Tuesday, April 18, 2006

The Heavy weights of Detroit Foreclosure Investing

Learning about Foreclosure investing from the heavy weights of foreclosure investing.

When I realized how little I knew about Foreclosure investing I decided to apprentice under experienced investors. Since I was inexperienced, knew very few people in the foreclosure community, I started looking in the want ads under Real Estate agents wanted. As fate would have it I found what I was looking for one Sunday in the Detroit Free Press.

The ad said Real Estate investor seeks Agents to sell his inventory. I called and got their address and drove by the building. The sign outside said "The Real Estate Building." The building was a one story brick build around 1955. The neighborhood was called Rosedale park and it is a nice area with many colonials, ranches, and a few bungalows. Located near the Southfield freeway and McNichols Rd, the neighborhood is considered a good area. (Six mile for all you Detroiters) I later found out that my grandfather had delivered milk for Twin Pines Dairy in the same area.

I scheduled an interview with the sales Broker, Steve Barnes. Steve was A jovial guy who assured me that working for Jerry Waechter would be good experience and Jerry always paid his agents what he owed them, unlike Bruce Schlulseal of Gannon real estate who apparently had stiffed Steve some years back. Steve gave me a tour of the "Real Estate Building" and showed my where I would be sitting. The agents sales floor was a long narrow room with four cubicles on one side and three semi enclosed offices on the other. At the front of the sales floor was the receptionists desk. Separating the receptionist from the main lobby was a one inch piece of bullet proof glass and a huge steel door that Marion the receptionist had to buzz you in from. A big sign in the lobby said NO Cash Please.

A big reason for all the security was because a few years before I was hired one of the business owners on McNichols had been shot. So Jerry took some of the staff and moved to the Town Center buildings in Southfield, leaving the sales department in Detroit. The bad thing for me was that I would have little access to the buying operations.

What I did learn from Jerry was that buying was the most important step in making money in Real estate. You make money when you purchase the property. You simply collect the money when you sell the property. In other words if you pay too much for the property you won't collect much money when you sell.

Jerry did most of the buying for his company and that showed me how important the task was. Jerry used many methods to get sellers to call him. One day I got to see the accounting books and the first thing I wanted to know was how much Jerry spent on advertising. Jerry spent around $10,000 a month on Direct mail, newspaper ads and yellow page ads. Now let me put that into perspective. when I worked for Jerry we sold anywhere from fourteen houses a month to twenty seven houses a month. Jerry’s minimum profit per house was $10,000 net. Now that profit was after all repairs, insurance, property taxes utilities decorating costs, and sales commissions where paid but before office overhead, advertising, salaries of office staff etc.

Most of us don't have 10,000 a month to spend on advertising. I looked at what was the cheapest way to reach the most people. I decided to use the Sunday Detroit Free Press to attract sellers. If I spent $100.00 a week on an ad or $5,200.00 a year and I got one house that earned me at least $15,000 after repairs and holding costs; then it was worth it to run the ad every week. I ran the ad in the section called "real estate wanted," Sunday was the only day I ran the ad because the Sunday free press had the highest circulation. It worked for me because I worked it every week. Some weeks I didn’t get any calls and other weeks I got calls from people who wanted me to pay full retail for their homes. Then, bam! I would get a call from someone who was ready, willing and able to sell me a house so cheap that I would be able to repair it, market it and sell it to collect a decent profit.

To Recap

1. Buying real estate is one of the most important steps in the path to profits because you make the money when you buy, you only collect it when you sell.

2. Pick one or two ways to get sellers to call you, then work them.

3. Find a mentor to apprentice under so you learn how to advertise for, buy, repair and sell homes.

Next post, I'll show you how to write an ad that gets calls.

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