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By Alan |
Referral-Based Investing,
Part One
By: Alan Brymer
I'm all about getting more for doing less. Not (usually)
because I am lazy, but because by spending less time on
one thing, it frees me up to do something else that I couldn't
have done otherwise. Or, by spending less on something,
it means I have more money to spend on other things. And
when you're talking about motivated seller prospects, more
is better.
Yet we investors continue to advertise in ways that require
us to find and win over new customers over and over again,
EVERY TIME. Think about it-has a seller in distress ever
sold you his house, and later, because you did such a great
job the first time, decided to fall behind on payments again
and sell you another house? It doesn't happen (with the
possible exception of finding a burned-out landlord who
wants to dump his entire portfolio on you).
This means that time and time again, investors have to run
ads, send out our message, build trust, and get people to
respond. That sounds like a lot of work, and it is! Ask
any business owner...What is easier to do-to win over new
customers or to get a repeat sale from the same customer?
The repeat sale is MUCH easier because the hard part (ads,
message, trust) has been done already. (And, of course,
our "customers" are sellers who we buy from, not sell to,
but the marketing principles are the same).
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Running ads costs money and takes time. Over and over again.
I want to suggest a different way to generate leads, that
isn't going to be the main method you use, but will probably
get you qualified leads for years to come, with a minimal
cost. I'm talking about referrals.
From whom? Not from people you have bought houses from before.
Because even if you did everything you said you would, bought
their house on the date of their choice, and even hired a
moving company to help them get into their new home in style,
Average Joes only know so many people. Motivated sellers are
just good, regular people. They hardly know any motivated
sellers anymore than you would if you weren't actively searching
for them for a living.
Our business is not normal. You won't find many mailing lists
of motivated sellers. There aren't TV shows made for motivated
sellers during which you can run commercials. There aren't
chat rooms where motivated sellers hang out and talk where
you can easily find them. This is why I recommend fulfilling
your promises to those you buy houses from, but don't expect
them to send a flood of referrals your way. They just don't
come across other people in distress that often, and they
frequently move out of state, never to be heard from again.
So who can you get referrals from? People in a position where
they meet potentially motivated sellers. Think about who they
might be. I'm going to name a few types, but I'm sure I'm
missing some (or saving them for my next course). So think
of the reasons WHY sellers become motivated, and then think
of the types of people who might know about their problems.
Wholesalers are obvious, and probably the most consistent
producers of referrals since they are actively searching for
them every day. And frankly, some of them are geniuses at
finding tons and tons of potential deals. How they do it,
I'll never know. Why they don't fix up and sell the houses
themselves, I'll never know (and will never ask). But they
find them, so be sure to network with them as much as possible.
The only downside is that they will want to be paid, and you
might make $5,000 - $10,000 or so less than you would have,
but so what, as long as your profit is acceptable.
Some less obvious types of people to get referrals from are
bankruptcy attorneys, probate attorneys, realtors, and the
person in charge of loss mitigation in small banks (big ones
have call centers for that purpose several time zones away).
I'm going to go into more detail later about the means by
which you introduce yourself, deliver your marketing message,
build a relationship with them, and get them to respond (does
this process sound familiar?). |
For the time being, just understand that it makes more sense
to do the work with these people ONCE, with some follow-up
from time to time, and have them refer motivated sellers over
and over again over time. This will allow you to get more
(deals) for doing less (hustling and bush-beating), which,
as I said, I'm all about doing in just about every endeavor.
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