The Three Best Ways I Know To Find Ugly Houses
by Ron LeGrand
The first step to a successful business, any business is to locate prospects who are predisposed to do business with you. The good thing about finding ugly houses is they’re easy to spot. They just sit there and glare at you. Anyone can see they need repairs, and we can assume if they’re ugly there’s a reason to contact the owner to see if you can buy it at wholesale price.
Obviously, it’s a numbers game. You’ll buy some and some you won’t. In fact, you won’t get most of them, especially the one’s you think ought to be the easiest to buy because they’re the ugliest.
As I write this, I have just seen my Roth IRA grow $80,000 from two checks on two ugly houses it bought, rehabbed and resold. I made $43,230 on one and $37,233 on the other…
And That Was Only My Half!
Both were partnered deals with people I know, so I only got half of the profits. Of course, I didn’t touch the houses and in fact, I’ve never even seen a picture of one of them! Perhaps, I should go look at it. Well… maybe not. The check seemed to clear OK.
Ugly houses are very profitable-too profitable for you to ignore. I’m afraid I’ve created a monster. I’m hearing too many students say they’d rather do pretty houses and not mess with the uglies. That would be a mistake. A big mistake. Sure, pretty houses are easy in, easy out. No contractors and little or no costly entanglements. So what? Does that excuse you from harvesting the gold in uglies? I think not! The two examples I just told you about should make my case.
You Can’t Find Pretty Houses Without Finding Ugly Ones!
Turn your back if you will, but it’d be a shame to trash a couple hundred grand a year because you have blinders on. Not only that, but ugly houses are easier to find than pretties simply because they’re ugly. Usually you find the house first then contact the seller to see if he/she is motivated.
Just the opposite is true in the pretty house business. You find the seller first and then see if his/her needs and the existing financing make sense for you to buy. Besides, buying ugly houses requires very little communication/people skills. You don’t have to meet anyone at their home because most of the uglies are vacant so buying is an easy process.
If rehabbing turns you off, you have several choices. You can get someone else to do it (like I did), or you can wholesale your uglies.
I bet I’ve talked to ten wholesalers in the last month, each making over $20,000 a month just from wholesaling. That isn’t bad money! Certainly too much for you to turn your back on! Think about what that requires.
Here Are The Steps
1. Find a bunch of ugly houses.
2. Prescreen out and put a contract on two or three deals a month.
3. Call your buyer’s list and sell em’!
4. Collect the checks.
What’s the big deal? A sixth grader could do that! Imagine what semi-intelligent, highly trained; money-motivated real estate entrepreneur could do if he/she really got serious. I’ve met a few who are and wholesale over ten deals a month. Some yielding profits as high as $25,000 per house!
Here’s my best three ways for finding these junkers. If you implement one correctly, you should easily do a couple of deals a month. Do them all and who knows! The key word is correctly. Not a slap shot attempt so you can make excuses for your failure. Serious people do what it takes…the rest get a job.
Method One: The Ant Farm
This is by far the most productive way to find junkers. I call it the ant farm because it involves a couple of people (ants) running around looking for ugly houses and bringing them to me.
You should be your own ant for some time. Simply drive around through low-priced neighborhoods and write down all addresses of ugly, vacant houses. Then come home and track down the owners and call them to see if you can strike a deal.
There are complete details on my ant farm in my Wholesaling Course and my Quick Start Real Estate School.Here are some key points and where most people fail at the ant farm. Like anything else, do it right or don’t whine when it doesn’t work.
1.Ugly houses are in low priced areas. You won’t find them in gated communities. If you’re having trouble locating them, you’re in the wrong neighborhood.
2. You must look up all the addresses on the tax rolls and determine if the mailing address is different than the address of the vacant house. If so, get the phone number and call the seller. When possible get on the phone and talk to the seller. If you can’t figure out how to get the phone number, get a job! This business is too tough for you…or you might try dialing 411. A quick Google search for “skip tracer” should yield some professionals who can track down your elusive seller.
3. If you don’t make contact with the seller the rest is a waste of time. Do what you have to do to make it happen.
4.You must hire a skip tracer to find the ones you can’t. This is where most people quit, yet it’s where the real money is to be made.
