The current retail market is very strong. Improved properties are moving like hot cakes, and prices are climbing with multiple offers on the most desirable houses. You’d think we’d all be dancing in the streets with glee.
The truth is the continued recovery of the housing market has created a new problem for my rehab business. Good inventory is becoming more and more difficult to find at profitable numbers.
I know there are still great deals out there. I am still buying. But I’ve been a little frustrated in recent months because I’m being out-bid on properties that I’d love to purchase. It’s costing me more marketing dollars to get the same number of deals every month.
I noticed this trend last fall after finding myself out-bid on multiple MLS listings. After looking more closely at my marketing campaigns, I saw that my leads-per-deal ratio was increasing each month. I seemed to be facing one of two decisions. I could either increase my marketing budget and get more leads, or do fewer deals every month. Neither of these options was very appealing.
I decided to listen to the advice I often give my coaching students: Examine your resources and move laterally.
First I examined my leads to find out what kind of properties were coming in. I found a large proportion of leads that were being ignored because they didn’t fit my rehab or rental model. More than 60% of the calls and inquiries I’d received went directly into the not interested file. Essentially, I was throwing away more than half of every marketing dollar.
Next I looked at my assets. I’m not talking about money in the bank, IRA’s or Real Estate investments. I’m talking about the resources at my disposal. From what I saw, I had a plan that began to emerge.
I have nearly 200 clients through my property management company. These are people that are already Real Estate investors. They own rental properties. Many of them would love to own more. Most of my clients have different buying criteria than I do. Based on their current properties, I even know where they like to buy.
I also have a great Rolodex. The relationships I’ve built over the years are much more valuable than any other asset. Bankers, lenders, Real Estate agents, title companies, insurance brokers and contractors are all at my disposal with a phone call.
Lastly, I have the experience and the team to coordinate all of the moving pieces.
My plan was to test the idea of a package deal. I would pursue the 60% of leads that did not fit my investment model. If I saw a deal, I’d package the contract with construction, tenant placement and property management. The buyer would only need to write a check. I could even help with the financing, if needed.
In November, I put together my first package deal. We went to settlement in December, and just recently completed construction (there were some delays in the rehab). The result of the project was a net profit of over $20,000 for my Real Estate investing company, another managed property for my property management company, and $30,000 in equity and $200 per month in positive cash flow for my client. It was a winning proposition all around.
Following the success of this test, I’ve sold 2 additional package deals. Both came from the leads I would have thrown away.
Obstacles are the things we see when we take our eyes off the goal. When you encounter setbacks, look closely at your assets. You’ll be amazed at the untapped resources that can transform your obstacles into incredible opportunity.