How I Helped A Father and Son Team Launch Their Investment Career In Houston
My Investment Week In Houston
I work with a lot of investors across the country to help them either get their real estate investment business off the ground or help them take it to the next level. My schedule is usually packed one to two months out. I sometimes feel like the post office in that I am working with clients whether it is sunny, rainy, sleet, or snow! So this was the case that I found myself with having a week planned in Houston AFTER Hurricane Ike ran through the town like a paper shreader. I wouldn't be able to reschedule for at least a month with my investor, so I told him that we would play the week by ear.
So the week rolled around and Harlan (my investor) called on Monday and Tuesday to inform me that he still didn't have energy or internet at his home. I made a few phone calls and found a few stores (Whole Foods and Panera Bakery) nearby that had power, internet, and food! So we planned on having a Wednesday through Saturday 1:1. Things were going to be interesting!
So I drove out of Austin Wednesday morning not knowing what to expect (except every electronic sign said not to drive to Houston or Beaumont!). I arrived and met Harlan and his son, John, who were anxious to get started.
The first thing that I work with new investors on is FREE marketing sources. My favorite tool to attract deals, buyers, sellers, and private money is to utilize Craigslist. Craigslist is a free online classifieds service that offers free listings on properties, miscellaneous services, etc. You can do anything from sell your property to post your resume to find free stuff. In real estate, your deal is only as good as your exit strategy, so I like to focus investors on having multiple exit strategies and that is why I have them (along with myself) posting several ads targeting wholesale buyers, traditional buyers, owner financed buyers, private investors, and people loosing their homes to foreclosures. It takes roughly about 30 minutes to post all five ads and then it takes about five minutes from their for the poster to repost them every two to three days. Let's just say it is automated marketing! I often get responses within a few hours to the posting, but imagine my excitement, along with Harlan and John's, when Harlan's phone rang in response to one of the ads offering homes with owner financing FIVE minutes after the post went live. Along with that, the person had $20,000 for a down payment along with looking for a home at $150-$200,000 in price range. This gave us a ready to buy buyer and a clearly defined goal: $150-$200K, three or four bedroom home, $20K down, owner financing, and a home in Pearland, Texas.
After showing them how to post, we then spent a couple hours reviewing and searching the postings for the requirements. We were able to find seven potential homes that fit the buyer's request. We sent a couple emails and left a few voicemails with the sellers. After tackling that, we hit some of the major lender websites to track down some local REO (Real Estate Owned or Bank Owned Property) listings. We pulled up several listings in Missouri City, Pearland, and Sugar land off of HomEq, Countrywide, Wells Fargo, Bank of America, and Litton Loan Servicing websites. All in all, we were able to pull 37 listings. After doing this, I had both guys work out several exit strategies as far as owner financing, rentals, and after purchasing with private and hard money at 70% of fair market values. After showing them how they could cashflow on each deal, we decided to call it a day as it was 6 pm.
We started early the next day as well and I had Harlan spend some time contacting a few realtors to help us pull up comps, listings, and property specifications. We were able to schedule two meetings later that day with two seperate realtors, Mark and Bill. Both stated that they were investors which was a plus, as investors have a tendency to think and judge properties differently than your typical buyer. I was glad to see that even with power being down to over half the area, that we were still able to find two realtors to add to Harlan's team. Along with Harlan making some phone calls, I was able to find eight local hard money lenders who were lending at 65-75% of ARV and who were active investors in the area as well.
After lunch, I was able to show John and Harlan how to cross reference the list of Harris County Probate filings with the Harris and Ft. Bend County Appraisal Districts to find property owners and potential nice equity deals. I also showed them how they could use the same resources to cross reference obituaries to find recently deceased owners.
We then headed out to meet with both of our realtors. We first met with Mark who in his own words had gotten his realtors license to help his investment career. He had flipped several properties and owned several rental properties in the Houston and Charlotte areas. Mark stated that he was having a hard time funding deals as he was running out of conventional funding sources. We discussed with him using private money and owner financing to help with him being able to purchase more properties. He was pretty excited about that idea as he had never explored it. Mark was willing to help us pull info on the bank owned properties so we left him our list to work on. We set up a follow up for Saturday to discuss his review.
We then met with Bill. Bill was another realtor turned investor who also worked with quite a few California investors. We asked him to cross reference the Fort Bend Foreclosure list with the MLS to see what properties were listed. We also agree to follow up with him on Saturday as well. I believe that it is important to have multiple realtors working for you as an investor as some realtors have different strengths and capabilities. Not everyone agrees with me on this, but I have six to ten realtors that send me deals on a monthly basis that work with me all the time. Why not duplicate your self and your work. The wealthy don't stay wealthy by doing everything themselves, they pick up the phone and delegate!
