questions for buyers

Aaron-n-Suzy, thanks for your comments and your question. I hope that I am interpreting it correctly, and also that I can share accurately the way I work with things in my own business.
I have already mentioned that I am continuously building lists of properties and of people who want properties. And that my objective is to get a match between a property, and someone who wants that property. In order for this to happen, I have to have a kind of structure to my marketing approach to find what I am looking for and to create the matches.
As I am finding properties, they can fit into one of three categories: Rehab, Rental, or Lease/Option. Some properties may fit into more than one--for example a property that would work as a rental, that needs minimal work, could also fit as a rehab property. We could consider each of these categories as a marketing funnel that the property will be placed in, hoping that it will come out the bottom as a match with someone who wants that property. The criteria for each funnel are determined by what my buyers and tenant/buyers have told me that they are looking for. I use an approach called "properties to order" so every property I offer and negotiate on will be pre-qualified to fit at least one of these funnels.
For example, if I find a rehab property with an estimated ARV of $400k, but my cash buyers are buying in the $200k range, I'm going to cross that property off my list and move on to the next property. And in order for a property to fit in my Lease/Option funnel, it would have to be a property that I can acquire with at least 95% seller finance, preferably 98% or 99%. I usually find these properties by calling on rentals and finding out if they will ALSO allow me to purchase the property from them at some point in the future.
So now let's switch to people who want properties. They also have to fit into one of my three funnels in order to be at the top of my list. I will not reject any buyer or tenant buyer, but I will only place a person at the top of my list if: 1) They have given me very specific data on what they are looking for; 2) They need 1 or more properties right away and are flexible and capable of performing; 3) Their needs overlap with what other people on my list are looking for. By being selective and carefully qualifying my buyers and tenant/buyers, I am more assured that each property I gain control of will be a match.
Now, let's be realistic. I have just described the perfect world scenario, and the world doesn't always respond that way. But by being clear on my objectives, I am able to get much closer to achieving them, and I waste less time on random properties that are low probability for matching. I also have clear lists of criteria to provide to real estate agents, and to use in my own searches so I don't end up with distractions.
When I am successful in contracting or controlling a property, my top of the list people get phone calls to alert them of the property, followed by emailing or texting them the link to the marketing information on the property. Bottom of the list people receive emails, but only receive calls if my initial marketing does not result in responses.
One final point, I can shift my energies back and forth between my Lease/Options and my wholesaling by spending more or less time on calling on rentals vs. properties that are for sale.
And also, when my searches turn up those gem properties that I want to own myself, I am in a position to negotiate for that as well--I am usually looking for favorable seller finance terms, if possible.
This may have included more than you were looking for, I hope that my explanation has been clear.

You did interpret correct,I have put buyers in categories.Rehab,buy and hold and renters,I dont have a long list yet but im trying to structure it so that I can keep adding to it and not get confused on what each is looking for.
I have added a new category wholesalers for networking with(thanks Karen)and look forward to this the most,I think in the long run networking will pay off nicely.

Something that has happened lately,I have a few bird dogs that bring properties to me but one brings people,I didnt ask him thats just what he does.He tells them Im an investor that might have a house they may be interested in,I was not looking to do LO but its coming to me and who am I to say no.I told him 500 for a property and 250 for tenant buyer LO.I think thats fair! Now I got more questions lol.

Coach have you read the book "who moved my cheese"? This little book talks about one character that fits me exact,"HEM" he analyzes everything maybe to much but he does get it,you didnt include to much the more the better actually.

