In many markets right now, it can be really difficult to find quality deals through the standard real estate agent / MLS channel.
In fact, it’s so difficult that many investors have moved away from the MLS entirely for now.
There are a hundred ways to find deals off-market, but the easiest ways are through a real estate investor website, and direct mail marketing.
Today, we’re going to focus on direct mail marketing to tax delinquent properties.
Before we dive into how to find tax-delinquent property lists, let’s chat real quick about the basics of direct mail marketing.
The Basics of Direct Mail Marketing
In general, you want to find two or three channels where you source deals, then perfect them.
That advice is nothing new, but it’s also amazingly broad. For example, there are dozens of different types of direct mail options available. So, within this category, it’s best to niche down to a couple.
Here are a few that come to mind:
High equity owners
Properties with building/health code violations
Tax delinquent properties (the topic of today)
You get the idea.
Once you’ve chosen your niche, it’s time to build your mailers.
Creating Your Mailer
This is probably the easiest part but also the hardest.
It’s easy, because it doesn’t matter as much as you think. It’s hard because you think it matters more than it does!
It’s best to be professional, polite, put a picture of you on it, and give your contact information.
Be succinct and let the person know what you do.
It’s really that simple.
Sure, you can tweak it over time to see if different versions of a letter get a better response rate. But, the key for now is to just send something!
Consistency is Key
The biggest problem new investors face is lack of consistency.
Many people will send out a big blast, get disappointing with a 1% or 2% response rate (which is good actually), and stop mailing. But, the best deals won’t come until you’ve built up some kind of rapport with the potential seller.
That’s why you need to mail them over and over again, so your name becomes synonymous with a quick sell!
So, send a follow up letter or postcard, and don’t forget to reference the first letter. Tell them “I sent you a postcard about a month ago and I’m still looking to buy. I’d love to look at yours so give me a call.”
If you get no response, mail them again!
Commit to sending between 5 and 7 mailers to each address over 1 year. That is roughly one every other month.
How to Find Tax-Delinquent Properties
Most cities or counties will have a tax sale from time to time. Some do it monthly, quarterly, bi-annually, or even annually. The key is to learn how your city/county works with their tax sales, and adjust your strategy accordingly.
The next step is to get access to the list of tax delinquent properties. In some places it is available publicly from the city or county. In other places you’ll have to mine the information from online records.
In general, though, there are list providers in every state that do the legwork for you to find properties that are delinquent on taxes, and you can just buy the addresses. These can cost anywhere from 20 to 50 cents each in most cases depending on how much information you can get.
Once you have the addresses in hand, it’s time to send them your first letter.
Mailing to Delinquent Tax Lists
Remember, the owner could potentially lose their home to the tax sale, depending on how the state runs it. They should have been getting notices about it too, so they should be aware of the situation.
If someone like you comes in and gives them the opportunity to earn a little money rather than just lose their house, they’ll probably give you a call.
Letters should be straight forward and to the point. Tell them you are looking to buy and you want to buy now.
Postcards pretty much always get read, so you should convey a sense of urgency to them. Let them know you only have enough money to buy one property, and you want to close fast.
Humans are hardwired to take action when there is a sense of urgency, so you’ll get more calls if you convey that sense of urgency.
Talking to Delinquent Tax List Property Owners
When a delinquent tax owner calls you, it’s important to ask them about their situation and not their property.
Then, let them talk.
DO NOT INTERRUPT!
You should simply say things like “mmhmm” or “and then?” to keep the conversation going. It’s a sales trick. Most people will talk if there is a pause in a conversation. So, by being quiet you are forcing them to do the talking.
As you’re learning how to talk to tax-delinquent property owners, or any other seller for that matter, silence is key. You want them to tell you the problem and give away what exactly they are looking for. So, just stay quiet and take notes.
Once they’ve given up all their secrets about their motivations, it’s time to ask about the property. Ask them:
These two questions will help you know their motivation level.
If the property is potentially worth $200,000 and they want $185,000, then they probably aren’t that motivated.
On the other hand, if their tax-delinquent property is worth $200,000 but they are willing to take $110,000, you should follow up by asking when you can go take a look.
While it may or may not be a good deal, at least you know the owner is motivated enough to give a big discount. If the price, amount of work, and after repair value all work out, then you might have a deal on your hands!
