, I ask myself.

Other students, have turned terrible situations around for themselves. They didn't wait around for the stars to line up, to get cracking.

Last month a student contacted me about his investing objectives. He wanted some help getting organized and putting a system together to buy some income property. When I found out what his deadline was, I was practically gulping air, it was so ambitious.

I'm not sure whether it was out of desperation, vision, or what, but his goal was short-fused. It's inspiring an fun to help someone reach an important, if not difficult goal. So, what was the deadline? March 1. So we got cracking! He took the steps necessary to familiarize himself with data sheets, and started making calls on properties. Now he's advertising for sellers and I am excited about helping him reach this goal...

At the same time, this was happening, I had just about had it listening to other newbies complain, "there's no deals," "I can't find anything to buy," "agents are jerks," "sellers want too much," and blahdy blah, and "I want to give up", because they can't find low hanging fruit like the gurus all promised will happen if they fork over $5,000.00 for their boot camp. Of course I don't promise "low hanging fruit," but I do promise the ability to recognize it! There's a difference.

Well, "Reality Knocking! Hello!" It's takes effort to do real estate profitably. That's what my new student is learning, too. I told him that he needed to complete 50 analysis sheets on 50 different properties so that he could learn to instantly recognize a deal. Slowly and painstaking we plowed through a couple income property data sheets so he could get acquainted with the process (and I relearned some important assumptions at the same time). Did you know that sellers will lie about their numbers to gather interest? Anywhoo...

Well, to really drive this point home about the work involved in finding deals, I received a call from a car salesman who wanted to lease purchase a house for himself. I told him that I had nothing in his area, but I would help him find something that he could negotiate on his own (after all he's a professional negotiator). I told him that he would have to put in some hours on the phone, and pointed him to the most likely prospects.

The next day he called me to let me know he found four potential deals ....after about 8 hours of cold calling. After he told me the terms he was throwing out, I could only sit in awe at what the sellers said they were interested in doing with this guy. Of course the next thing out of his mouth was that he wanted to bird dog for me. Of course I said, "nah, I work my own deals, thanks, but no thanks." NOT! Of course, I took him up on his offer as soon as I could get the word "Fantastic!" out of my mouth.

Well, I've got a student digging for income property gems and learning to recognize deals on the spot, and a used car salesman looking in just the right places for deals for himself (and me) and neither of them are complaining about the hard work involved so far.

So, forget about finding the low hanging fruit, and start digging for buried treasure in your own gold mine, and dig out the juicy deals that nobody else knows exists, like my students and bird dogs are willing to do. Then in no time, you'll reach your goals and somebody will assume it's just as easy as the gurus say it is!

"One Sub2 Ringy Dingy, Two Sub2 Ringy Dingy"

"Is this the party to whom I am speaking...?"

Unfiltered calls are the pits!

Last month I abandoned all heretofore protocols of mine and posted an unfiltered craigslist ad.

Why? I had a friend who had a friend who needed out of her small house yesterday. Frankly, I don't like doing low-end deals, especially, if I can't get the deed, and it's going to be lease/option deal --- and especially when the house isn't that nice.

That's nearly 3 strikes. The third strike would be trying to cover an adjustable loan, on an underwater house. Forget that.

However, my friend's friend needed help so I thought, "Well, if I owned an upside down rental, and needed a way to protect my credit, and I didn't know any way, and I found a guy like me to help me, he would be my hero." So I succumbed. I'm so desperate to be a hero.

I didn't have a buyer's list ready for either a lease/option house, or one this cheap. So I had to scramble to get things together. So, I experimented with the generic craigslist "lease option" ad, based on some proven ad copy I developed from earlier times. However, I left most of the qualifying information out of the ad to get the largest response, in my attempt to remind myself why highly tailored ads are critical to maintain --- and used to avoid having to wade through a bunch of trash calls.

My experimental ad copy worked, but I left out another important ingredient. Meantime, I got exactly what I advertised for...a pile of unfiltered buyers with no money for down payments. Whoops!

The real point of this, is that certain shotgun ads work. However, when it does, we'll be on the phone forever with "Looky Lou's!" who aren't serious (or ready) to actually buy our houses if we don't first say what we must have... Otherwise, we just get the just curious, and the tire kickers, that waste our time.

