1. They don’t market to find their deals or more specifically to locate the leads. They run around looking for and chasing these deals. They follow all those standard cheap or free approaches that you hear about: working with real estate agents, calling the ads in the paper, driving around looking for vacant houses, writing down ugly houses in the neighborhood or target area. These tactics just don’t work. It takes up too much time.

Here is why these methods do not work. Real estate agents don’t work because motivated sellers, which is what we are looking for, don’t typically list their houses. I am not saying that you will never find a house this way, but there is not enough volume. We want to create a business out of this. You won’t find a regular consistent number of leads coming from the MLS. Motivated sellers are overwhelmed and they are not taking a lot of forward action on their own. When they think about having to list their house with a real estate agent the first thing that goes through their mind is I probably can’t afford the real estate commission or I can’t afford to wait until they find me a buyer. I need an answer right now. When I look back at all the deals I have ever done, I would say that less than 5% of the deals came from houses that had ever been listed.

Calling ads in the paper is a common method that is often taught with the idea that if you call enough ads you will eventually find a deal. Well that’s true, but there are hundreds, and thousands and tens of thousands of ads in the paper. And you may go weeks and weeks of calling ads in the paper until you finally find a deal. Again, it is not a volume type answer. And again motivated sellers don’t run ads in the paper. They are overwhelmed and it takes a lot to try to figure out how to sell your house by yourself. It’s not just running the ad, then it’s taking all the phone calls, scheduling the appointments, and then selling the people once they get into the house. Then trying to write up some sort of purchase and sales agreement they have no idea how to do and then how to set up a closing. That is more work than a motivated seller is willing to do. So you don’t find great deals looking at ads in the paper.

You could drive around your target area looking at vacant houses or writing down the ones that don’t seem to be kept up, but again that is an awful amount of work. A lot of effort can go into just finding a few leads only to have it go nowhere. You have to talk to a lot of leads to get a deal. You don’t speak to one motivated seller and get one deal. The ratio is about 20 to 1. By 20 to 1, I am talking about speaking to 20 sellers that have responded to my advertising. That ratio is worse when you are making outbound calls trying to find people. So a lead to me is someone who has seen my advertising and has put up a hand and said yeah I am interested. When you are out there chasing down leads it is much worse. Houses that are for sale, a fsbo, or in the MLS with a realtor are not leads. Those are just simply houses for sale. So if you have to talk to that many leads you want to be sure that the process for doing it is very easy. Otherwise you are going to go crazy trying to find enough leads. Investors that don’t do the marketing and are happy to chase down leads become motivated buyers. In other words they are very anxious to buy a deal so they pay too much for the house and accept a much smaller profit margin. They end up becoming motivated sellers themselves because they bought a bad deal to start with and now they can’t get rid of it.

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