The Harder They Are to Find, The More They Pay!
I’m sick of telling people this and watching them go cheap here. If you’re not going to do this, the ant farm isn’t for you. No more excuses!
“Serious People Do What It Takes. The Rest Get A Job.”
– Ron LeGrand
5. You must understand it’s a numbers game. You can’t get upset after the first 10 houses don’t produce a deal. If you’re that weak, get out the help wanted ads.
Let’s assume you send a batch of 20 houses to the skip tracer. He’ll find 60% or 12 sellers. This means you’ll pay about $300. Suppose you get one deal out of the twelve that wholesales for a $10,000 profit. Do we need to run a spreadsheet on this? It’s a no-brainer.
If You Don’t Get A Deal From The First 20 Leads…Go Find 20 More!
If that doesn’t produce…get another 20 more! Could you spend $720 to gain $10,000? Why is this so difficult for sensible people to understand?
If you do what I just said, you can’t fail with the ant farm unless you just totally screw up the offers. It won’t fail you. Only you can fail it. Doesn’t it stand to reason that some of the owners of ugly houses would love to sell them to you for cash? Go find them!
Method Two: REALTORS
Realtors have always been a good source of ugly houses, even though the last couple of years it’s been a little tougher to get at the deals. The economy has been good and that produces easier sales for the banks and brings me wannabe investors out of the woodwork. However, I’ve been getting listed deals all along and so have many of my students. In fact, the one I mentioned at the beginning of this article that made me $43,000 for my half was a bank REO listed with a Realtor.
Here Are Some Keys To Consider On Listed Houses:
1. You’ll probably need some proof of funds to submit an offer. The Proof Of Funds Letter is truly the easiest way, OR you could use anyone’s bank statement you know, a letter from a mortgage broker, a letter from anyone who says they’ll fund the deal, someones mutual fund or IRA statement or even your own credit card statement showing cash available to cover the purchase.
2. Expect to put up a $500 deposit or more.
3. Keep your offers clean with no contingencies not already covered in the contract.
4. You’ll use the Realtor’s contract or you won’t get the offer presented. They will NOT use your contract.
5. The first time they believe you can’t close game over. The last thing you tell a Realtor is that you want to wholesale the house. Keep your mouth shut!
6. If a letter of intent is acceptable to the Realtor, use it. You can fill out the contract when you have a seller in the game. Follow the Realtor’s lead here.
7. Find the ugly houses that are listed first; then call the listing agent to make an offer. Don’t try to get Realtors who deal in pretty houses to help you buy ugly ones. That’s like trying to get me into a size 28 pants! It would involve excruciating pain!
Method Three: Direct Mail
This will produce results if you do it correctly and stick with it. There are numerous targets to mail to, so your best bet is to pick two or three and focus on them. I’d suggest mailings to out-of-town owners of vacant, ugly houses in your own city. They’re good and proven targets that yield results.
Another target is the list of condemned houses you can get from your code compliance officer. Of course there are pre-foreclosures, probably the highest paying segment of the business. These are easy to find because a lawsuit has been filed on public records.
If it’s effective and inexpensive direct mail prospecting you seek, look no further than the Yellow Letter. The Yellow Letter revolutionized the world of direct response marketing in the real estate business, and when you see how simple, low cost and effective it is, your jaw will hit the floor. That’s the nature of “Eureka!” moments, and I can’t tell you how much easier it made getting responses from motivated sellers.
Frankly, it takes two or three things properly implemented to get several houses a month. Don’t get carried away trying to do too much. Choose your weapons and put them to work. In fact, the ant farm will be instrumental in everything I’ve mentioned here. It will locate the houses you buy from Realtors and produce a list of out-of-town owners to mail to if you can’t get the phone number. It’s cheap and effective and you can crank it up or slow it down as you see fit. I’d make it a part of your buying machine.
Whether you want one house a month or ten houses, it all starts with locating prospects. If you’re not buying as many as you’d like, that’s the first place to look. Crank up the buying machine!