Getting your property due diligence right is critical. But how cautious should you be in your estimations? Wishful thinking with your numbers is like forcing a square peg into a round hole and could spell significant financial loss. This week Marks helps you avoid these mistakes. You'll learn:
Get the free resource that accompanies this segment. Due Diligence Checklist
The property industry lags way behind in it’s levels of marketing and online lead generation sophistication. That opens up countless opportunities for those willing to learn how to source deals through online strategies. This week Brad introduces you to the basics of online lead generation and how you can source deals other sourcers can’t find. You'll learn:
Get the free resource that accompanies this segment
6 Steps To Creating Your First Lead Magnet & The 5 Point Lead Magnet Checklist
07:33 - Q&A Session: Mark introduces this week’s question
09:02 - Sourcing from estate agents
11:28 - Using direct mail
12:42 - Professional services including probate solicitors
13:26 - Look out for empty houses
15:02 - Mark’s intro on due dilligence
16:50 - Looking at valuations
17:52 - Local area research
19:10 - Property types
20:06 - Flips and refurbs
21:33 - Resaleability
22:04 - Other sources
25:38 - Sourcing for yourself
30:15 - In The Lab with Brad – Brad walks us through the Online Lead Generation 101 – The 7 Steps to Consistent and Predictable Property Deal Flow
33:07 - Step 1: Targeting Specificity
33:36 - Step 2: Target Audience Persona
34:50 - Step 3: How to find the Target Audience
35:20 - Step 4: Creating a Lead Magnet
36:20 - Get your 5 Point Lead Magnet Checklist
36:50 - Step 5: Using a Squeeze Page
37:30 - Step 6: Drive the Traffic!
38:41 - Step 7: Start to engage
To follow is the transcript of the Facebook Q&A, Sourcing With Mark and In The Lab With Brad.
Mark: This week’s Facebook Group Question and Answer Session is going to be on the question from Ian Ainslie that we mentioned before, which is a really good question, one that we’re looking forward to answering this week.
The question is “Of the 20 methods listed in the 20 Ways To Source Property Deals course, which is best suited for finding Flips and Refurbs?”
So one of the big, big reasons I love this question is because the Buying to Let market is turbulent to say the least and I think there’s a lot of people jumping out. There are a lot of people waiting to see what the market does but there are also still a lot of people looking to do property deals and one of the best ways to do property deals is to Flip. For those of you that are listening that may be new to the property world and don’t know what property flipping is, flipping properties is where you buy a property at a certain price, usually you will do some work to it like a refurbishment, or you add a bedroom, or just tidy up in general. Then you will resell that property for a profit and in the industry that is known as a Flip or a Buy to Sell.
1. Estate Agents
The best way and the ultimate way, is going to be through estate agents. We really do focus a lot of our attention on avoiding estate agents for many of the other strategies. A lot of the more creative things like property lease options and rent-to-rent, you tend to move away from estate agents and try and get direct to the motivated seller. But for flips, refurbishment projects and for buy-to-sell projects, really the best way is to go to estate agents. The big reason for this is because they have the properties advertised online, so you can go on Rightmove, Zoopla, OnTheMarket or their own websites and you can see the properties on there as estate agents generally put photographs on. Or with flips, quite often they don’t put any internal photographs on which is usually a good sign that it’s a potential flip. Also, what we want to be doing with estate agents is to be looking at properties to add value to, not just to knock the price right down to below market value.
When it comes to a buy-to-sell, you are going to be looking to properties that either need a full refurbishment, so you’re looking for the old swirly carpets and properties that look damaged inside, or have kitchens missing. You can use keyword searches on Zoopla such as ‘cash purchase’ or ‘quick sale’. All of these sorts of things you can look for with estate agents.
The other thing to do if you are going to physically go into the estate agents or phone them is to be very clear on what you’re looking for. So for example, if you’re looking for three bed properties to flip, or if you’re looking for three bed properties with the potential to add a bedroom, or two bed properties to add a bedroom, or ones that have the potential to extend out the back. Be very clear because the clearer you are with an estate agent the more chance of getting those deals sent through to you when you’re following up on a weekly basis. (We went through this in session one, so if you haven’t listened to session one, there’s a whole ‘Sourcing with Mark’ based on working with agents.