Following Up Is Important
Most of the time it won’t work out, and that’s ok! Often, the seller just isn’t ready mentally to part with their property.
I remember once I made an offer on a 10 unit property for $500,000. The seller said no way.
4 or 5 months later I found a wholesaler advertising the property for $520,000. You know that wholesaler was taking $20,000+ on a deal of that size, so the seller was getting $500k or less for it.
I thought it was kind of crazy, because I had just offered that amount. The reality is the wholesaler followed up and I didn’t.
The seller wasn’t ready to sell at that price at that point. But, after a few months they were and I wasn’t there to get it.
So, make sure you are the one to follow up!
Chicago Real Estate Mogul: Here’s How You Flip Houses
Chicago-based Sean Conlon is a real estate investor extraordinaire. He started his career in the early ’90s, quickly becoming the top residential realtor in the nation with nine figures in annual volume.
Conlon’s the host of CNBC’s real estate show The Deed. In this video, Sean gives some insights into how to become a real estate investment master.
4 Tips For Managing Your Airbnb
I’ve been talking a lot about vacation rentals lately.
No, I haven’t gone out and bought one…yet. But, I want to!
And interesting factoid… Nearly 45 percent of all real estate purchases in the United States are made by people in search of profit. Investing in a short-term rental property is a great way to generate a steady income stream.
With the use of websites like AirBnB, just about anyone can turn a condo or house into a short term rental property. This is a great source of income for many families, and can be for you too!
But, most investors think that managing a short-term rental property is just too much work. The reality is, it’s not easier or harder than any other rental, you just need the right management in place.
There are a lot of options out there, but I’ve recently stumbled upon some software such as Rentbelly, which helps you manage property like this and makes it a lot easier.
The biggest hurdle that you will have to overcome as a short-term rental property owner is keeping enough bookings. This hurdle can be overcome with the development of a comprehensive marketing strategy.
Here are some essential tips for properly managing your short-term rental property.
1. Get A Feel Of What’s Happening In Your Local Area
Renting out your property in the off season can be a bit difficult. The only way to combat the lull that occurs during this low season is by staying up to speed on the events happening in your city. Knowing what events are coming up in your area can help you market your rental to the right audience.
Running targeted Facebook ads is a great way to connect with prospective customers. These ads allow you to target Facebook used based on things like their occupation, location and age. Once you know what type of event is happening in your area, you can make decisions regarding what type of people may attend this event. With this information, you can fine tune your Facebook ads and get more bookings.
2. Set The Right Minimum Stay Requirements
Setting the right minimum stay limit is crucial when trying to make money with your short-term rental. Ideally, you will want a higher minimum stay limit. While this may initially deter certain consumers, it will allow you to make more money in the long run.
Accepting a one night booking in the middle of a week can make you miss out on a one week booking later on. Realizing that short-term rental success is a numbers game is your first step to achieving your financial goals. Setting a minimum stay of three to four nights will guarantee that each booking will have a higher value overall.
3. Focus On Keeping Your Property Well-Maintained
In the world of short-term rentals, only the most pristine properties get consistent bookings. This is why you will need to devote time and money into keeping your rental property in good shape. If you are like most property owners, you simply don’t have the time to do this work on your own.
Instead of letting your short-term rental fall into a state of disrepair, you need to hire professionals to perform essential maintenance. With a minimal investment, you can avoid extensive repairs and keep your property booked solid.
4. It’s All About Great Customer Service
If your short-term rental is located in a larger city, chances are there is a lot of competition. Finding a way to set your property apart from competitors is something you need to view as a priority. One of the best ways to do this is by going above and beyond for your guests on a consistent basis.
Anytime a guest calls you with a problem, you need to address it in a timely manner. By providing guests with this type of service, you will be able to get great reviews from them. These reviews are like gold when it comes to attracting new bookings for your property.
Here’s How To Get A Mortgage You Can Actually Afford
So, you’ve finally decided to purchase a home. After years of contemplating if you should buy or rent, then saving, building your credit etc, it’s now time to dive in and get it.
Purchasing a home is exciting. After years of dreaming, you’re finally getting a place that you can call your own.
It’s really easy to get caught up in the excitement making you forget to ask one crucial question – how much “home” can you really afford?