Thank you very much Coach

Aaron

Aaron, I have only skimmed through "Who Moved My Cheese," but I found it to be a great little teaching book, and the idea that people tend not to be very adaptable (which causes many of our problems in life) was very profound.
When I started as an investor, I was coming out of a difficult divorce, financially, and my level of discomfort (living in the basement of my sister's home, God bless her for that), pushed me to take action--I simply had to. There was no over-analysis, because I needed income. I needed to find the cheese, and quickly. I had no savings, my credit had been damaged significantly, there was nothing to cushion things, and I was getting lots of mail and phone calls from creditors.
Now, I knew I was going to make mistakes, and I did. But most of them were not really costly because of the strategies I was using.
My counsel, not exclusively to one person, but to anyone starting out as a real estate investor, is that the program teaches the techniques with the lowest risks, and it does so to protect you from big financial mistakes. That should take care of your biggest concerns in taking action. So don't allow yourself to be stopped by a tendency to over-analyze. We all make mistakes, we recover from them, and move on, and we all must jump into the deep end of the pool in order to be successful. There is no sink or swim--there is only start paddling and stay afloat.
And finally, it takes getting out of our old habits, and the ruts we are in, and our comfort zone in order to find the cheese in this business. Take some chances, that's what life is all about, and it certainly is a lot more exhilarating than doing the same thing over and over and expecting a different result.
I guess I'll get off my soapbox now. Aaron, this post was not directed to you, you simply opened up a topic that I have wanted to address, so I appreciate you giving me the opportunity to open up and share from my own personal experience.
I guess I want to add one more item to this. I have found that whenever we need someone to assist us in moving forward, that person arrives in our life. I have had many mentors and guides that have helped me along, and more keep showing up as I need them. I think there is something divine in that, but I encourage everyone to trust that the same will happen for you.

Loving all of the information that everyone has shared so far and adding it to what I already have. Thank you everyone for your input!

I totally do agree with you about it being more interesting than frustrating!

I try to be very careful when I explain things and to be as clear as possible because I know that so many of the people on this site are in the beginning stages and I direct most of what I say in that direction. I should have expanded on "this business can be very frustrating" to include "when you first are trying to get started".

At that point you are usually so overwhelmed with information, trying to make sure your contracts are protecting you, wondering what to say and when, etc, that you can get frustrated and wonder if it is ever going to happen.

Once you get that first deal, much of the fear eases and things become much easier. After a couple more, you are usually having so much fun and it never seems to get boring!

Thanks for all your patience and sharing here! You are such a blessing.

Karen

Hi everyone! I have an opportunity to purchase a building from the 1900's. the seller is a broker who described it as a "shell" of a building that needed to have just about everything replaced.
Question: How would I know how much rehab cost it entails? It is a building from 1900,3,000 sq ft, upper & lower levels and I wondered if there was any way of qualifying for historic significance to assist with the reno budget or sale of the property. If anyone has any ideas on how to proceed, please respond to this query. Thanks! Ne rien succes comme le succes! From the French, transalation is "Nothing Succeeds Like Success"! Continued success to you all.

Thanks Dallin for sharing your story with us,you are a great example of determination,hard work and the want or need to change can happen if you want it bad enough.Thank you again for sharing.
Karen you are right that when starting out its information overload and I can see why someone would think its to much to learn,Im here to say keep at it and it will start to sink in,everyone can do this if they work hard and stick with it!
Im new and I feel lost at times but this site is full of helpful people(thank you Dean)and they all want to help.

Aaron

Gotta love this site and all the DGers that want to help I know I do.

Aaron

First, compliments to Karen, Aaron, and others who are posting here, each of you is adding so much to the body of knowledge conveyed here.
While I confess at the outset not to be an expert on Historic restorations, the first question I would want to ask is if the property is listed on an historic registry. If it is, that may sound cool, but it MAY create some significant additional costs in doing the restoration, if the state historic preservation organization has some standards or requirements in place that affect this particular property. Check with your State Historic Preservation Organization to find out if this property is on the National Historic Registry.
If I remember correctly, there can be some tax benefits in doing historic restorations. That could be to your benefit.
And finally, if you decide to take on this project, you have to decide what your personal dedication to historic accuracy is, and what influence that will have on the project you are undertaking. I personally, in good conscience, could not simply try to make a 1900 property look like a 2013 property, I'd have to preserve the character of the property along with making it functional in the modern world.

Here's a website link you may wish to explore: http://www.nps.gov/nr/faq.htm

When I started getting my buyers list going I was looking for people to do an assignment with,Im getting more people wanting owner financing that I was expecting.
So what im thinking is, find L/O deals!

DG family lets have it , what should we ask potential buyers that call in wanting to do lease with option to buy?

Aaron

Aaron, you're really good at opening questions that get lots of responses, I can't wait to hear what others will have to contribute. My own response may need to be broken down into multiple posts, as I would like to kind of create a process here that is duplicatable.
From my own experience, by far, the largest group of queries I receive are as a result of an ad that I run specifically to find potential tenant/buyers. The ad reads as follows:

________________(City), Rent To Own, 3 BR, 2 BA, NICE, Call xxx-xxx-xxxx, 24 Hr Recorded Message.

I have run this online, in newspapers, etc. I get numerous responses. The people who respond tend to prefer getting a recording rather than a live person, which makes it more convenient for me, and yes, the phone does ring at 2 a.m. sometimes.