So what was the missing ingredient here, besides not qualifying with the ad copy?

Why, it was not using voice mail to capture and qualify leads. If we're not using a 3rd party lead capture, then what? It means that we're gonna have to do the screening in person.

In years past I was the "Marvin Milquetoast" of phone interviewers. I all, too often, operated from my heels. I rarely felt in control, or confident about how to cut to the chase. That was then. Not no mo.

Now, I've got one question that I ask every buyer before we get down to business...to see IF we can get down to business, so that I'm not wasting my time personally helping the curious weigh their options at my expense. And what is that "one question?"

You can find it in my creative real estate investing course I call, "Screw The Bank!"

It's my "no credit - no down payment - no hassle" real estate investing system that allows me to find the most anxious buyers and sellers in this market who will let me pocket $30k in 90 days."

The Sub2 Chihuahua Rides Shotgun!

This is my Terrier/Chihuahua mix Wolfie resting on the way home from a prospecting journey.

We checked out a new farm of multifamily income properties that look like fabulous Sub2 deals in the making.

Nobody knows these properties are for sale! YES! And the sellers are scared spit-less about the vacancy rates in the area, and don't have the courage to weather a storm. YES!

Not to mention that the unit prices are shaping up to be fantastic high cash flowing deals for a knowledgeable investor. Meanwhile, taking over poorly operating buildings and getting them turned around without any financing obstacles is REALLY nice, if not just a giggly thing to ponder.

Did you know the most cash flowing properties are the same ones the bank is least desirous to lend on, or likely to finance for a decent rate?

Yes, we can find the baby cash-cow dumps with a potential 25% capitalization rate, but because those properties are located in C-minus or D-plus areas, the bank holds its nose and says, "no thanks" to our requests for loans. How come the most secure deals are the ones banks don't like, I ask?

Here's one hypothesis. Banks are like low-return pride of ownership types of buyers. They like to plow money into low-return ["A"] projects that they can point to and say, "We lent on that!"

How nice.

Now if you ask the bank's borrowers what their returns are on those same "A" properties, they might say, "Uh, about 2.5 percent." Uh, huh.

Well, I like bigger returns. We prefer meaningful returns, not ones that can't even match the costs of rising energy. We find these juicy returns where the average investor doesn't want to shop, and the average bank doesn't want to lend. Yay!

There are so many opportunities waiting for the courageous and the proactive. Meanwhile Wolfie, the Sub2 Dog, will ride soon again looking for stray cats and bicyclists to bark at while we talk with sellers who don't know how to turn a lemon into lemonade the sub2 way!

If you would like to know how Wolfie buys cash-flow opportunities without a credit check or down payments, click here: "Screw The Bank!"

Successfully Finding The Juicy Deals Without Competition

The latest news from my "MIT" (Millionaire In Training) is that he just spent about $1500 mailing out to 4,000 prospects this week.

I'm so proud. He's going to be making a bunch of money in just a few weeks. Usually, the newbies start out with such baby steps, and the results are so minuscule up front that they want to quit before they even get going.

Do you know what the average small business start-up cost is? It's around $100,000. So even if MIT spends $5,000 in postage while overcomes the learning curve, and pitches "Sub2" deals for a couple of months before he makes his first $10,000 of the $50,000 in equity he's likely to capture, he's still so far ahead of the average business starter-upper that it's sinful. Imagine if MIT just finds four deals this year and grosses $50,000 each deal. That's $200,000. Not bad for a "tiny" postage bill.

If you would like to learn what MIT is doing to make money click here >>> "Screw The Bank!"

Making It In The Big Leagues!

I've got a champ in Sub-To training as we speak. I'm going to provide a real time commentary on the base running of this newbie so I can develop a testimonial about how easy it is to make money using my system.

This trainee emailed me a couple of weeks ago asking for help, and after getting a rib dinner out of him in return for some quality feedback, I realized this guy was going to make me richer if I played my cards right! He's chomping at the bit to make a go of a fresh investing career, and so I'm feeding him tools and training.

