Interested in learning how to determine how much you can offer a seller when you intend to pay all cash? If so, check out the latest episode in my Real Estate Investing video series “Real Estate Investors – The All Cash Offer” below.
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No matter what your goal in life, hard work, perseverance, and an unshakable commitment to achieving what you want are unavoidable elements in the equation of success. That doesn’t mean that every step along the way has to be 
difficult, though. The shortest distance between any two points is a straight line. When it comes to gathering motivated house sellers into your real estate business, it’s no different. You can take all kinds of angles and curves while seeking out people who want to unload their houses or you can get them to come straight to you without expending a lot of time, energy or resources. The following mediums not only save time, but are extremely simple yet effective.
Business Card/Magnetic Car Signs
Business cards are cheap. You can buy 500 of them for $35. The nicer the card stock, the better. Leave them everywhere, give them to everyone. If you go to a restaurant, leave one on the table. When you go to the grocery store, leave one on the bulletin corkboard. Everyone knows of someone who wants to sell a house, especially in these market conditions. For magnetic car signs, you can go to any print shop, and they can make them for about $75 a piece. It will be magnet that sticks to the side of your car. It’s like a traveling billboard.
Every time you stop at a traffic light or pull into a parking lot, you got a billboard right there. Both business cards and magnetic car signs will say the exact same thing: Sell Your House Fast! Quick Sale – Fair Price (707) 555-1212. Remember, the first letter of each of these words is capitalized. You want the information to stand out.
Realtors
Build a relationship with one or two motivated realtors in your area who are going to send you leads out of the Multiple Listing Service (MLS). The only criteria you will give them is this:
So if the average selling price is $100,000 in a given market, you want leads out of the MLS for any house listed that is $80,000 a or less. This immediately lets you know that the house seller wants to get rid of their property badly enough to accept less than what the average price for a house in that area goes for. They are a motivated seller. In return for those kinds of leads, you’re going to give your realtor-ally the leads that you get from your other marketing strategies. When it comes down to it, you’re only going to buy, truly, one out of every 30 leads that come across your desk from your marketing, which means there are 29 leads out there that you are never going to do business with. So you’re going refer them to a motivated realtor that you build a relationship with.
The Bee Hive Process
You are the “Queen Bee,” and you want worker bees out there in your target market bringing you qualified leads. You’re going to hire people to drive around certain neighborhoods that are right outside the rough areas where first-time homebuyers are going to be: neighborhoods that aren’t very pretty. You’re going to hire people by advertising on Craigslist under the Real Estate Jobs section-anyone looking for some part time work, flexible hours and extra income. All they need to have is a car and a camera, preferably a Polaroid. You’re going to have your worker bees drive around these neighborhoods and snap a photo of any house that meets two criteria:
1. Abandoned
2. In need of excessive repairs
Some basic things that you’ll have your bees looking for include homes that need a new roof, exterior paint, new siding, and windows replaced. For every picture they take of a house that fulfills the requirements you’re looking for, you will pay them $10 per picture. If you don’t want to pay anybody, you can always take your weekend to drive around and do this yourself. Then, you will call the owners of these ugly, abandoned houses that are in need of excessive repair. You can find them by looking them up at town hall or hiring a skip tracer (private detective). You will find some gold within these ugly properties if you pursue them.
One of the most common ways to buy property is through creating an agreement with the seller whereby you lease the property from them, much like you would lease a car, with an option to purchase the property from them at an agreed upon price and by an agreed upon date in the future.
Under this scenario, the homeowner maintains ownership (i.e. the deed) on the property, but you have an equitable interest (control) and the right to sub-lease the property to a prospective buyer and give them the option to buy from you. In fact, by lease-optioning a property.
Here are our six different buying strategies: getting the deed “Subject to”; Land Contract; All Cash; Split Fund; Straight Option and Lease Option.
Please remember that the All Cash and Split-Fund strategies are for ugly, rundown houses only.
