It is less expensive to dig deeper than it is to pack up the well and look for a new site.
I gave up marketing for a month. I had spent so much recently and the results were getting pretty bad. Sometimes, you just can't out think the market and it tells you exactly what to do. I was at a lunch with a few other investors and another big direct mail marketer made the comment when the discussion turned to how bad response rates have gotten recently, "It is getting hard to write that check every month." With that on my mind and looking at my marketing schedule, I decided to just put things on hold for a few weeks and see if the market responds better later.
The problem now, what to do to keep the deal flow going? Well, I could start a new campaign targeting a different list, create a new marketing piece, run some tests... I could restart a retired method like going back online. I used to be the #1 guy on Google, Bing and Yahoo. That is how I got invited to that lunch in the first place. That same investor I spoke of earlier made the comment, Aaron is everywhere!
All that seemed like a lot of expense, testing, and quite frankly, with summer coming (June is not actually a good month in southern California as the marine layer is quite think and it can be windy & cold at the beaches - think June Gloom), I decided to farm some of the thousands of old leads I've saved over the years, but didn't close. I might have been 2 or 3 days into this endeavor when I struck gold.
This seller originally called me back in April. He wanted a quick offer over the phone so I looked at what Redfin estimated the value of and threw out $170K. He said he'd call me back. I didn't hear from him again. Of course. I did spend the time to properly comp the house and realized Redfin's estimate was off by $43K!! I left him a few messages and explained what happened, how I could pay more, but no luck.
When I looked at this old lead I decided to recomp the property and see where value was at. I was now seeing an easy $300K. I called him up and actually got him on the phone. He said, "You still want that house?" Yes, I do. He said he was looking for $225K. I offered him $200K. He responded with, "Okeedokee. Let me think about it." A few days later I called him back to follow up. He said he'd call me back in 1 hour, which he did. We went back and forth and I was able to close him at $210,000. Split the difference, but never down the middle!
The house is rented to a great tenant paying $1,650/month. I paid $210,000 and my lender lent me $210,000. I am out of pocket $4,500 in closing costs and another $1,000 to get of of about 9 queen palms that were planted in the front yard. The house looked like a palm nursery, but now it looks like your typical SoCal 1990's tract house. Time to work on fixing the financing. It will be a long term keeper until I can pocket $100K+ on it and 1031 into something bigger and better.
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