-----------------------

These posts are going to be dangerous for me. Normally I would wait until a newbie actually accomplished something before I would post anything of this nature. However, this time, you're gonna know just as fast as I do if my system works for this guy or not. Of course it works, but not everyone is willing to work it, if you know what I mean.

Meantime, let me bring you up to speed. I provided my "millionaire in training' "MIT" for short, about 300 quality leads to mail postcards to this week. These are leads I provided to what turned out to be a not-yet-ready-for-prime-time trainee late last year. Meanwhile, these are virgin direct mail prospects that have never been contacted by my marketing machine. MIT sent out the 300 postcards this weekend.

Meanwhile, just to confuse things, I've mailed to a separate, experimental group of MLS "victims," who's homes are currently listed by an agent in the same farm as my trainee. It'll be interesting to see what kinds of responses I get to compare with. I'm sure about 80% of my experimental group are REO listings by a bank, but I'm hoping I can get at least a .001 response rate from the remaining list. My experimental group is different from our normal farm niche in that we have filtered for nothing except disgruntled, tired Sellers who who will be/are fed up with their real estate agents. he he

When we get our first calls, I'll give you the blow-by-blow accounts. So cross your fingers that we get responses from a least four or five MLS victims.

Here's one side of our postcard just to give you a glimpse of how low-budget these cards are. Click for a larger view.

Rocket Test 1

What a week!

In preparation for my own product launch I've been practicing my marketing skills on a real estate related affiliate course. The course is very good, but the sales page is weak.

My "click rate" is three times better than what I imagined right off the launch pad, but I'm not happy with the zero conversion rate to date [sad face].

I'll be REALLY glad when I get that first conversion! Then I can reverse engineer my approach to see where that one conversion came from, and then focus on doing MUCH more of whatever I was doing! :)

After I get the "conversion" mechanics figured out, and I'm pulling in at least $30 a day, then I'll have to consider the next step.

BTW, what is $30 a day? Is that about $900 a month? Well, that's a new Vette payment.

Whoopee!

If you'd like to see what I'm mercilessly pushing as a test click here:

Click Here!

Websites are "Bug Zappers" For The Unmotivated

To be "distressed" means different things to different investors. I only want "distressed" Sellers that have new homes they can't afford anymore; that don't need work; that are easy to sell; that aren't over-leveraged; and all beckon me to live in them!

Meanwhile, I don't think there is any secret other than being chronic, persistent and repetitive in letting a targeted niche of prospects know what you have to offer. Otherwise, "one-off", or short term advertising puts the "pain" in campaigns.

I'll go further and say that ugly mail always works better for me than pretty mail. The less I explain on the piece, the more compelling the mail is. I never mention anything negative, and only pique the Seller's curiosity in solving ONE problem they are most likely having.

That said, I believe in direct mail. I profile a zip code for all homes that have been owned for a certain period of time, had "x" amount of equity at the time of transfer, have fixed rate mortgages, no recorded 2nds, are 3/3/2's or 3's, over 1,100 sqft and under 3,500 sqft and built within the last four years.

These are going to be excellent Sub-To prospects. Now, the entire mailing list conforms to a similar profile.

So...now I know who's not going to call me. No acreage owners; no farm owners, no condo owners, no massive fixer owners, no McMansion owners, etc. These are not popular properties to resell. The buyer pool is smaller, and the resale time is LOOOOONGER.

Meanwhile, when Buying, unlike the amateurs who think they need fancy websites because guru "X" says they're the "bomb", or whatever, I only provide my cell phone number to Sellers. If the Seller is too unmotivated to call me on the phone, they'll be too cool to say, "yes" to me asking for their deed, taking over their payments, and leaving them on the hook for a loan.

I only want to bother with desperate, anxious Sellers that don't know they have any other options, and are willing to overcome their fear of the unknown by calling me directly on the phone.

Websites serve as "bug zappers" for the unmotivated, and/or the idly curious.

I encourage the competition to always rely on websites for Buying property! he he. They've got lots of time on their hands. Meanwhile, I've got too many fish to fry to screw around with either the curious or the "web sniffers".

Jay

Kick Mutt!

