How did you get into real estate investing? Did you read a book on it? Was it a seminar? A meeting of some sort with speakers selling courses? Did you get really, really jazzed and pumped up by these simple (“not easy”) concepts that were delivered to you in parable form from the stage by a charismatic speaker? Did you find yourself levitating to the back of the room, powerless but to slap down your plastic to buy the kits that were being sold there? Like…
“Yes Mr. Ker, we do take traveler's checks. Yes, cash is okay, too. HEY BARNEY, DO YOU HAVE CHANGE FOR A HUNDRED? There's your kit Mr. Ker. Good Luck!”
I have to admit that's where I began. I attended a “conference” and dropped over a grand in two days. What I ended up with was a very funny course about Paper (i.e. discounted mortgages) and a more sober account of making a million five in eighteen months buying and rehabbing multi-units. I listened to tapes for about four days straight, then went out and bought an HP12C financial calculator.
I loved paper (the units can wait a while). I really got my head around it. I loved discounting on the calculator, I loved calculating yields. And the guy on these tapes was so funny! I spent a fun couple of weeks learning the courses and I knew more than most bankers because the guy on the tapes told me so. I wanted to get started and get a note-closing-sweatshop going just like he described. I knew this stuff inside and out. Two deals a week would be OK with me you know, I'm not greedy. Now where was it in the book that it showed how to find the deals. OK…here we go … Look up names at the courthouse, call Accountants, call Contractors, call Attorneys……hmmm.
To cut a long story short, I looked up five hundred names at the courthouse and sent letters to them, I made about five hundred phone calls to Accountants and Lawyers (setting up my “network”), and finally I found one note holder who was interested in selling. I made an offer, he said “no”, and I went home and went to bed for two weeks, too depressed to function. All that work, and this guy just said “no”. That was my introduction to the wonderful world of real estate investing. From there, I got into low income apartments and completely flushed myself down the toilet!
Five years later, after buying and giving back about 50 units, nearly penniless, I discovered this thing called creative real estate. Control without ownership, solving people problems, use your brain to buy property – not your cash. I had an acute appreciation for it, given my (expensive, and painful) landlording odyssey, but it seemed even with all this wonderful knowledge, I was still in very much the same position I had been in when I first got started. The same position I stayed in, until I wised up, and the same position most real estate investors struggle with year after year because they don't know any better.
That is: “I know all this stuff inside and out. I know 100 different creative ways to buy a property. But I've got to suffer through things like lackluster advertising results, cold-calling, talking to hundreds of testy uninterested people, and dead ends, before I even get the chance to talk to someone who is half way motivated to sell. This is a crossroads. The proverbial “brick wall” for most of us.
And this brings up an important point. Possibly the most important point to really “get” here. Knowing how to find motivated sellers is far more important than knowing 100 different ways to buy a house. You see, your business (and therefore your life) is going to be frustrating, stressful and unfulfilling unless you find a way to create a non-stop flow of motivated sellers calling you, every day. Now, that's obvious isn't it? Well it can't be that obvious because not many people actually do it. You see, what I'm trying to point out here that there is a mental shift that needs to occur in your mind, a paradigm shift if you will, before you are going to make any serious money as a Real Estate Entrepreneur.
And What is This Paradigm Shift?
Instead of being a real estate entrepreneur, you must become a marketer of your real estate entrepreneurial business. That's what it comes down to. If you are in business, you need to make this shift in your thinking. Because no business is going to prosper, or be successful without a lot of customers.
Making this shift in thinking, in orientation, about who you are, focuses you on the singularly most important and financially rewarding aspect of business: marketing. The money is in marketing the business, not in doing the business. It may take a while before you really absorb this. You may have to think about it for a while before it really sinks in. Read it again. Take a minute. Once you change your thinking to accept that you are a marketer first, and a Real Estate Entrepreneur second, you'll finally be able to start making the kind of money you really want to make.
