Marketing Using Postcards

I am guilty of trying different methods of marketing for motivated sellers and qualified buyers.  Many of the "gurus" out there swear by direct marketing.  Beware however, due to its repetitive nature; direct marketing can be quite expensive.  You can go online and find different sources for lists; some are trash so you have to do your homework.  Almost six months ago I started a new direct mail campaign using yellow postcards I created at http://www.click2mail.com. I found http://www.listsource.com and purchased three different lists targeting both buyers and sellers and mailed them out.  The initial response is never what it's hyped up to be, so I was not thrown off by the fact that I received only a handful of responses.  The point I wanted to make here is that I am still getting calls on those postcards, six months later!  I just got a call from a guy who lives six hours away who has a vacant house here.  I'll look at some stats over the next couple of days and follow up with him.  I can't say that the postcards didn't work, but I could not afford to continue the mail outs.  Needless to say, one flip would more than justify the time and expense spent on the cards, but time is money and at present I need more of both.
Once you get the phone ringing what's next?  I have experimented with using two different approaches with sellers.  The first approach allows for full disclosure and uses a non-exclusive option
agreement for the A to B transaction and uses standard sales agreements for the B to C and then the A to C transaction.  As a former Realtor, full disclosure is important to me.  However, as an Investor I
find that the more I disclose the more confused the seller becomes.  The second approach is less direct but uses a one page purchase agreement between the seller and myself and an assignment agreement between me and the end buyer.  I am confounded by the fact that sellers do not appreciate that I can offer them the same services as a Realtor for less.  I have actually been accused of acting like a Realtor, as if there were something wrong with that!                                                                            
Since my intent is never again to have to close and take title, the first hurdle I face is finding motivated sellers that are not suspicious of that, secondly I need to negotiate the price down low enough to compete with foreclosure values and lastly I have to find the right end-buyer.  All these things have to align before you can cash out and believe me, when that happens, it's a true miracle.  That's not to say that it doesn't happen, it does, but it is a huge numbers game requiring patience and persistence and lots of luck.

We Don't Negotiate with Poor People

I had stopped making my mortgage payments at the beginning of the year. I knew that being three months behind would launch the foreclosure process. No surprise when I was notified of a foreclosure date scheduled for the first Tuesday in April. In the meantime, I found an investor/buyer that was willing to go through the nightmare of negotiating a short sale if I handled all the paperwork. So, at the end of March '10 I requested loan modification paperwork from my two lenders and was able to stall the foreclosure.  I knew that I didn't want a loan mod but that's where I had to start as far as the paperwork was concerned.  I filled out the request, provided my financials, a hardship letter, bank statements, my tax returns and an option to buy.  I submitted all this information to both lenders at the same time.

While I had no experience with short sales, I had been in real estate for over 20 years. I had heard about how hard it was to close a short sale and a lot of it has to do with the lenders involved.  After a lot of emails back and forth with the first lender I was told that their investor had a minimum requiring they net at least 85% of the appraised value, no problem. So, the first lender ordered an appraisal report. I met their appraiser and provided my own comps hoping to bring the value down to the offer amount. The appraisal came back in the range I had expected, no surprises. The fact that the value was close to 55% of what I owed, broke my heart.
Meanwhile, the second lender started shuffling my file around from department to
department where I started over each time and provided more and more
information each time. Every time I spoke with someone new, I submitted the same paperwork plus whatever else they wanted. To make a long story short, six months past before the 1st lender decided that they didn't want the 2nd lender to receive anything on the HUD statement! In order for that to happen I would first have to settle up with the 2nd lender before I could close with the 1st lender on any short sale. 
Well, that little distinction resulted in my file being transferred to yet another
department within the second lenders maze.  It wasn't just departments that changed, the criteria by which they could negotiate with me changed. At first, when we thought we could settle with both lenders on the same HUD at the same time, the minimum acceptable bid the 2nd would consider was 5% of the sales price due at closing, which I was able to get the investor to agree to pay.  When the departments changed and they realized that I couldn't close without settling with them first, the minimum bid became 35% of the balanced owed and it was due whether we closed or not. That decision, to shut out the 2nd lender, effectively killed my deal. The buyer was not going to pay anything up front with no guarantee of reaching a settlement with the 1st lender and I certainly didn't have that kind of cash or credit or access to it from family and friends.
Communications with both lenders ended as far as I was concerned after more than six months of emails and telephone conversations culminated with the 1st lender denying the 2nd lender to be on the HUD, then they wanted an additional $25,000 be added to the sales price plus they wanted to order a 3rd appraisal since more than six months had passed, it was just their policy I was told. I wasted 8 months trying to avoid a foreclosure and minimize the lenders' loss, and my own, to no avail. It’s been more than two months since everything fell apart, both lenders continue to call me; I continue to reject their calls. Neither has contacted me by mail or email nor have I heard from the foreclosing attorney.  I don't know what to think except that my file is sitting on
someone's desk under a pile. I thought they would've foreclosed in August, then in September and now it's the end of November! I could've been living in the house or rented it out or something while going through all this, instead, fearing foreclosure was imminent, it stands vacant and abandoned. 
My experience with this makes me think that neither lender really wanted to negotiate with me. I wish they had just said "we don't negotiate with poor people" and spared me these last eight months of anguish and uncertainty.