There are five elements in good advertising that I want to discuss here. I'm talking mainly about direct mail pieces, and I'm offering a video clip for discussion. Meantime, many businesses fall prey to making up in design, what they lack in ad copy. That is to say that amateurs make the mistake of thinking "pretty" mail pieces produce higher conversions than ugly ones.

It's been proven time and after time that {controlled for ad copy alone}, ugly pieces are read 2 to 1 over pretty pieces. Hmmm. Regardless of the "look", here are five elements to include in good advertising copy:

1. Clear.
2. Forceful.
   
3. Memorable.
   
4. Easy to understand.
5. Call to action.

Play the video below see how this advertiser included all five elements in the video. I'll say that this add is a bit cloying, but they sure get their point across.

Consider how you might improve your own advertising. This has been very helpful to me.

The Right Tool...

Of course this post will make any guy cringe. However, the point of this post is to illustrate how important it is to use the right tool for the right job (or...really not try the job at all!).

In fear of devolving this post into a vulgar double entendre, the real story of using the "wrong tool" in question was used by a young man to perform what would expectantly result in an unsuccessful effort to give his "own tool" a circumcision.

Ouch!!! No really!

After the aborted surgery, the young man was rushed to a hospital at Stevenage, Hertfordshire (England). The wound was disinfected and cleansed before he was given a bed in an observation ward.

"This is something we would advise men never to attempt," a medic said, "The results can be quite horrific and long-lasting and have quite an affect on a man's sexual performance."

Oh, really...? "advise never to attempt!" Such words of wisdom.

So, how does this apply to real estate investing? Well, for one, I've seen enough newbie investors try to create/use "one-size-fits-all" negotiations and presentations that sent them out the door in a bloody mess of rejected offers.

That's why having/using the right tools to qualify/disqualify prospects as soon as possible in order to produce successful outcomes is vital. Otherwise, we get promises of the moon by passive-aggressive, codependent sellers that want to please us more than they want to sell, or.... we get a punch in the nose. Whichever, we lose the deal.

Meanwhile, we can burn out real fast knocking our heads against unmotivated seller's skulls! So why pitch those who don't initiate a sign of motivation in the first place?

The answer is we don't want to. However, in order to avoid this we need to use another "special" tool. This is a tool that eliminates most of the Sellers that ask retail prices, have options, can afford real estate agents, are maintaining their homes, and then look forward to rejecting our profitable offers (otherwise known as "low-ball" offers).

BTW, unmotivated Sellers just LOVE to turn down our profitable offers. These are a DIFFERENT species of sellers.

So what is this "special" tool? The tool is the thing that not only helps us uncover the motivated sellers, but gets them to call us first, before they think to call anybody else.

Okay the tool is...(drum roll, please)

The U.S. Postal Service!

Yes, using the mail system to market ourselves to the most likely prospects is the BEST tool we have available. It's private, confidential and "below the radar" of nearly all of our competitors. Mailing to the most likely prospects is likely to keep us from getting bloody noses, and/or empty promises.

The challenge then is creating the best mailing list. Not just a mailing list, but the BEST one. One that has the most likely prospects. Ones that don't need extra "warming up". One's that just need to believe that we're not showing up to scalp them. Remember we can sheer and sheer, but only skin...once. So, we only do a nice, comfortable, enjoyable, satisfying coat sheering. This way the sheered will recommend us to others.

The next question revolves around the definitions of what the most likely prospect are that we put on the mailing list. That is the subject of a chapter in my new investing course coming out soon.

Jay

Guerilla Online Marketing!

Matt Bacak is one of the most successful internet marketers I've come across. Many of the folks that visit my blog are also interested in learning how to market online. So I'm posting this for their benefit.

Trust Me! I'm An Uber Negotiator!

A recurring theme on this blog is the ability to negotiate profitably, if not professionally. I say profitably, rather than successfully, because some folks forget they're negotiating for a profit. Instead they settle for successful negotiations.

So what's the difference?

Roger Dawson and Barney Zick were the first two gurus that introduced me to both negotiating philosophies and resultant gambits.

Barney Zick taught me about "Targeted Negotiations" and how superior this was to generic "win/win" negotiations. In fact, I would be embarrassed if anyone thought I was still negotiating for banal "win/win" transactions.

