How to Make Your Rental Properties More Profitable

Excerpt from Millionaire Real Estate Mentor by Russ Whitney

It’s important to approach prospective sellers with tact and diplomacy. I recommend a personal visit as soon as possible after you see the legal notice; if the owner isn’t home, you can leave behind a letter. Most would-be investors just mail the letters, but the difference that will make you successful is in going to the door. People facing foreclosure are probably being bombarded with mail by collectors and may not be opening all the letters they get. If you want to use mail, post cards work better, because the homeowner doesn’t have to open an envelope to see that you are offering a solution to his problem.

You might want to call the homeowner if his number is listed. This can work, but I still prefer a personal visit because it allows you to see the property so you know what you’re dealing with. The best time to go to houses that are facing foreclosure is Sunday afternoon. That’s when you’re most likely to find people at home. Take your business cards, contracts, information release forms, marketing letters, and envelopes. You’ll have all the tools you need to either negotiate a deal or to leave behind information if the owner isn’t home.

Another benefit of a personal visit that you’ll find out right away whether the house is occupied or vacant. A vacant house indicates owners are much more interested in unloading the property as quickly and painlessly as possible. If a house is vacant, immediately begin tracking down the owner. You can find owners by checking for telephone listings, checking the tax rolls, or sending a letter to the foreclosure address with “address correction requested” on the envelope so the post office will provide you with their current address.

If the house is occupied, go to the door and ask for the owner by name. If he’s not home, leave behind a letter in a sealed envelope. If the owner is at home, introduce yourself and say that you’re interested in buying a home in the area and have been told that this house might be for sale. Be prepared for a variety of responses.

You might be asked who told you that, so have an answer ready. A good response is to say that you have a friend in the real estate business who knows the area—but don’t indicate at that point that you’re aware of the pending foreclosure. The owner often admits freely and frankly that the house isn’t on the market but is in foreclosure. If he doesn’t admit it, you’ll have to engage in some conversation to win his trust before he opens up to you.

Once the owner acknowledges the foreclosure to you, tell him you have knowledge and experience in the area, and think you can help him. At this point, he’ll probably invite you in, and you can go over the numbers to see if you can make a deal work. If he doesn’t want to talk—and owners are often not ready to until it gets closer to auction time—leave your letter behind, and tell him to call you if he has any questions or if you can help in any way. Make a note to follow up with mail or phone calls every week or two until the auction date.

When a seller calls you either from your letter or one of your ads, use an information sheet to gather the preliminary information so you can determine whether or not to pursue the deal. If the numbers don’t work, be polite but honest. If the property isn’t in an area you want to work, again be polite but honest. If you know of another investor you can refer the seller to, do so.
If the preliminary numbers look good, have the seller call the foreclosing attorney or trustee to give you information regarding the back payments. Then put together your offer.

If the auction date is imminent, be candid with the seller about how he’s going to have to work with you to make the deal happen. For example, let’s say he’s got a non-assumable loan and only four days before the auction. In your sales contract, stipulate that you will reinstate the existing loan and maintain it until new financing can be acquired. That gives you the time you need to either refinance the property if you’re going to keep it or find a buyer if you’re going to sell it. Remember, you only need to refinance the property if you’re planning to keep it.

Most pre-foreclosure deals will happen in the last week or so prior to the auction. Up until then, the sellers are still hoping for a miracle that will allow them to keep their home. Even so, it’s a good idea to contact them early and establish a rapport so that they will call you when they realize that have to sell.

If you found this excerpt from Millionaire Real Estate Mentor valuable, you’ll want to read the entire book. In his always practical, easy-to-understand style, Russ Whitney explains how to achieve financial freedom through real estate investing. Order your copy today!