When they call, the response is as follows:

"Hi, this is Dallin, thank you for calling. We are private investors who provide rent to own opportunities for good people like you. Our terms are reasonable and fair. We look forward to speaking with you. Please leave a message, including name and phone number, and we'll get back with you."

In a next installment, I'll provide you with the basic script for the conversation that I have with that person, and a few things that are helpful to realize as to why I ask certain things, and why I do not ask other things.

This post is a continuation of my most recent previous post called Buyer Questions Response.
Before providing the basic script for the call, let me share with you a couple of factual statements about the people who are interested in Lease Option properties as tenant/buyers:

1) They have damaged credit that needs to be restored--some are chronically bad with money, many are not, just victims of circumstance, or a bad choice, etc.
2) Approximately 12 to 18 months of positive choices with credit can get many of these people ready to obtain a loan and purchase a property;
3) Many of these people have the ability to compile an up-front sum of cash in the 3 to 10% of purchase price range, but practically none of them believe that they have much ready cash to invest in a property. It is going to require a conversation that I call "Finding the Money" to figure out how much they can really come up with, so simply asking them on the phone how much money they have up front is almost always a huge disappointment;
4) People will always tell you less than what they really have for option consideration or for monthly payments--we have to expect that.
5) In any conversation, the person who asks the questions controls the conversation.
So, with that little list behind us, here's the script that I use in having conversations with people on the phone (assuming I am returning a voice message from them):

"Hi, my name is _______________, I am returning a call from ______________, who answered my Rent to Own ad from _______________(source). Am I speaking with the right person?
"Great! Thanks for responding, are you still looking for a rent to own property?
Okay, we actually work with a number of different properties, not just one, so I need to gather some information from you so that we can match you with the home that will work the best for you. Would that be okay?
1) How many bedrooms and bathrooms are you looking for?
2) What areas of town would you consider?
3) What's the most that you would feel comfortable with as a monthly payment?
4) Do you have some available money for a down payment?
5) Are there any other physical characteristics of the house and yard that are important to you?
6) Does the property need to be close to anything specific, like schools, or hospitals, etc.?
7) Is there anything else you would like to have on our matching list?

"Okay, now, the arrangements for each property are different, we will begin the matching process and get back with you once we have one or more properties that closely match your requirements with all the details. Let me confirm the best number to reach you, and you're welcome to get back with us anytime."

That's the phone interview script for the first contact.

Note: Often they want to know how our program works, I provide only minimum information in the first call, and remind them that the arrangements for each property vary, but we will provide them with complete information once we match them with one or more properties.

(If you have a property you are in the process of marketing now, you can provide them with information on that property once you have gathered the matching information from them.)

When I have a property that I am marketing, I will contact each person I have gathered information from with details about the property, and very basic info regarding the program--term, basic monthly price, and give them two appointment time opportunities. I don't let them know, but these are showing times and I will be inviting multiple people to schedule that appointment time. I want to have competition walking around the property at the same time, and I have applications for them to fill out at the property. I will spend time with each party that shows up, and explain the property, and find out their level of interest. Highly interested people I meet with individually to explain the program and processes--that meeting can be right after the showing, or later on.

In an additional installment, I'll explain the "Finding the Money" conversation.

This post is a continuation of two of my previous posts, "Buyer Questions Response" and "Buyer Questions (2)":
In a previous post, I explained how many tenant buyers have the ability to compile a substantial 3 to 10% up front Option Consideration payment in order to move into a rent to own property, but most of them do not believe they have that much ready cash to use for this purpose. As such, I do not press at the beginning, merely take down in my notes what they tell me they have available.
In order for a person to part with a large sum of money, they must:
1) Understand what that money buys them;
2) Really want it!
Neither of these is satisfied until a person has physically been to the property, loved it, seen that my program is a pathway for them to get into home ownership, and basically be salivating to make that happen. Once I see that they are at that point, it is time to discuss the arrangements, and have the "Finding the Money" conversation.

