Distressed property inventory may be on the rise, but without an effective strategy for connecting with motivated sellers real estate investors are going to miss out on the best of the housing gold rush.
Rumor has it there is a big wave of distressed properties coming down the pipeline to feed investors hungry for discounted deals, yet so many are doing so poorly at connecting with these opportunities and are seeing such meager returns on their marketing budgets, that they’re seeing just a tiny fraction of the cash coming in that they could be.
In addition to a 100% plus surge in foreclosure filings in some parts of the country, and almost half of loan modifications under the government’s HAMP program re-defaulting and heading into foreclosure, the media recently picked up on reports from RealtyTrac that they have identified a likely 800,000 additional distressed properties coming on the market soon.
Direct Mail is Junk
However, none of this matters much if you can’t connect with a reasonable number of distressed homeowners or motivated sellers. Sadly, many are buying terrible leads in the hope that they will turn out to be viable ones. Some are still working with direct mail campaigns that yield such horrible results that investors are effectively paying thousands of dollars for a single conversion.
Some may justify their lackluster marketing ROI by the fact that they can bring in $50,000 plus per home flipped or generate 10% plus yields from cash flow, but they rarely factor in all of their real costs. This is insane considering others are paying pennies for direct access to distressed REOs, not to mention the obscene missed-opportunity costs these investors are experiencing.
Think about it.
In reality many investors are really paying over $3,000 per closed lead. If that was even brought down to $30, that’s 100 times more deals that they could be doing, and 100 times more income!
It’s not just direct mail that’s the issue or buying bad lead lists. It’s struggling with social media and, now that Google has effectively killed off email marketing with its new Gmail inbox, many forms of online marketing are taking a beating too.
Then, There’s Distressed REO
Banks with distressed assets dot the map heavily. In fact, there are probably few banks without distressed assets on their books today. Choosing to buy distressed REO from banks eliminates all of that marketing expense. It wipes out all of the ad creation, marketing assistants, the gambling on results, time spent speaking with unqualified leads and respondents complaining about being harassed, and dramatically reduces the cash-flow cycle as well.
Of course, the key to successfully buying distressed REO from banks with distressed assets is being able to instantly hone in on those with REO to sell and gaining the contacts that can approve deals and serve up more on a platter each month. BankProspector can do all of this for you.
That only leaves the choice of what to do with all of that extra cash you are saving and earning. Keep it in the bank, use it to buy more distressed REO or marketing for end- buyers and better tenants, or treat yourself?
That’s up to you.