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While most estate investors are out there looking for “motivated Sellers,” we Thoughtful Real Estate Entrepreneurs know that often times our best leads are not so obvious. In this episode, host Jeff discusses the single most valuable types of Seller leads we can possibly find. These Seller leads have two important traits—and when we find Sellers with both of these traits, we can build major wealth in our rental portfolios. Join Jeff for a discussion of these two important traits, and how to find these types of Sellers.
Episode Transcript
Hey there, this is Jeff. And I want to thank you for joining me for another episode of Racking Up Rentals. Show Notes for today’s episode can be found at www.thoughtfulre.com/e37. Hey, would you please do us a big favor by hitting the subscribe button in your podcast app. It really helps other people who are Thoughtful Real Estate Entrepreneurs like you and like me to find us so that we can all join together with this kind of common perspective and school of thought on the right way to do real estate entrepreneurship. Okay, onward. So I just bought a house a couple weeks ago. And I bought it with seller financing. And this isn’t just a normal deal, though. For me, this is the third property that I’ve bought from these sellers over the course of just about five years. The first one was in about 2015. And it was a rental property for the sellers. And it became a rental property for me. The second one was a rental property that had the tenants had moved out, and the sellers were ready to sell. And so they gave me a call. And then the one I just bought was a very similar situation, it was a rental house for them. And they wanted to be done with the business. And they had asked this tenant to leave. And I closed on it just a couple weeks before they left. And today, I’m going to actually go over and take a look at their primary residence to now I’ve been to their primary residence many times, of course, because that’s how we’ve done all of our deals together, literally sitting at their dining room table and mapping out how it would all work. But I’ve never really gone through the property with the set of eyes of somebody who’s looking at buying it. And certain parts of the house I’ve never seen before. So today, I’m going over there as well. So there’s a good chance this could become my fourth deal with these sellers in about five years. Oh, I’d like to add to that all of these properties that I’ve bought, have been with long term seller financing, I did make a downpayment on each of them, of course, and that downpayment varied. But at this point, I can tell you I have over $500,000 of low interest long term seller financing with these people. In our episode today, we’re talking about the most valuable types of seller leads that you can possibly find. And those are the people that you can do multiple deals with either at once or over time.
But we’re going to talk today about the idea of doing multiple deals with these people over time. And in another episode, we’ll talk about the idea of doing multiple deals with a seller at the same time as well. So today, I want to talk with you about the two traits that really make for these ideal and most valuable seller leads. And the first trait is simply that they are a good fit for your style of acquisition, your approach to acquisition. And the second thing, the second trait is that they have multiple properties, of course. So let’s just dive into each of these two. This will be a simple conversation, but it’s going to make a lot of sense. And then we’re going to talk about what you can do to put yourself in a position where you can find and connect with these types of people.
So the first trait is that they are a good fit. For your acquisition strategy. So first of all, you have to know what your acquisition strategy is. And if you are a Thoughtful Real Estate Entrepreneur, which I’m guessing URLs, you probably wouldn’t be listening to me right now, you have a very relational approach, you have a very well, first of all, certainly, you’re talking to these people off market and not through real estate agents, their property is not listed. And you’ve connected with them, you take a very relational approach, You’re in no hurry, just as we discussed in the last episode, we are going as slowly as the conversation feels like it should go and not rushing things at all. And so you’re talking with them. And so that means that these people really appreciate your relational approach. And it’s probably normally how, like how they like to work, as well. But that relational approach that you’re taking with them, where you do want to go to their house and sit down and have a conversation over time, is something that really resonates with them. Secondly, they feel comfortable kind of representing themselves, they feel confident in their own ability to navigate this conversation with you, and make good decisions and know what they want and know how to go about accomplishing that without feeling like they necessarily need representation on the outside from something like a real estate agent. Oftentimes, these people are a good fit for your acquisition strategy, because they don’t like the idea of paying fees and commissions. For many of them, this is really a matter of principle, they really don’t like the idea of writing a large check out of their proceeds for a real estate agent or agents that they don’t really feel like they need. So they’re a good fit for you in that sense as well. In a really broad way, they’re such a good fit for you, because they’re very negotiable. on all aspects of this deal. All aspects of this conversation. It’s not just the price, they’re actually very willing to speak with you about the terms as well, the timeline, all of the aspects of how a deal comes together. And what that really means is not just that they’re negotiable, and all those things, but they’re just open to having an open conversation with you that they aren’t acting with their guard up that they are willing to answer questions with you that that might not seem really, totally directly relevant to buy their property, but you’re trying to understand them, and their context and their situation as a whole and how this particular transaction may fit into the bigger picture of their world and their lives. And they’re very open to engaging you on that level. And that leads them to them being very negotiable with you and discussing all the aspects of that deal. And in many cases, they are not only open to but they very well may prefer some some form of owner financing, seller financing, or something other that people normally call creative financing. And that might be driven, often times by their desire to manage their capital gains, obligation that’s coming their way if they sell this particular property, especially if this property is an investment for them. And they’re often also interested in generating income from the property not just proceeds from the sale, but continuing to have an income stream for the property. So the first trait is that they’re really a good fit for your acquisition strategy. Now, you can do deals with people who aren’t a perfect fit for your acquisition strategy, you know, you can kind of force your way through that. And even though maybe doesn’t feel like the fit is perfect, perhaps their need or their situation, you know, makes them more inclined to have this type of conversation with you than they normally would. But there are other people like these ideal sellers, things just click, you know, the way that they want to do business really fits nicely with the way that you want to do business already. And so when you found somebody like that, it’s such an important question to ask yourself, what other types of opportunities are there with these people either now, or over time?