2. Direct Mail
The second method is going to be direct mail. When you are exhausting the estate agents method and they are not coming up with the goods, what you can do is start using direct mail. Again, in the property training course 20 Ways To Source Property Deals we have the direct mail section which shows you how to list build but also what we’re looking for is to use the advanced search function on Zoopla which you can, again, enter keywords like ‘needs modernising’, ‘needs modernisation’ and things like ‘no chain’. When you are looking at the photographs of the properties and when you’re looking at floor plans, you’re looking for the key elements that are going to let you know that you are going to be able to add value or whether you’re going to be able to knock some money off. Then what you’re going to do is go through the due diligence to make sure it’s the right price. Conveniently, ‘Sourcing with Mark’ is on due diligence this week as well.
So, direct mail and estate agents are probably your two main ways.
3. Probate Solicitors
Now to touch on a slightly left-field angle, one that also works very well, is looking at professional services, more importantly, probate solicitors. If you can become friendly with and work with probate solicitors, you will get properties generally that are in need of work and if you are able to transact quickly, you will pick up leads from probate solicitors. So, for those that don’t refer things directly to agents or maybe need a quicker sale than normal, if they know you and again, you are staying in touch, same way as building rapport with estate agents, probate solicitors are really good. So, that’s the third method out of the 20 ways to source flips.
4. Empty Houses
Always be on the look out for empty houses. You can generally see through windows to see whether there’s furniture in living rooms. You could have a peek through the window just to see what the condition of the property is inside. Drop handwritten notes through the properties asking for the owners to give you a call or the people popping around to give you a call. Now the estates agents will pick those notes up if they are the next person into the property. So just make sure you are doing that once a week. If you’re not getting anywhere the agent, just keep popping around and seeing. Also, have a word with the neighbours as they may have contact details for the owners.
Those really are the best from the 20 ways to source flips and refurbs, so hopefully that was quite useful.
Brad: Fantastic, excellent. Ian, thank you very much for a great question.
Mark: Thanks, Ian.
Brad: Really good question, thank you for that. Remember, if you have any questions you would like Mark or I to answer, then get yourself over to the Facebook group, which is GoliathFBgroup.com. Leave your question in there and we’ll pick one for future episodes and get that answered for you.
Mark: Hi everyone. Welcome to this session’s ‘Sourcing with Mark’. This session is on due diligence. It’s a big of bugbear of mine, this one. The big reason being that it’s just not done properly. There are a number of deals that I see flying about social media, on mailing lists and when you see the numbers, when you see the valuations and the market appraisals, the rental values, they just don’t stack up. Sometimes, I know that they don’t stack up without doing my due diligence!
What I want to do in this quick session is run through the importance of due diligence. What sorts of things you really need to be considering as the main things for your due diligence and also what we’ve got in the Resources section this week is the Due Diligence Checklist, so it covers all the different elements of due diligence. So, what you are going to need to do is work out, depending on what strategy you’re using, what the most required due diligence is for that strategy and then tick those boxes off on the list.
In this section, we’re going to go through sourcing for your own portfolio, packaging and selling and also when buying deals from other property sourcing agents. When you’re sourcing through an agent, either an estate agent or a property sourcer.
Estate Agent Valuations
Estate agents are notorious for advertising the properties for quite a substantial amount more than the current market value. The reason for this of course is to get offers. So what they’re going to do is price it high. People are going to come along and they are going to offer below market value, below the asking price, because everyone does. Then what they are going to do is get them up to the level that they need to be, in order to achieve the seller’s price. Now, that’s fine when it comes to owner-occupiers buying their forever home. For us as investors, or as property sourcers, we need to know what the actual market value is, not the estate agent’s valuation and not the hopeful, ‘one day it might be worth this’ valuation. We want to know the actual market value. We want to know the actual market value for sell and the actual market value for rent. These are probably the most important two figures that you’re going to work out across most of the strategies. On the rental side, you are going to be working out the room rates if it’s a room to rent or if it’s buy-to-let, you would be looking at current market rent.
Local Area Research
We’re also going to do a bit of local area research. Now, when it comes to local area research, we need to make sure that the property deal that we’re looking at is suitable for the tenant type; that the area is suited to the tenant type that we’re targeting. So, if you had a serviced accommodation for example, and it was in the middle of nowhere, at no real holiday destination, it’s just simply a village in the middle of nowhere with no amenities, no transport links, it is in the middle of nowhere on its own, it is probably not going to maintain occupancy levels to make it a good investment decision. You might find that the numbers work because the sourcer or the agent or someone that presented the deals to you made it look like it worked. So, you’ve done your own numbers and worked out the room rates but actually when it comes down to it, maintaining that occupancy level is going to be almost impossible. Factor that in rent-to-rent again, if you’re looking at targeting professional sharers and you take a property in the middle of a predominantly housing benefit, local housing allowance area, your chances of getting the tenant type that you want are severely restricted. So, your local area research is very important.