Anyone who knows, knows that "win/win" is the code word for "trust me" that the amateurs and residential real estate agents use to con the unsophisticated into thinking that they are being served in some altruistic fashion. Agents work for their own best interests. They work for closings and nothing else. Some agents are smoother about it than others, but without closings everybody starves.

Meanwhile, the Uber Negotiators I find are the ones that pull in the big bucks. These are the negotiators that focus 100% on the objective and don't get knocked off the tracks with win/win sob stories of one kind or another that would cause them to lose track of their primary objective which is to make money --- and lots of it.

Recently I heard of an investor who got tangled up in a sob story, and failed to ask for what he wanted in the deal in a professional manner, and ended up failing to close profitably. He confused his objective with that of some humanitarian effort of some stripe.

What's worse the story was relayed to testify to what an honest guy he was --- that his first priority was to "help people," and then passively allow the stars to line up as other party came around to ostensibly forge a profitable deal with him later. Ho hum. It's the old "Trust me. I'm really a nice guy." or the "Karma" approach to negotiations. Puh-leeze!

Been there. Done that.

Win/win is...more often, than not, a con. Or maybe at best its a way to deal with a neurotic guilt trip over actually making a profit off of somebody. Either way, run from anyone who says "Trust me. I'm a great guy! Look what I've given up to help others." The ones that impress me, are the ones that never say what they've done, but let others share the good fortune they've had dealing with that person. This would be called a "referral."

Of course I'm not suggesting that we shouldn't be honest in our dealings with those we do business with. It's a small world out there, and once a person wrecks his reputation by cheating people, or taking "undue" advantage...it just makes doing business that much harder and more expensive --- if he can stay in business.

I like cheap and easy business dealings. So I suggest that we remain honest about what we're about, and not confuse our identities with "frustrated priests." We're in the business to make money, not compete with charities.

To illustrate the otherwise confused mind that some folks allow to occur, let me share a situation that happened several years ago with a family friend.

Our family "bud" had a TV stolen from his motor home. After the police caught up with the thief, our friend was so sympathetic to the crook (with emphasis on pathetic) that he offered to drop charges and offer the burglar the TV to keep "if he really needed one".

The cops told him that was stupid. We told him that he was naive. Everyone told him that he was missing the point of the whole "prosecution" effort. However, our neurotic friend was so motivated to let this crook off the hook, as it were, that he lost all perspective of the situation and essentially undermined law enforcement efforts.

That's exactly what happens when the negotiator takes his focus off of making money, and internalizes a victim's situation to the point where the problem becomes the personal property of the negotiator. When this happens the negotiator begins operating from a position of weakness. He confuses his objectives with that of the prospect. And sabotages his own position.

Now let's consider the opposite...

There are a large number of negotiators that go overboard in their advantage taking. They'll equity strip Grandma Moses, if there's an opportunity. That's not what I'm saying we should do. What I am saying is that it's not a sin to make money. It's honorable if we are acting in good faith, doing what we say we'll do, not making false or empty promises, and keeping our intentions and actions clear and respectable.

Advantage taking, of course, is not a virtue by any account. However, keeping our heads on straight, and not confusing our efforts with some secondary objective is a virtue.

When a client calls me, they already know that I'm an investor. I don't call myself anything other than that. If the prospect doesn't like investors, he won't call me. That's fine. There's a bunch of other crap he won't like either if, for starters, he doesn't like those who negotiate for a profit.

So I say be honest about yourself. Don't lose perspective by internalizing the prospect's problems and fail to negotiate clearly in your own best interest. Remember there's a huge difference between having sympathy and being empathetic. Sympathy will draw you into donating blood. Empathy will motivate you to find blood donors.

Jay

Popularity Contests!

Rental demand in San Diego is crazy right now. Who knew?!

A few years back, we accidentally started a rent payment bidding war on a 3/2/2 rental house. We had already been scheduling cattle calls for our units, but this once, we had prospective renters actually offering to pay more rent than we had advertised.

Obviously we didn't know our market. Obviously we had advertised too low a price. Obviously we got a hint when our phone rang off the hook.

It's fun knowing what we offer is in high demand.

However, it's a hidden sin to lease out a house for less than it's worth. Sure, we get all giggly listening to all those voice mails.