So the first trait is that these most valuable sellers, they they’re just a good fit for your acquisition strategy. It just feels natural when you’re talking with them. They don’t seem to be resisting the way you’re trying to conduct this conversation at all. And the second trait is that they have multiple properties. These sellers have multiple properties, which they are probably going to want to unload, sell or get Have in one way or the other over time. Now, this is usually for this particular type of seller that we find ourselves talking with a lot. These are multiple rental properties, not not necessarily like they want to sell their vacation home. And then they’re, you know, primary residence and this and that, it’s really much more about a portfolio of their own rental properties that now they want to often slowly disentangle themselves from. And that means that they’re usually at a transition point in their lives, where they just kind of want to be done. You know, they’re glad in many cases, that they bought these properties, they’ve probably had them for quite a while, which also, you know, leads into the capital gains topic that we just discussed, or we just hit on. And they’re just at a point now where, you know, the the properties have serve their purposes. And they just want their lifestyle to be a little bit different, perhaps they want to do some traveling, perhaps they just don’t want to have to physically do so much maintenance, things like that maybe they have other just focuses and concerns in their life that they want to be able to turn their attention to. So they’re at a transition point in their lives, where they want to be able to do other things. And they’re done a little bit what now with this idea of being mom and pop landlords, a lot of these folks want to sell these properties over time, some do actually want to sell all at the same time. But a lot of them come into the conversation with a mentality of I need to sell one per year, that’s an expression I hear quite literally. In those words, very often and their mentality is I want to sell these, and I don’t want to have to incur all this capital gains hit at one time, so I’m going to sell one per year. Now, as you may know, or as we’ll certainly continue to talk about in this podcast, you can help them really take some of the sting out of that capital gains bill with the way you structure a seller financing deal. So you might actually be able to change that belief in their mind over time, too, but they often want to sell multiple properties over time. So if you put these two things together, it’s pretty clear to see that when these people are a good fit for your acquisition strategy, and you’re a good fit for their disposition strategy, you might say that there’s a natural clicking that happens, there’s a comfort level, and when they have multiple properties that they need to sell, that comfort level is super, super valuable to them. The idea of getting through one transaction with you and then needing to start over completely from scratch with somebody else, a few months or a year, a couple years later, on the next property doesn’t seem nearly as appealing to them as going back to the well. And that’s kind of the the metaphor that I want you to think about, you’re going back to the well of a deal, that that you were able to get done with people who were just so well suited for you. And you’re going back to the well. And you’re saying I can buy multiple properties from them. But you know what’s happening on the flip side of that equation, the exact same thing, your sellers are thinking, I’m going to go back to the well, and I’m going to go back to that buyer. Because that experience was great. It was easy. We got what we wanted out of it, it was structured correctly, why wouldn’t we go back to the same person and want to have Plan A, B to sell them our next property and next properties as well. And that’s in my story that I told you here actually how these things came about, as well. I bought this first house from these folks. And I knew that they had other rentals, and I sort of planted a seed with them in their mind, in which I said, when it’s time for you to move on from these other properties, I would sure appreciate the opportunity to be the first person to talk to you because I really enjoyed how we work together the first time. And I’m always in buying mode for a great property with great people. And that’s what you are and what you have. And I would be honored to have that conversation with you. So a couple years later, when they were in the mindset of wanting to sell that property, they decided to go back to the well, and I was there well. And I thought to myself great, I’m going back to the well to I want to buy more properties, I want to structure them very similarly to how I did before. And so we both went back to the well which is really the definition of a perfect synergistic and symbiotic type of relationship.