1) I begin by talking with them about their past, many have previously been home owners and experienced some challenges, others are trying to take the leap from renting to home ownership, ALL of them have some credit challenges.
2) I ask them to describe any current credit challenges they have that prevent them from getting a loan for a property, and probe if I need to;
3) I ask them why they want to become home owners of this property, and let them explain, sometimes adding a couple of additional benefits of home ownership to what they say;
4) I ask them, on a scale of 1 to 10, how much they want to become home owners--if they respond with an 8 or lower, I look them in the eye and say, "I'm sorry, for this program, I only work with people whose commitment level is 9 or 10--I am only looking for successes." They usually quickly re-identify themselves as a 10.
5) I explain the arrangements for the program, and that there are only two ways I receive money from them--option consideration, paid up front, and monthly payments. Option consideration, I explain, is a legal requirement of a rent to own program.
6) I tell them that there are two choices for the arrangements for this property, and I quote them one version with higher option consideration and lower monthly payment, and another with lower option consideration and higher monthly payment. I let them know either one is fine with me, but the one with the higher payment up front gives them more credit toward the purchase of the property. I write these numbers down on a yellow legal pad and ask which one they prefer.
7) Almost always they ask if they can do something with less money up front. I'm expecting this, and say, "Well, let's try something here--many people have more capability than they think."
I begin going through a list of ways that they may be able to come up with this option consideration. Some of these they will be able to say, yes, and give me an amount that could come from that source. As they do, I list that amount on the yellow pad, to keep a running tab on money that could be available.
9) I reinforce to them that this is the most important purchase they can make and that I want to help them be successful, since they are creating equity in a property that lasts forever. I am hoping that they may come up with their own methods as we stimulate their creativity a little.
10) Here is the list that I usually go through with them:
A) Ready Cash
B) Bank Accounts--Checking, Savings
C) "Mattress Money"
D) Cash Advances on Credit Cards
E) Borrow Money from family members or friends
F) Refinance an automobile
G) Convert Collections (dolls, guns, memorabilia, etc.)--This can be done by loan or sale. I always let them know on this or some of the following that it is possible to get a loan against the item if they do not wish to sell it--so it would be a temporary arrangement.
H) Convert Jewelry to Cash
I) Convert RV's, boats, snowmobiles, etc., to cash
J) Do they have any property they own--vacant land, etc.?
K) Do they have stocks, bonds, etc., that can be converted to cash?
L) Employers will sometimes give salary advances to an employee buying a home
M) Do they have any work bonuses coming soon?
M) Is there anyone whose will they are a part of, who may give them an inheritance advance?
N) Can they think of anything else of value that they have that could be converted to cash?

I am looking for the cash, not the item. In a few rare instances, I have accepted items either in exchange or as collateral, but there will always be a very clear and unbending arrangement with regard to those items so that if they do not redeem them I can sell them the day after the conclusion of the arrangement--I'm not a pawn shop.

Once we have gone through the list, I know what their assets are, and either the amount will exceed, match, or fall short of the amounts I have quoted to them for Option Consideration. I can make proposals for lesser amounts if I choose, but I am able to see what I'm dealing with and whether I can assist these people.

I close this post with three statements:

1) We will not be able to help everyone;
2) Collect lots of cash up front;
3) Don't sacrifice your humanity, but don't be taken advantage of either.

I WILL SEND IT TO YOU.... in a PM.

Your the first I was hoping would respond..Im going to print and keep this with me on every call.
Very detailed as I expected from you since I know L/O is the way you started,I appreciate you sharing your time earned knowledge with us!

Thank You

Aaron

Thank you, I look forward to getting your thoughts on this.

Aaron

Thanks Aaron for your kind words.
A few additional points occur to me about the early steps in dealing with your respondents who are interested in lease options (tenant/buyers):
1) If you have a property available when they are responding to your ad, it is okay to tell them about that particular property AFTER they have told you what they are looking for--that way you can reference points about the property that match their needs. You can then schedule them to meet you at the property;
2) Schedule showings, but tell your potential tenant/buyers that you are scheduling an appointment for them to see the property. These candidates are notorious for not showing up, and if you have two to three scheduled at the same time, only part will show up. It's okay to have multiple people there at the same time, it will increase the urgency for them to move into action.
3) Charge an application fee and do a complete credit and criminal background check. I do not do business with sex offenders, chronic criminals, or those with multiple ongoing credit issues. They will tend to bring their bad habits along with them;
4) Obviously our program does not mesh with Section 8, since the first requirement for a person trying to get a loan is "Get OFF Section 8."
5) You will also want to learn about the job history of your applicants. I do not do business with chronic job changers, I want to see some stability.
6) You need to do a background check on ALL adults who will be living in the property, make sure all adults are on the application form, along with their SSN, so that you have the ability to do a background check on each of them.
7) Make sure you have a detailed photographic record of the property--each interior wall, floor, ceiling, furnace, water heater, under sinks, etc., exterior, all walls, roof, foundation, yard, etc. These should be taken before move-in.
I introduce my tenant/buyers to a mortgage broker who is used to dealing with hard to finance people, and tell them he is the "credit police" and all decisions about how they use their credit for the next 18 months need to go through him. He provides them with suggestions on how to rebuild their credit during that time.
9) I strongly encourage tenant/buyers to go in 50/50 on the purchase of a homeowner's warrantee, that covers major repairs on the property for the next year.
10) Remember that the most important thing is "collect lots of money up front." It doesn't absolutely guarantee anything, but it can sure solve a lot of problems that come up later on.
Hope these tips create more solid lease options for each of you.

