New Location

The Website Grader convinced me to change blog hosts, so I've moved my blog to davemcarlson.wordpress.com for the time being. All updates will be now posted there.

Tools of the Trade: Keeping a "Buyers" List

My last entry was about the importance of motivated buyers and how to identify and attract them. However, many of these motivated individuals may not be appropriate for your current properties, but could be your perfect customers at some point in the future. Follow-up and continued communication are crucial, and that is why many investors compile a "buyers" list to keep track of these high-interest individuals.

Similarly to a tickler file, a buyers list does not have to be an actual list, per se. It could be a bunch of papers inside a file folder, or could be stored on your computer and/or online. The only requirement is that it must be an easily accessible collection of information on potential buyers.

A software-based solution such as SmartInvestorPro can be excellent, or you could use a file on your hard drive, or a physical file folder containing individual sheets of paper. Whichever approach you take (experiment with them to see which one works best for you), there are a few crucial pieces of information that must be collected, and many others worth considering:

Contact Information - Fairly standard. Try to collect as much of this information as possible (since buyers may not be settled in any particular location and may be hard to track down).

• Name
• Address
• Email address
• Phone #
• Fax # (if applicable)
• Skype # (if applicable)

"Buyer Profile" - The buyer's preferences. This helps an investor avoid unnecessary phone calls, saving time and increasing the quality of your interaction with potential buyers.

• What size property would the buyer be interested in - a single family with 3 bedrooms and 2 bathrooms, or some other type of property?
• Which neighborhood(s)?
  
• Why is the buyer motivated?
• Property specifications: is the buyer looking for a big yard? A location close to a good school or the airport? Close to shopping and major roads, or a more private location?
  

Financial and Logistical - The "nuts and bolts" that help shape your opinions and structure your contracts.

• When could the buyer move in?
• Would the buyer be interested in a "terms" purchase (such as a land contract or PMM)? Would the buyer consider an "all-cash" purchase? Does the buyer only want to rent?
  
• Can the buyer qualify for a traditional mortgage? Are there any previous financial difficulties worth noting?
• Does the buyer have enough cash for a down payment?
• Is there a previous property that needs to be sold before the buyer can reasonably purchase this property?
  

Notes/Other - Anything else of interest.

• Names of spouse and/or children, if applicable.
• Important days or deadlines that may affect motivation or purchasing ability (new job, beginning/end of school year, end of an existing lease contract)
• Follow-up questions to ask.
• Any observations, personal information, summaries of discussions.
  

Finding Motivated Buyers

I tend to preach a lot about finding a buyer as soon as possible, preferably before you even close your purchase contract. I emphasize this point because there's no better way to ensure profit than by having a definite resale strategy while finalizing your analysis of a deal. "Analysis paralysis" is one of the biggest deal-killers, and by reducing the uncertainty of the exit strategy, you can relieve yourself of the fear that prevents investors (and wannabe investors) from reaching their maximum potential. I know this because I've been there myself.

Some people mistakenly believe that buyers should only emerge after you list the property for resale, but the truth is that motivated buyers are constantly looking for new opportunities, especially "buried treasures" that they hear about before everyone else.

"That's just peachy," you may say, "but how is it possible to find a buyer so quickly?" Simple. By finding interested buyers beforehand.

Motivated buyers make themselves known. They may be disguised as sellers who need to find a new place to live, or may materialize as other real estate investors - always looking for a new rental property or an assignment deal. They will be the people who inquire about one of your other properties, but who didn't end up buying that property because they came too late or it wasn't exactly what they were looking for. Chances are they're still looking.

Conventional wisdom says that you have to make yourself known to the buyer. Not necessarily. Selling a house is like conducting a job interview: there will be a lot of interested people available, but only one will be the perfect match. If the opportunity is good enough, the potential buyers will be marketing themselves to you. Try posting a classified ad in the newspaper or on craigslist: say something like "Looking for buyers interested in 3-bedroom, 2-bath property in North County - Call us to find out more.", or "Can't qualify for a loan? We offer alternative purchase arrangements," and see what happens. You'll probably find at least a few interested buyers this way, and often many more.

Any one of them could be the perfect buyer for your next deal.