So the question of course, you might be thinking as well how do I find these people? Because Yeah, this sounds great. These people do sound super valuable as as similarly as people that I can develop relationships with and go to that well over time and they can come to my wealth over time too. How do I find these people? Well, as you know, we like to do off market market and we’re not looking for distressed and motivated sellers in your and as I said at the very beginning of this if you think your job is to go find Quote, motivated sellers who have found themselves in a financial bind of some kind right now that you’re going to completely walk right by these folks, because these people often do not have any of the signs of being motivated sellers, their motivations are not spray painted on their foreheads, they’re much more subtle, they’re much more just unique to their context, and they’re not outwardly showing. But once you start talking with them, you really do understand that their motivation is to spend their time in different ways or to be able to go to their granddaughters, traveling basketball team games all the time. And so if you’re looking for motivated sellers, you’re going to miss these people completely. And motivated sellers, of course, often because they’re in a financial bind, they’re not owners of many properties, they’re not people that are a well, that you will be able to go back to, and you’re not a well, that they’re going to be able to go back to in the future, usually, either because they’re just pretty much handling a one time problem that they have, and you’re helping them out of that situation. So how do you find these people? Well, as you know, in our our strategy is using what we call thoughtful direct mail. And we get our lists from our title company partners. Now you could go through your title company partners, to try to find people whose names are on the title of multiple properties, and that that might work. But it also might not work very well, for a couple reasons. One of maybe the most obvious is that sellers, especially the ones are a little more sophisticated, often take time, take title in different names, they vest in different names, they might have multiple business entities like LLCs. This one might be titled in the the wife’s name, this one might be titled in the husband’s name, a third one might be titled as you know, the so and so family trust, and it might just be hard to connect those dots and to really find them using your database type of work. So instead, what I recommend you do is you do your normal, thoughtful marketing, to your non distressed sellers, and you do it in your relational manner. And you do it where you’re reaching out to them about a specific property. And when you get that lead, when you connect with those people when you meet them, ask yourself the question. What other opportunities do I see here? Ask them some nice, politely phrased questions that are just woven into your normal conversation with that, you know, you might ask the seller, you know, so, Mrs. seller, how did you find yourself with this property? Is this something you’ve been doing a lot of, you’ve got a rental portfolio you’ve built over time? Or is this a one, a one time situation where you moved out of this house, perhaps you lived in and then you kept it as a rental. And if you open the door like that people will often tell you what other types of properties they have, if any, sometimes people proactively tell you what other properties they have, because they are trying to position themselves as being financially strong. And being sophisticated. You know, this is a bit of a tangent, but sometimes sellers have their guard up at the beginning, because they assume you’re there to exploit some kind of perceived, well, distress or motivation in them. And so sometimes they want you to know, right off the bat, hey, I’m not, quote motivated, I’m not in a financial pinch, I know what I’m doing. And so sometimes they’ll give you information about some of their other holdings, just as part of their effort to do that. Well, that’s great. All you’re really trying to do at the beginning, is just learn about your seller lead, understand who they are, how they think, what other things that they have, and just understand the bigger picture of them. So as you do that, then you’ll be able to see if there might be other types of opportunities with these people, either in the present, or, as we’re talking about on this episode, overtime in the future. And then lastly, as you do know, which sellers you’re talking to that have other properties that you feel might be candidates for you to buy in the future, I’d really encourage you to give that some weight in your current thinking. So what what do I mean by that? Well, I’ll tell you, if I’m talking to two sellers that are basically identical
in their situations, the properties are very similar. If I know there’s one of those two sellers that has more properties in the future, that I feel like I might be able to buy from them, then that seller to me is more valuable than the other seller even though the deal that we might do today with these two sellers is is virtually exactly the same. The seller with whom I see more potential in the future is the one that I would rank higher in my own mind as well. So I would work really hard to take advantage of establishing that relationship with them and getting the first deal under my belt because I could see down the road and around the corner. Knowing that there might be a good chance that there are more things that we could do together in the future. So thanks for listening to today’s episode of Racking Up Rentals again shownotes are at www.thoughtfulre.com/e37 for Episode 37. Please do us a big favor by hitting the subscribe button in your podcast app. And also, if you’d be so kind to rate and review the show, just give us your honest take on what you’re learning from the show how you like it. And that will definitely help other people find us. Also, did you know that we have a Facebook group for Thoughtful Real Estate Entrepreneurs as well. It’s a great forum for us to get together and people of our similar school of thought of mindset connecting together. It’s called rental portfolio wealth builder. So just search rental portfolio wealth builders on Facebook, you’ll find the group and we would love to have you join us there. If you like this episode, please take a screenshot of it and post that screenshot to Instagram and tag us at thoughtful real estate. Until next time, I look forward to talking to you then I hope you have a great week and get out there and let’s go rack up some rentals.
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