But it's smarter asking for more money and being OK with fewer calls. This seems self-evident, huh? Well, there's lot of landlords that are too ignorant, insecure, if not impatient to negotiate top dollar rents.

Today we can spot an amateur in a nano-second that doesn't know his market, when he brags about how fast he leases up his units, and the numbers of call he got. Uh, huh. After he finishes indirectly bragging about how ignorant he is about his market, we ask facetiously, "Wow, you got ninety calls for your unit and rented it in less than a day!? That's just fantastic. So how many more dollars do you plan to continue to drop in the toilet each month so you can remain popular?"

That's our polite way of asking a braggart how much money he plans to lose by negotiating stupidly, if at all. Maybe that's not more polite... Oh well.

Meanwhile, several years ago now, we advertised a 3/2/2 in Orange County for a $1,300 bucks which we reasoned was probably market value. At the time, this was actually $300 under market. We're guerilla market testers, and just needed some feedback. Our phone r.a.n.g. o.f.f. t.h.e. h.o.o.k from prospects!!! We scheduled our routine cattle call, not realizing the full impact of our offering price on demand. We had a stampede of "Lookee Lous".

After all was said and done we had negotiated the rent up to $1,600 a month, received a gigantic (probably illegally large) deposit, and had the unit re-rented within seven days of the last tenant moving out. We probably could have reduced the down time by three days, if we had scheduled our cattle call the day we had the house ready for re-renting. However, a week is acceptable in our book. A month used to be acceptable until we learned better.

"Are auctions always good?", one might ask. Yes, we believe they are. However, at the auction, we don't want prospects feeling like they are being treated like suckers, or they bail in disgust and contempt for us.

The secret we think in having a successful auction, especially if the prospects are not expecting an auction, is first to create scarcity through the cattle call itself, and then "let the cat out of the bag" to the prospects privately, that there is an outstanding bid from "x" dollars for the house. Then we give the prospects the chance to mull it over, while asking which of them would be willing to pay this much, or say Twenty-five dollars, more. Frankly some prospects that were only curioius, but not really prospects will leave immediately. We want them gone!

Meanwhile, as experienced negotiators, we can deftly go round robin with the prospects until we get the rent we sense we can command under the circumstances. We've had tenants pull out wads of cash trying to get to the head of the line. It's important to remember that the most likely prospects to win the bid, will have terrible credit. For us that's great. It just gives us that much more leverage on deposit sizes, co-signer requirements, and higher rents --- and longer leases.

It's OK to say, "We'll rent to you, but we want a 24 month lease, so we can cover ourselves in the event you get 'flakey'". Or to be a tad more professional, we couch the demand as a benefit to the lessee (who is paying over retail rent) by saying, "...to give you time to improve your credit and establish a positive rental history, we need to commit to a 24-month rental agreement."

Notice what we said here. "time to improve your credit", "establish a positive rental history", "we need to commit". We're saying.... The tenant "needs" time... The tenant "needs a proof positive history of on-time rent payments... and we've included ourselves, as the Landlord, in the tenant's problem with the use of "we need to commit" [to a long term lease].

The only thing we're committing to is gobs of extra cash for two years from this guy! Yay!

I love auctioning off gargantuan rent payments, collecting confisicatorily huge deposits from desperate, anxious, credit challenged people!

Anyway this might be an alternative way for some to positively get retail (or more) rents, from people happy to pay --- and not throw money down the drain trying just to be popular. You can be "popular" and get all the money due you! Who knew?!

Old MacDonald Had A Farm, Too!

If you stare at this picture long enough, you'll discover a smile on this couple's face. Look closer! See them smile?

Yes, this couple is out front of their house letting everyone know they're making a killing in real estate. He's got a pitchfork in hand ready to poke any trespassers that try to send any postcards to his farm prospects.

She's ready to back him up with that "ol' school marm warning" expression, which barely hides her exuberance over the $40,000 they pocketed as a down payment yesterday from the house they just seller-financed.

Yup! This couple flips houses bought from desperate, anxious sellers, and then turns around and seller-finances new credit-challenged buyers. More specifically, they take over loans and resell those loan terms to those that couldn't borrow a rake (or a pitch fork) at this point.