When we’re considering the Lease-Option offer to a seller, we’re only going to make such an offer to higher-end homeowners, people whose homes are in good shape; people with vested interests in leasing and/or selling the house to someone who is going to properly maintain it. In short, we are now focusing on the pretty-house side of the business.
Most sellers who lease option their house are looking for debt relief. They may have had a job transfer, or maybe there was a divorce and neither party can keep the house on their own. Or maybe they’re living some-where else, renting, and just couldn’t sell the house in time before they moved. However, there are some sellers who do not want to sell the property and lose complete control over it buy handing over the deed of ownership, losing the benefits of being a landlord—like depreciation for their taxes and receiving monthly payments when selling or renting. But they may consider leasing the property to you with an option to buy.
Now, since we’re on the pretty-house side of the business, a homeowner’s asking price is going to be considerably more than what we would purchase an ugly house for. Even if they may really want to sell that house, we may not be able to buy it at a price that makes sense to us to pay them all cash. However, the benefit of offering the lease-option strategy is that it provides us with an opportunity to offer a higher price to the seller—up to 70-80% of the value of the house (as opposed to only 50-60% through the all-cash buying strategy).
We could also offer 70-80% through the Land Contract buying strategy. If fact, if you had it your way, you’d want to try to see if they’d accept a Land Contract first for the simple reason that you’d be getting the ownership, have control over the property, and you’d have more strategies you could employ to sell the house. But sometimes the seller just doesn’t want to hand over the deed or ownership through a Land Contract if we’re not buying the home outright.
So we’ll immediately flip to our lease option offer and say something like this:
“I can certainly understand that you want to maintain a little more control. I do have a Lease Option program in which you’ll be able to maintain ownership of the property, and you and I will have an agreed upon price which I’ll buy the home from you at some point in the future. I will make monthly lease payments to you in the meantime, up until, if and when, I exercise my option to buy it from you.”
The first thing you do is agree upon a purchase price and the amount of a monthly lease payment. You’ll maintain the home in good condition until you exercise your option to buy the house. Then you agree upon a date in which you will purchase the property from the owner. In addition to that, you have the right to sublease the property to a tenant/buyer of our own. At that time, the home will be paid off in full.
A Matter of Trust
The most important component of buying houses through Lease Options is the rapport that you build with the homeowner. If someone has the intent to sell their house and they contact you, you are offering a different kind of creative strategy for them to sell. When it comes to buying and selling houses, most of the outside world only knows that “I find a buyer, and they come in and pay me off at closing in full.” That’s conventional wisdom.
So if we’re offering something outside the norm, like a lease with the option to purchase, it really comes down to trust. You either build rapport to the point where they trust that you know what you’re doing and they feel confident that you can produce, or you won’t get the deal. If someone is unsure of you, or of your ability to do what you say you’re going to do, they most likely aren’t going to just come out and say, “I don’t trust you.” Instead, they’ll come up with objections. When the human mind is feeling uncertain about something, it’ll create reasons as to why this should not work, why I shouldn’t take action, or why I shouldn’t trust this person.
Objections are perfectly natural. When someone presents you with an objection, what they’re really saying is, “I think I understand, but I’m still missing a piece. I cannot say yes with complete confidence. Please keep talking to me to fill in the information that I’m missing.” After you’ve completely covered their objections in an open and honest manner, they will become comfortable in working with you.
It’s the way that you handle their objections that will determine the rapport and trust you build with them. You want to cover the material in a natural tone of voice. If the person picks up on the fact that you are reading a script, then you will lose all their trust. Building and maintaining trust are the most critical parts of becoming successful in this business.
About Tim Taylor Real Estate Success Coach
Tim Taylor real estate success coach and author of “Wealth with Purpose” is an accomplished learner. He has been mentored by Robert Kiyosaki, Robert Allen and Ron LeGrand and is now passing on the secrets he has come to know and practice onto select individuals with a burning desire to become successful real estate investors.
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