Last summer, I decided I was going to start BRRRR’ing properties out of state. Once I put the team together to do this, I quickly realized that finding deals would be the toughest part. Due to the current market, I knew that I would have to create my own system to generate leads rather than rely on agents and wholesalers to provide them for me. Creating this organic deal funnel took months of trial and error, multiple software systems, and lots of time spent finding the right virtual assistants. I finally have developed a system that generates leads for property owners who are motivated to sell.
You might be wondering why I don’t just buy properties through an agent or a wholesaler. For the most part, those individuals are asking for too high of a price for me to make the numbers work. A key component of the BRRRR strategy is finding a property well below market value.
Here’s the basic formula I use to quickly assess if a property makes sense to buy:
Estimated After Repair Value (ARV) X .75 minus repair cost = Maximum Offer Price
By developing my own process to find motivated sellers who aren’t talking to anyone else yet about selling their home, I’m in a much better position to purchase the home at the discounted price I need. I’m also providing value to these homeowners who don’t want these homes anymore. Many are in poor condition and have been neglected, and the owners don’t have the money or desire to fix them up to sell on the retail housing market. Also, most homeowners are purchasing homes using bank financing, and these banks will not usually approve lending on homes in need of lots of work.
Leads for properties with motivated sellers are always in demand. Real estate agents and wholesalers will have a list of buyers (real estate investors) that are ready to purchase a property at the right price. In this hot market, there aren’t many deals to be had on the MLS, so investors are increasingly having to look elsewhere to find deals.
But why wouldn’t you just keep all the leads for yourself? The simple answer is that not every good lead fits my strategy, but that doesn’t mean that it isn’t a great lead for someone else. I have very specific criteria for the properties that I want to buy, so most of the properties that come through my deal funnel won’t work for my strategy. That doesn’t mean that I can’t still benefit from those leads or provide value to others in my network. For a given property that I don’t want to buy, there will probably be another investor that does.
Here’s how the process works:
- Receive motivated seller lead from virtual assistant team
- Send lead to a local agent
- Agent talks to the seller, walks the property, gets an idea of what the home is worth, and what offer number works for the seller.
- If it works as a BRRRR, I buy it. If it doesn’t work as a BRRRR for me, but the agent thinks another investor might be interested, he puts it under contract and presents the deal to the other investors.
- If the agent thinks the property will sell on the MLS, he can list it and I will get a referral fee.
I love this strategy because no leads are wasted. I’m spending a lot of money on marketing each month to generate these leads, so I want to make sure to extract any value from them that I can.
They paid me $5,000 just for bringing them the lead. All I did was send the contact info and property info to my agent and he did the rest. Could I have made more money by keeping it and flipping it myself? Probably, but flipping is not my business, so I was happy to pass this opportunity on to other investors and collect a fee for finding the lead.
A few months ago, I sent a lead to my agent for a home in fair condition and in a nice neighborhood in Oklahoma City. The agent and his partners saw value in the home, so they decided to purchase the property themselves, rehab it, and list it on the retail market to hopefully make a profit.
For the record, this is the only time this has happened so far but as my lead generation team brings me more and more leads, I believe I will get more and more of these deals.
I will keep the best ones to BRRRR myself and sell the rest of the leads to other investors.
Is it easy? Of course not, because if it was easy everyone would be doing it. But it is simple, and it’s something that can be replicated in any market in the country.
In real estate – as with any other business – if you can solve people’s problems, you can make money. Real estate is so amazing to me because you can create these scenarios that are win-win for everyone involved. The seller received cash for her home, the flippers make money on the sale of the improved home, the next buyer of the home gets an updated home to live in, and I get $5,000 to reinvest into the business.
I hope you enjoyed this article. Please let me know your thoughts by commenting below, or sending me a direct message on Instagram @honorandequity. You can also email me at firstname.lastname@example.org