Two years ago, this couple found out what kinds of houses were selling the fastest and in what area over the previous 90 days. They discovered that the three and four bedroom houses in the 37237 zip code were the most common, and fastest selling properties. So they staked a claim in that zip code and mailed postcards to all the three and four bedroom home owners letting them know they buy houses. This stake, or claim is referred to as a "farm". Not to be confused with raising crops of course, but cultivating a profit nonetheless.

Farms are important to investors for several reasons. First, they focus the investor on an area that he can become intimately familiar with. This is important, because familiarity with values/comps trumps about anything else, even cash, when it comes to finding, funding, and flipping houses.

Others may have cash, too, but the professional investor that is cultivating a well-defined geographical farm area (defined here as something one can drive to and back from in 45 minutes) can and will beat any potential competitor to the punch because he can first instantly recognize the deal for what it is --- and land the deal like a seasoned airline pilot, before anyone else knows there's a deal.

Meanwhile, the amateurs are still compiling comps, addresses, computer print-outs, and pouring over last-minute CMA's (comparative market analysis), biting their nails, second-guessing themselves, if not simply flying blind. That's no good.

The best way to start and maintain an investing career is to first choose, and cultivate a farm area. It doesn't really make difference where the farm is, as long as the investor has enough prospects to pick over in a given geographical area, and become more intimately familiar with it than practically anyone else is/can/will.

The fastest way to fail in real estate investing then is to fail to have a farm defined. "Southern California" is a "region", and for our purposes of discussion would be considered a lousy farm. Any one zip code in "Southern California" would be superior to the entire region.

I'll just say, nobody can be an expert in a region, but few can be more of an expert than the investor who cultivates a familiarity around a one mile square. Of course the uniqueness of a property may dictate the size of the farm. For instance, say we're looking to buy a slightly used nuclear power plant, we might have to resort to a farm the size of a "region" just to get enough prospects on our mailing list!

Short of this, however, we need to focus on a specific territory, or farm area, so that we can be the fastest, most reliable buyer around.

After all, there's no such thing as "stealing in slow motion".

///

Frog Kissing! Just Do It!

There is SO MUCH opportunity right now, it's a riot! Auctions and REO purchases are all the rage as I write this. Short sales are happening, too, but the universal theme on those is, "you've got to have a lot of those in the pipeline" to make up for the losers --- and the only "buyers" are end-users.

As for the auctions, the banks are just now (July 2008) loosening up the terms of their reserves (here in So. CAL) to effect actual investment grade deals.

That all said, if one doesn't know their farm, they won't recognize a deal, unless it was SO obvious a blind person would trip over it ---- and then they would be self-doubting and suspicious anyway.

You know, that's the theme of the real estate business.

There's just no short-cuts other than knowing your farm.

That's why 95% of the would-be investors are scared to pull the trigger. They don't know if they're shooting at a good deal, or shooting themselves in the foot.

Nevertheless, sifting through a bunch of crap is still the name of the game. I'll call this "Frog Kissing". It takes time and money to "frog kiss", or wade through a ton of responses from even highly refined and tailored direct mail prospects. It's just the law.

We've got to expect that we'll kiss a bunch of liver-spotted, warty reptilian organisms before we finally discover the prince/princess!

Even then, turning the frog into a prince, isn't just a matter of kissing the thing. No. The devil's in the details.

Meanwhile frog kissing is what we do as investors. That's why RE is so profitable, too. Very few people want to spend the time, energy, and money doing that.

The squeamish, lame, and/or lazy won't do the spade work required to find those green, slippery buggers. What's worse is the newbie frog kissers get things backward. They look for princes/princesses instead of the frogs. We don't really find the princes/princesses by looking for princes or princesses. No. We can only find the "royal gems" by looking first for the frogs, and well, "kissing them" first.

That is, looking first for "problems". Or better; recognizing problem properties or owners with problems. Then analyzing the numbers (comps, repairs, etc.); making offers; waiting for counter offers; being patient; and finally being willing to "unsuccessfully" negotiate a deal --- over and over again. That last part is important. The impatient investor often is unwilling to "lose" a deal, and then puts himself in a weak position, or worse --- "marry" the frog.