A Lot Has Happened Since Feb. '10!

I finally came to grips with the realization that I could no longer hold onto all my real estate, my life long dream of saving by building equity was ridiculous now, seeing any equity at all was now the challenge.  Something was going to have to go.  There simply was not enough money coming in to cover what was being paid out.  By ignoring this I managed to dig myself into a debtors nightmare.  I was way in over my head, waiting for the market to turn, waiting for my other income resources to kick in, waiting and hoping for a miracle that hasn't come yet.  I decided to give up on the single family I had been trying to sell or rent, at least the other properties were paying for themselves.
I started out asking for what www.zillow.com had valued the property for.  Before long I was trying to sell my house for what I owed, realizing that my equity was gone.  Obviously, I was trying to sell it on my own.  Since there was no equity, there was no money for commissions either unless I wanted to come out of pocket, which was not an option either. 
I created online flyers at www.postlets.com and advertised on www.craigslist.com, www.backpage.com and other similar free online advertising venues.  I put "For Sale By Owner" signs in the yard, made up flyers and put them out everywhere I could think of. I also used social networking mediums like Facebook and Twitter to get the word out, I received zero inquiries.
I did this dance longer than I should have.  I should have stopped making my mortgage payments a long time ago and just let them take it.  Instead, I tried to avoid the inevitable and be responsible, to do the right thing and meet my obligations.  That's how I had been raised, that's what I believed.  The bottom line is that you get no credit for any of that on your credit report and your lender will not care that you tried.  I exhausted my credit trying to stay out of foreclosure and bankruptcy, in hindsight, this was a critical flaw in my plan.
I had gambled everything I had on out lasting this recession and I had lost.

I'll Never Buy to Hold Again!

I suspect that many of my fellow investors started out as landlords like I did.

I've been able to hold onto two multi families and one sfr for the last six years.  With the two sfr's my partner has, we manage nine units all together, not including the one we live in.  It's like having nine children, they're all different and we have a love/hate relationship with them all.

I started out thinking how perfect my life would be if I only had some rental properties that would just pump money into my bank every month.  I was convinced that this was the best way to stabilize my income.   I was tired of waiting on sales commissions, closings that were delayed or canceled created havoc for a budget minded family.  My goal was to be able to retire on the strength of these properties and I did.  But, I wasn't able to retire all together, just from sales.  I was able, the first four years, to focus on acquiring more properties and keeping them cash flowing.

The last two years have been turbulent within the housing market nationwide, historical lows for sales have resulted in mass foreclosures and the repercussion is a lot of new inventory flooding into the rental market.  The supply now exceeded the demand.  I suffered unprecedented high vacancies during these last two years while property taxes and utilities went up.  I happen to pay the utilities on two of those rental units as well as the mortgages, taxes,  insurance,  maintenance and repairs on all of them.

My tax returns show negative income; which is not exactly a glowing recommendation if you're trying to get any kind of financing for anything.  So, I drive a nine year old car that I love and I've learned every possible way to buy and sell real estate without using my own money.

Armed with all this, I have vowed not to take on anymore rental properties, not to buy and hold, but rather to buy and flip as many as I can.  This is my new adopted philosophy and I've learned it the hard way like every other life lesson.  I must be the hardest headed person... Or maybe I'm just not a quitter.

When Is Renting No Longer An Option?

I've really been dragging my feet on pulling up that "For Rent" sign in the front yard and replacing it with a "For Sale By Owner" sign.  I am clearly too identified with it because I'm reacting as if it's a personal failure.  It's not.  It's more a sign of the times.

You know, when a house has been vacant for awhile the decision making process can't help but be compromised.  No money coming in when you have two mortgages on the thing will do that to you.  By the time a persons' choices are reduced to selling for what they owe or else let them foreclose, trust me, ones' thinking has gone through more than a few scenarios.  It's not an easy thing to come to terms with, not being able to meet your responsibilities, whatever they are, is a sobering, humbling experience. 

Anyway, I've decided to stop advertising the house for rent, because then I'll just be stuck with a $400 deficit every month for the length of the lease.  It's way over time to start cutting my loses.  I've already stopped making payments, I just couldn't justify continuing to throw money into it.  I'd feel better if  I could remember how lucky I am because I had time to pull all the equity out of it before the market crashed.  I'd feel better if there were more money coming in period.  The Presidents' stimulus package is not going to help me.  I've taken training on how to process loan modifications, so I know that I wouldn't qualify for one.  What has compounded the problem is that the rental market here has taken a nose dive, I have no choice but to accept the remaining options, sell or face foreclosure. 

So, tomorrow I pull up the "For Rent" sign.