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When it comes to the subject of finding motivated sellers, we can ALL benefit from finding new ways to do business.
If you're familiar with this blog, you probably know we prefer things like direct mail and internet marketing to find motivated sellers and while these methods can do a phenomenal job of reaching the masses, they offer significantly less control in terms of pursuing specific properties that you might have your eye on.
Given this, I wanted to show you an alternative strategy for finding motivated sellers that require a lot less money, in case you happen to be on a shoestring budget.
Driving for Dollars: A Brief Overview
When a real estate investor is “driving for dollars”, this is the act of driving through a targeted neighborhood and taking note of specific properties that appear to be distressed and/or abandoned.
Once these leads have been discovered, you can reach out to these property owners in an effort to find new investment opportunities.
This strategy can be useful whether you are looking to flip, buy and hold, wholesale, or even “bird dog” for other real estate buyers. It works particularly well if your marketing budget is limited… because it doesn't require you to spend hundreds or thousands on direct mail or other forms of paid advertising.
The more properties you can find and target, the higher your chances of finding a great deal.
There are very few drawbacks to this method since it only requires a nominal amount of money upfront (a few envelopes, letters, and stamps, and maybe an inexpensive subscription to a data service like DataTree and/or an app like DealMachine).
A Goldmine Waiting To Be Tapped
As real estate investors, we are looking for both equity and motivation in every potential deal, because both of these things are necessary components to structure a traditional deal in real estate.
One of the problems with direct mail (aside from the cost) is the fact that many real estate investors in some markets can find themselves trying to contact the same lists of property owners. This can lead to over-saturation in the market, a lower response rate, increased competition, and ultimately, it results in fewer deals and lower profits for YOU.
As a general rule of thumb, the more work you have to do to obtain a lead, the less competition there will be for you in the end (and in turn, this can result in some potentially larger profit margins). This is one of the key reasons why driving for dollars is a great way to generate quality leads with little competition.
One of the strongest benefits of driving for dollars is that it can give you the ability to find “red flags” that may potentially indicate a motivated seller. For example, a vacant and distressed property is a clear and visible “red flag”, which means there may be a higher likelihood of motivation to sell at a discount, but it is critical that you continue to send them mail throughout the year. This is necessary because time and circumstances change over time and you are waiting for this potential seller to have a trigger event that causes them to pick up the phone and call you.
Probably the most significant downside is the TIME required to find these properties. If you don't have much time, this probably isn't the right strategy.
However, if you are short on cash for a marketing budget, you can start building your lead generation engine by spending as much TIME as you can driving for dollars. Even if you are seasoned and your marketing budget is not bootstrapped, this is still a great strategy to implement since this can be done before or after an appointment. The leads you can acquire through driving for dollars typically have both EQUITY (after your research) and MOTIVATION.
Driving for Dollars in Action
When you are spending the day driving for dollars, there are some key factors to look for, such as:
- Differences in the grass between yards
- Mailboxes with no doors on them and no mail inside
- Newspapers piled up on the front porch
- Obvious code violations on the house
- Boarded up and/or broken windows
- No realtor or bank-owned property signs in the yard
If the neighboring properties are halfway maintained, the unkempt yards and properties will stick out like a sore thumb. These are the property owners to contact.
Drive as many or as few subdivisions as you'd like, and make sure the subdivision you drive suits your needs. For instance, if you want to make high-equity plays, it probably doesn't make sense to drive through a subdivision built in 2020.
When you are finished, proceed to the next step.
Research
Once you've jotted down the addresses of several properties you'd like to pursue, it's time to go through them one by one and examine them on your local appraisal district website or with a service like DataTree.
You want to make certain the property is NOT bank-owned (you should be able to find the name of the individual(s) or entity that owns the property). If the property happens to be bank-owned, scratch it off your list.
In addition, verify that the property has equity of some sort. You can do this by checking with a service like DataTree to see if there are any outstanding mortgages or liens on the property. I like to keep it simple – if the property was last transferred 10+ years ago, the owner probably has a fair amount of equity to play with (even if there is an existing mortgage). I will keep it and mail to them.
Market
Now that we have refined our list, it's time to compile it and keep track of it.
Again – I like to keep things simple, so a basic Excel file will do just fine. At this point, it’s up to you how you would like to begin marketing. Some investors prefer yellow letters, and some like postcards. However, a trick that works great for me is as follows…
Remember how I told you to take pictures of these houses? Utilize this in your letter and print out an image of the house in the body of the letter. Many times these properties are absentee-owned, which means that the owner does not occupy the property or use it as their personal residence. Sometimes the last time the property owner saw their property was 5+ years ago. Sending them a picture will paint a fresh picture of just how bad of shape the property is in and will drive home the point that their house needs to be sold at a discount.
You can also print out a small thumbnail image on the upper left quadrant of the envelope. I have found this to help increase my response rate.
As I explain in this blog post and video review, DealMachine is a paid mobile app designed precisely for this purpose. You can take a picture, look up the property owner's contact information, and send them mail like this – all from your phone. If you're serious about driving for dollars and you need a way to streamline this process,
Now What?
To succeed at this technique long-term, you need to work with your leads and follow up with people, and if you haven’t received the response you were hoping for, don't give up!
A common practice in driving for dollars is to continually market to these property owners throughout the year. Some investors will send out a recurring mail piece once every other month or every three months for a 12-month period. You've already spent the effort researching and driving to find these properties, so you might as well spend a few extra dollars and continue to market to them!
