I have just about beaten this topic to death (or so I thought), but I still see real estate investors every week throwing in the towel after sending out two or huge mailings to what they have determined are potential motivated sellers. Let's face it; numbers and statistics aren't always sexy. But, there's no doubt that great results are.
First of all, let’s talk about the criteria for your list. You have to narrow it down. Not everyone is a potential motivated seller, so how do you do that?
First Things First
First of all, pick a niche for your list; just one. It can’t be two or three; it has to be one. You might pick absentee owners, NOD’s, foreclosures, probates or some other narrowly defined group. Let’s just say you chose absentee owners.
Narrow that down one more step by choosing only out of STATE absentee owners. If you live in a big state like CA or Texas, then use a radius of about 3 to 3 ½ hours driving time. Choose folks that live outside that parameter. If they live close to the property, they can just easily drive in and take care of the house (no pain). Remember that in order to be a motivated seller, they must have some pain. You are there to bring them “pleasure” by taking the problem (the house) off their hands.
There are 4 important steps to follow.
- Eliminate bad zip codes and areas you don’t want to work in.
- Pick only homes with at least 50% equity. Remember that 70% formula? It won’t work in most cases if they don’t have at least 50% equity. Unless….your strategy is lease options or other creative financing strategy where equity isn't important.
- Decide what price range the house should be in. You are looking for middle of the road, bread and butter homes. If the median home price is $160,000 in your area, I would pick homes that have an ARV of $50,000 to $250,000 or so.
- You don’t want high end homes unless you already have high end buyers on your list.