Thursday, September 28, 2006

A creative way to increase direct mail responses...

If you are using direct mail marketing to locate motivated sellers (which you definitely should be), then here is a little trick I discovered to increase response rates while saving you some serious time.

When you are sending letters to a list that you feel would respond better to a hand written letter, but don't want to sit and write each one, you can use a custom font to provide the same results.  The alternative is to write the letter and then photocopy it, but then you are unable to merge in prospect information into the letter using a mail merge program like Word, or RealProspect.

So, I did a quick Google search and found a custom font that looked very similar to my handwriting.  I just downloaded it and installed it on my computer, then wrote my letter template using this custom font.  But to make it look like I really hand wrote the letter, I set the font color of my letter template to a royal blue just like a blue pen would look.  I also increased the font to 16pt and printed on a manila colored paper using an inkjet printer.  The blue ink slightly bled around the text like a real pen does because of how the inkjet printer applies ink to the paper. For some reason the manila colored paper makes it look really like it was handwritten, but on white paper you can kind of see that it was printed.

I used the letter templates feature in RealProspect to merge in the prospects first name into the greeting and the prospect property address into the letter, and I wrote the letter as if It was specifically written and sent to that prospect.  I did not put anything on it that looked or smelled like it came from an investor, or a company for that matter.  It looked exactly like a personal letter without any company names or letter head.  Just a greeting, a body, and a signature.

Then I used a 6 x 9 manila colored envelope and I actually printed the prospects address and my return address on the envelopes using the same font, color and inkjet printer.  Its amazing how much it really looks like it was hand addressed when you use the inkjet printer with blue colored text on a manila colored paper.  I even showed it to a few people before I sent it to see if they could tell it was printed, and they all thought it was hand written.

So, I sent the test to a few hundred prospects in a specific neighborhood that I'm targeting, and I got an overwhelming response rate.  I'm not sure what the total response rate will be because I'm still getting calls 3 weeks after I sent out the letter... and I only sent 300 of them!

Needless to say, this is a cool little trick to increase responses without much work other than loading paper into the printer. =)

Saturday, September 02, 2006

Here is why I love rehabbing junkers...

I often have the opportunity to talk with investors from all over the country who are using my software in their businesses.  And I love to hear how people are using different strategies to buy their houses, and what works and doesn’t work in different areas of the country.  And when I am asked what strategy I prefer, I undoubtedly respond with… “I love rehabbing junkers”.

It was an email conversation that I had today with one of my customers that reminded me why I love rehabs, and more particularly rehabbing lower end houses.  The main reason that I like this type of deal is because I get a great deal of satisfaction from taking a complete dump of a house, and turning it into a place I would consider calling home.  Or perhaps it’s the look on my Realtors face when I show him the finished house and he can’t believe that I did it in less than a month, and for less than $10k.

There are some practical and economical factors that make low end rehabs very lucrative. Like for example in most areas of the country “affordable housing” is in great demand. So if you can provide a solution to that problem by creating good quality affordable housing, you will never have to worry about not being able to cash out if your exit strategy is to retail your houses.  I try to keep my houses under $175k when I put them on the market (the average median house in my area is $350k), and I usually have a full offer and several backup offers within a week or so.  Usually there are absolutely no “quality” houses available in my price range, and there is a huge volume of buyers looking for houses in this range.  It’s a supply and demand issue, but completely in my favor.

There are some other simple economical factors like, rehab costs. These low end houses do not require expensive materials or labor to renovate.  I’m not paying a master carpenter to put in crazy crown molding, I’m not installing marble counter tops in the kitchen, and I’m certainly not putting in $1500 stainless steel refrigerators.  I can put an entire kitchen in one of these houses including a refrigerator, stove, microwave and cabinets for $2000, and it’s all brand new.

The other great factor in the low end junkers is that there is less competition.  For some reason there are certain neighborhoods that scare people, and I’ve learned to find these neighborhoods and target them specifically.  It’s easy to find the houses that need major repair in these neighborhoods just by driving around.  I sometimes pay a kid to do this for me and get a list of houses that look like they are ready to be condemned.  These are the ones I love because there not for sale, there not in foreclosure, I know they need work, and chances are the homeowner needs my money.  So finding these deals are not too hard to do.  And I constantly call the “we buy houses” signs and let the investors know that I buy wholesale deals. 

The only downside to these deals is that the profits are smaller per deal.  I average a $25k profit on each one, and the turnaround time is 3 – 6 months depending on if I have to get permits for any of the work (roof, windows, etc.).  But because I can build up a steady stream of inventory, and the holding costs lower, it works out to be very profitable. 

I just thought I would share this because I find that many investors are working hard on the “pretty house” business, and some are finding it difficult because of the competition in their area.  If you are struggling to find deals, and have not previously considered rehabbing “junkers”, then perhaps you have a neighborhood in your area that is ripe with junkers just waiting to be picked, and profits to be harvested.