Day three started off with us being grateful that Harlan now had power. Since this was a Friday, I had three important goals for them. The first was to target his list of contacts for private money on potential deals along with contacting secondary marketing managers of mortgage companies to get a list of defaulted notes. While I was working on preparing an email, John and Harlan were able to identify close to 20 deceased homeowners to market to with the help of yellow letters. After they were able to get their list, I showed them how to use their contact list to INDIRECTLY market for private money (I'm going to follow up this blog posting with another one on this subject alone, so keep an eye out for it). We sent out our email and then headed out to lunch. When we arrived back, we checked the email and we were excited to find three responses, all who were pledging the $100,000 needed for our "theoretical" deal. Let's just say that whatever excuses or fears that Harlan had about making deals without having the necessary funding disappeared right before my eyes. I really enjoy watching investors learn new things and seeing the lightbulb come on in their eyes is one true perk and passion of mine as a mentor. John was also excited to see how easy it was to find money. We were also glad to see three responses to their handyman special or wholesaler ad along with a couple requests for contact and more information on their buyers posting. I tell you, Craigslist is awesome!
I spent the last part of the day working with them to help automate some of their marketing. According to their goals, and backing those numbers out to marketing pieces, they were going to need to send out at least 200 postcards or letters. I introduced them to Postcard Mania (www.postcardmania.com) as a way for them to automate their mailings. John and Harlan would pull and clean the lists and then email the lists to Postcard Mania, who would handle the mailings from their end in a timely fashion once Harlan and John created a custom postcard to help attract potential selles and buyers of properties. While their was a few on the front end, this service would only end up costing them on average of around $50 a month. I've used their service in the past numerous times and I recommend them to any new or seasoned investor. Their customer service is exceptional and they are always running all sorts of deals.
With the final day arriving, I put together a marketing plan for Harlan and John that focused on immediate items along with daily, weekly, and monthly activities for them both to work on to make sure that the momentum created continued to keep the ball rolling. After reveiwing these items we headed out to meet with Bill the realtor to discuss his findings. Bill had cross referenced the MLS and the Ft. Bend Foreclosure list to identify 14 listed homes. Eight were listed as short sale listings and the remaining six were just listed as active. I worked with them to call each of the six realtors to discuss with them if they first knew the property was in foreclosure and set to go to sale in three weeks, along with if the sellers were open to us taking over the property subject to the underlying financing or starting a short sale negotiation if their wasn't much equity available. All the realtors were quite open (which was nice for a change) and one even had several investors who were looking to dump other properties. After doing this, I asked Bill to pull comps on the short sale listings and find a per square foot average and make offers on each property at 65% of Fair Market Values as all the properties needed no work and were move in ready. Bill was excited to be making the offers and Harlan and John were both stoked as well to find other deals. All in all, we had eight short sale offers, and six potential subject to deals with more rolling in from the agents we met with.
We then headed out to meet with Mark. Mark was equally excited as the properties that we had sent him were all bank owned properties that the bank had already made their first initial price reductions. I showed Mark some tricks in his MLS service that would allow him to save a lot of time (like the CMA and tax records reports). We also based our numbers and offers off of the square footage price for the neighborhoods and had Mark put in offers at 65% of Fair Market Value. This excited Mark as this was a similar formula to his offers and he basically begged Harlan and myself to work with us on deals that he would come across. It was quite humorous to watch a realtor almost mess his pants with excitement after we stated that we wanted to make similar offers on all 37 properties on his list and that they were going to be cash offers! Harlan echoed my response by stating he was there to make some things happen and that he would be glad to work with Mark on helping grow his business as well as his own!
So our tally for the week ended up looking like this:
8 short sales (contracts submitted)
3 wholesale buyers
3 owner financed buyers ($20K down payment on 1)
$300,000 in private funds pledged
8 hard money lenders ready to lend on other deals
Numerous other deals from marketing to the obituaries, foreclosures, and probate lists that will keep Harlan and John busy.
All in all, I would say that it was a very productive week for Harlan, John, and myself! Even if Hurricane Ike did do $8 Billion dollars in damages, he couldn't slow down the momentum created by our whirlwind of activity in four days. Now the ball lies in Harlan and John's court to keep up the activity and marketing. I have a feeling that they will need very little help with this as they both have a very strong and deep desire to succeed.