Meanwhile, the impatient investor thinks by insisting on bargaining that the frog will by sheer force become that prince of a deal. Wrong!

Frogs don't become princes because we're desperate and settle. Frogs show themselves as princes when we care less than the "frog" sellers do. That means that we search patiently for the frog that will become a prince only by making many, many profitable offers in the first place; by knowing our farms better than anyone else, and being willing to kiss as many frogs as it takes for the princes to appear! That's always just a lot of plain ol' frog lips to wade through, huh?

So be patient, know your farm, make lots of "profitable" offers, care less than the frog sellers when negotiating, and eventually one of the frogs you kiss will turn out to be your Prince.

Credential Books - What are they good for?

I'm working up a post to explain how extremely valuable, helpful, and most of all, profitable a "Credential Book" can be for any investor, regardless of their investing strategy. This is a misunderstood, and undervalued sales tool. I used my first credential book to make me $125,000 in paper equity within six weeks of first using it.

It's that powerful.

Guerilla Creation of Mailing Lists

I've been asked many times where to find prospects for a direct mail campaign.

I always suggest subscribing to CoreLogic (Formerly F.A.R.E.S. ["First American Real Estate Solutions"]).

Then there's "Listsource.com", but that's expensive, too.  Especially if you are sifting for a lot of variables.  AND really especially, if they haven't "abstracted" the data recently...and you mail to a bunch of dead ends.

However, after explaining that it's going to cost them about $1,500 hundred dollars a year for that subscription, or maybe $1,000 for a good list, their eyes glaze over.

Newbies mostly don't realize that this is just the cost of doing business consistently, and routinely.

CORELOGIC is not just for compiling mailing lists however. It's also for searching property and comp information before we commit to buying.

For example, I check out their (the prospect's) property profile (this time thoroughly) to see if that prospect still "qualifies" for my program before I meet with the prospect. If the property fails to qualify anymore, I cancel our appointment. What disqualifies a prospect is usually a recent refinance, a new A.R.M.-bomb loan (negative amortization, adjustable loan that spikes to 12%, etc.)

Fortunately, there are other alternatives for compiling a mailing list that can be just as helpful, and practically free for the newbie (or the cheap!).

Here's a step-by-step method I used to jump start a shoe string direct mail campaign several years ago.

I'll be writing editorially hereafter.

We went to the local title company and asked for their sales rep. We explained that we needed assistance from them in assembling a "farm package". These folks knew exactly what that meant. Title companies routinely assist agents and mortgage brokers in putting together "farm packages".

So what is a farm package? This is a specific mailing list that only includes prospects with a certain profile. For instance, mortgage brokers want lists of prospects that are due for a refi, or would likely want to create an equity line of credit. Agents want lists of those who've owned their homes for a period of years, that would allow them to list their homes for sale when the time comes.

Our farm packages usually included all those with purchase money mortgages that were less than two years old and showed at least 10% of equity, or more, at the time of refinance, or purchase. These folks are the most likely to get in trouble with their debt load, as discussed in a previous post.

So the title company culls out our custom farm package (prospect list) that includes only certain LTV's at purchase, a certain length of loan (by date of Record of Transfer), by zip code, house size, lot size, etc. We wanted a very precise profile that was nearly identical from prospect to prospect. That way we knew exactly what every prospect that called us was likely to own, and it made determining values extremely easy.

BTW, the title company doesn't offer us farm packages for free just because they can't think of anything else to give away. This information actually COSTS them money to provide. Remember the $1,500 or so, we're saving by not subscribing to FARES? Well, somebody paid for this information, because there's no free lunch in this world.

As a result, we made sure the sales representative knew that we were committed to them exclusively to handle our closing and insurance needs when we sold our properties; and we ensured that their "small" investment in us would pay off in an "obscene" fashion eventually! Of course we don't come out and say that exactly, obviously!

To sum it up, we established a relationship with a title company. We let them know that we plan to bring all our title insurance work to them in return for help in assembling a custom farm package.

So, title companies can be very helpful in assembling our custom farm packages, and save us a bunch of money up front --- just for bringing them all our business. Not a bad trade off, huh?