Accepting your role as a marketer is the thing that will move you out of the rut of occasional mediocre deals and up into a level of sustained success that would not otherwise be possible for you. And this is true of anyone in any other business or industry. The person or company who is most on top of their marketing, makes all the money, and dominates their market.
Look at Domino's
A marketing machine! Very average pizza. But aggressive marketers, and they virtually own their market. Look at Bill Gates (yes, I know, everyone cites BG). If you saw Accidental Empires though, a PBS documentary by Robert Cringley, you'd know that Gates was just one of hundreds of fanatical “techies” who were trying to make this computer thing work somehow. With his astute positioning and relentless marketing he rode Microsoft up over IBM to the $80B company it is today.
Of course, this doesn't mean you just market better and let your buying, negotiating and selling skills go to pot. You've got to be the very best property buyer you can be and run your office well too. After all, your sellers and buyers deserve the very best treatment from you. But more importantly, doing what you do so well that people can't resist telling others about you, is the purest type of marketing in and of itself. Remember, it doesn't matter how good you are if you have no Motivated Sellers to talk to. Buying houses from Motivated Sellers with little or no money out of your pocket is the name of the game, and marketing is the thing that brings in the Motivated Sellers.
OK, so, marketing. Really fabulous! But, what does it mean? So far it's just a word I've said 10 or twenty times, right? Well, there are two types of marketing people typically use.
The traditional approach which, for want of any better way to go, usually involves just going out after randomly selected sellers. They haven't been screened or qualified in any way. We just know they have a house to sell. We run up big phone and classified ad bills to get to talk to them. In communicating with them we usually talk to them about our financing, and how great it is, and if they will just sell to us their “problems” will go away. We do it manually; call by call, door by door. We talk about us, rather than inquire about them. We chase, they run. When we stop, the marketing stops. The cost per deal is very high, both financially and emotionally.
The second approach is the targeted, low-cost, systemized, response-oriented approach that, through a variety of media (such as direct mail, lead generating classified ads, flyers, signs, radio, cable TV) states or implies a benefit for the seller, calls for a response from them, and positions you as “the solution” for the sellers who want that. The sellers step forward and select you. The marketing is automated, and it is an operating system that works whether you are there or not.
I don't want to shock you, but we are not going with the first choice here. Pick up just about any book or course about real estate investing or creative real estate and you'll find the choice #1 approach to finding motivated sellers, if any. What you won't find anywhere in those books or courses is the choice #2 approach, which is direct response marketing. Direct response marketing targets a specific group of most-desired prospects that you have defined as those most likely to respond to your offer (e.g. out-of-state homeowners, or expired listings), then it advertises for or delivers a message to only those people via a media (e.g. personal-looking hand-addressed #10 envelope mailed first class) that will reach them and get their attention. Once in front of the target, direct response delivers the following:
1) benefit-telegraphic headline
2) true marketing message
3) offer, or offers
4) reason to respond immediately
5) precise response instructions and mechanisms
With these five elements in place, you set yourself up to be called only by motivated, partially pre-sold sellers, continually, day after day! So now you can be freed to do the most productive thing possible for you as an investor: make offers to motivated sellers!
Hopefully you can see the picture here. Direct response marketing cuts your advertising expense in half. It sifts, sorts and screens your prospects so that only the most qualified and most motivated respond and get to talk to you. In short, it allows you to make more while working less, with more predictability, consistency and control than anything else you could do to find deals. Is that something you want? Think about it. Is there anyone you know of who is buying and selling a boatload of houses every month?
They are still doing a ton of business. Now, why is that? They don't offer sellers anything more outstanding than you, do they? They certainly don't offer sellers anything more creative than you are capable of offering. They don't have any better phone manner than you. Not at all. The only thing that very successful Real Estate Entrepreneurs do better than anyone else is: Create a reliable, consistent flow of motivated sellers calling in each day! That's it! That's the difference. So did you get the message here? I hope so. If you want to change your experience in real estate investing from one of anxiety, frustration and disappointment to working less and making more, you'll make the change.