I really appreciate your input on this!
It sounds like your anticipating the deal to fall apart after some months down the road, prepare for the worst and hope for the best. I get it asking for 3k-5k to get into the deal, but I only want this deal to last 1-2 yrs!

I dont want a buy and hold on these type of deals, should I make the contract 12-18 month and if they cant follow through with improving there credit to buy then what?

Here is my thought on this- Get all info on them,check all info on them, make sure they have 3-5k let them know im going to help them improve their credit(my mortgage broker)and after 12 months they should be able to get financing!

Thanks again coach

Aaron

Wow, so much helpful info. I love it. Do any of you have a letter format that you wouldn't mind sharing with me as far as what to say to first time potential buyers / investors.

Steve Tellez

Steve, excellent question, sometimes the initial contact would be in the form of a letter or email that is sent to someone. From the things that I have learned from my own mentors, I am a believer that we do not "fire all of the guns at once and explode into space" (from the song "Born to be Wild." So my letter would basically be structured to see if they have an interest in what we can do for them and get them to respond. Let's see if I can put something together off the cuff:

Dear___________________________:

We are contacting you because we understand that you are a real estate investor and cash buyer of properties. We are also real estate investors, and offer a service that you will likely be very interested in. We understand that being a real estate investor means running a company with a lot of moving parts--finding the next property while you are fixing up the current property, and still trying to market the last property. That's complicated, and time consuming.
The service that we offer to a select group of real estate investors like yourself is called "Properties to Order." What we mean by that is that if you can provide us with the specific criteria you are looking for in a property, we will find properties that match your requirements, pre-negotiate the deal, and place the property under contract according to your criteria. And that is what we will bring back to you.
We realize that your time is valuable. We do not want to waste your time, or ours bringing you random properties that you will not be interested in. We only want to bring you properties that match your requirements, that you will be excited about, and that you will say YES to every single time.
Would you be interested in that?
If so, we would love to have a brief conversation with you. Our fees are built into the deal in a way that still provides you with your required profit margins. If you would like to be at the top of our list, to find properties that you will want to say YES to, call us today at ______________. Or you can email us to schedule a time that we can contact you.

Hope this helps. I would then ask them the qualifying questions to determine their criteria when they follow up with me.

What Dallin has posted is very good and should help anybody!
I like it because if your just starting out and fear of not knowing what to say is holding you back, this is a great way to let them know you are a serious investor.

I think this would also work well on many other scenarios, you could almost read it word for word, of coarse in a conversation way.

I like it!

Aaron

This is all great information. I really like this.

I had to laugh a little when I read Aaron's comment about being able to use the letter content in a conversation. I actually converted my telephone conversation script into a letter format to post it here.
So it was originally designed to give you verbiage to use on the telephone. Thanks Aaron, for pointing that out.

thanks aaron

Wow this was one of my first threads on here, thanks Walt I needed to read this again and DGers should to.

I've stepped away from my REI biz for a bit but one thing I have stayed with is I've stayed in contact with my buyers! This is something we should all do, givem a call, email or text however you stay in touch with them just keep in touch so you stay on their mind you don't wanna lose them just because you have slowed down for awhile.

I have another question for DGers.

When you know friends that have money however they have it 401k,inheritance,good paying job ect. How do you approach them and what are the words?
If they don't know anything about real estate how do you get it through their heads that savings account they have isn't paying crap..

Lets hear ir DGers

Aaron

Need some advice DGers....

Aaron