…and, once you decide how much you can afford, you should stick to it. It’s all too easy to decide on a price, then find the home of your dreams is only $25,000 more. Then you start thinking, “we can make this work…” But, can you really?
According to statistics, the median monthly mortgage payment for homeowners in the U.S. is $1,030. That’s a lot of money.
While you may love the fabulous kitchen or huge backyard one house offers – if you can’t pay the mortgage every month or get the cash to fix what’s broken, your home’s never going to be a blessing.
The good news is, determining how much ‘house’ you can afford isn’t rocket science. You can use the four tips here and utilize online tools to help you figure things out.
Build a Solid Foundation
There are countless people who have gone broke by buying a house simply because they believe it’s the “grown-up” thing to do. However, life events such as having a baby or getting married aren’t reasons to buy a house.
The time will be right when the money is right. Before trying to figure out how much house you can afford, be sure you are financially ready to purchase a home.
To do this, ask yourself the following questions:
- Are you debt free and have an emergency fund of three to six months put back
- Do you have enough cash to cover moving expenses and closing costs?
- Can you afford a 15-year-fixed-rate mortgage?
- Can you make a 10 to 20 percent down payment?
- Do you have enough money to set aside each month into passive investments above and beyond your mortgage?
If you answered “no” to any of the questions above, it may not be the right time to purchase a home. Wait until you have a better financial foundation.
If you are currently financially stable, then move on to the next tip.
Maximize Your Down Payment
One of the biggest costs in a new mortgage is PMI or MIP. Both of these are different ways of saying that you need to pay an extra fee every month because you didn’t put enough down.
If you can get to 20% or more, then you won’t have to pay mortgage insurance for the lender. This can save you hundreds of dollars per month.
When buying a home, remember – the more money you can put down, the better. Higher down payments mean lower mortgage payments every month and the ability to pay your home off faster.
While the best option is to pay 100 percent of the home cost in cash, this isn’t viable for most. If this is the case, then try to put down at least 20 percent. By doing this, you can avoid paying for private mortgage insurance.
Calculate the Costs
All you need to do to figure out what you can afford when it comes to buying a home is to crunch a few numbers. If you need help with this, consider using a mortgage calculator with down payment, which will help you figure things out.
If you want to do things manually, consider the following:
- Add up all the income you bring in every month. If you bring home $2,000 per month, and your spouse makes $3,000, then your total monthly take-home pay is $5,000.
- Multiply your total monthly take-home pay by 25 percent to determine your maximum mortgage payment.If you are bringing home $5,000 per month, then it means that your mortgage payment should not be over $1,250 each month, including insurance and taxes.
Remember, your bank or lender will tell you that you can afford WAY more than that. In fact, some loans allow you to get to 40% or even 50% of your income going toward loans. While they may allow it, it isn’t financially smart to borrow every dollar you can afford.
Don’t Forget About Maintenance and Capital Expenditures
When comparing if you should rent or buy, most people look at the total rent, compare it to the mortgage, and say it’s better to buy a house.
What you are forgetting is that rent includes all the maintenance costs in a home whereas a mortgage does not.
As a general rule of thumb, it’s good to plan on spending around 1% – 2% of the total home value every year in maintenance and CapEx.
Major capital expenses are things like a roof or HVAC that last for several years. Even though you might have 10 years left on your roof, you should start saving for it now, along with the dozens of other major items that will not last forever.
So, if your home is $200,000, you should think about adding another $2,000-$4,000 per year in maintenance and capex. You definitely won’t be spending this much every year, but what you don’t spend now will be spent in a year or two when you have to replace a $12,000 roof, replace a garage door, etc.
If you have higher end appliances and fixtures, you should be more toward the 2% whereas standard grade homes can be closer to the 1% mark.
When you know your numbers, you will be able to shop for a mortgage and a home with confidence. Trying to determine what you can afford without considering the tips here may leave you with a home that’s going to cause you financial hardship in the future.
Remember, buying a home is not an investment, it is an emotional decision. Once you recognize that, you can begin to take it seriously and make decisions based on actual facts, rather than be driven entirely by your desires. If you base everything on the emotions involved with buying a home, you’ll dive right into a mortgage that you can’t really afford.