When you’re working in an area you will discover the type of property that works for your particular strategy. What you want to do is then look for lots of those but in order to discover that property, you are going to have to carry out your due diligence. You’re going to have to go and view these properties. You are going to have to check the floor plans. Once you find one, all you do is the Cookie Cutter model, i.e. go and look for all the other properties that are very similar or exactly the same and just replicate. So, property type is very important.
Flips and Refurbishments
Then you also have things like your flips; your specific due diligence if you are flipping property, or buying to sell as refurbishment. You have to work out a refurbishment estimate and I would always recommend including a 10 to 15 percent contingency. When I say contingency, I just mean a little bit extra on top of the estimate that you made out yourself. Purely on the basis that you might find prices have gone up or you might find a few extra things that need doing. You’re better to overvalue that refurbishment than undervalue it.
And remember when we’re packaging and selling deals for a fee, representing these numbers so that property investors can make a decision on that investment deal. If the numbers are nowhere near what you’ve suggested or proposed, the chances are you are going to have a very upset investor on your hands. And obviously a very upset investor will speak to other investors and you will not do so well in the sourcing world.
Resaleability (my newly created word)
So, always err on the side of caution, always have your contingency. Also, always ensure on flips the resaleability. I don’t even think that’s a word! I’m going to use that a lot, so I’m going to take that as my own word now. Hopefully it will make it in the dictionary but resaleability is all about once you have refurbished that property, how quickly is that property going to sell? Who is it going to sell to? Is the refurb type applicable for the person that is going to buy it? That’s really important.
Factor all of those in for your specific due diligence.
Now, I wouldn’t be doing my job properly if I didn’t bring in how to source through other property sourcing agents. You’re going to be finding deals and if you’re an investor that is cash rich and time poor, you are going to be using other sourcers. Now in order to use other property sourcing agents, you are going to have to carry out an element of due diligence on them as well. You don’t need to go into too much detail and the basics are very simple. One of the first things you need to check is their experience. So just see how many deals they’ve done, the presentation of the numbers. Obviously, you are going to do your own due diligence on the numbers that they present. Is it accurate? Are they presenting the correct numbers?
You also want to check that they are a member of a redress scheme, a property redress scheme or a property ombudsman scheme. There are three that we can be members of. We at Goliath are members of the Property Redress Scheme, the PRS. There’s another two, which are the TPO (The Property Ombudsman) and then there’s another one, which is Ombudsman Services. There’s only three but as a sourcer, we have to legally be a member of a redress scheme. The big reason I’m sharing that with you as investors, is so that you could then have a way of complaining if something is to go wrong. If you complain to the sourcer and the sourcer doesn’t have a complaints procedure or the sourcer doesn’t want to know, you can then take it to a new level, obviously if they are not a member of a Redress Scheme, then you won’t be able to do that. So, check that out and like I said, always continue to do your own due diligence on top of the numbers that they are providing to you. They will fudge numbers; they will make numbers look a lot better than they are. So, if you do your own due diligence, you will always be safe in the knowledge that you have done everything correctly.
So that just about covers due diligence in a quick ten minutes spell. Just to conclude, you want to always err on the side of caution. So, you always want to make sure you are overestimating refurbishments but you’re undervaluing properties. You are better to be under the value of the property of the current market value than over it. The main reason being that, at the moment, especially if you are buying properties on a mortgage, you’re going to have to get a surveyor out. A surveyor is going to come and evaluate the property based on actual market comparisons. If you’ve over-egged it and based your numbers on a higher figure, they are not going to work properly. That’s very important. Always err on the side of caution - higher on a refurb estimate, lower on the value.
Also, don’t try and force a square peg into a round hole. What I mean by that is don’t try and create a white-collar professional multi-let in the middle of a high volume LHA (Local Housing Allowance) area, it won’t work. You can make the numbers look rosy all the time, but the problem you would have is occupancy levels. Occupancy levels are where it matters when it comes to those sorts of properties. So don’t try and force a square peg into a round hole.
Do your own numbers!
Always make sure you do your own numbers. So, even when you are getting the property deals from other sources, when they are getting presented to you, just go through the basic numbers and make sure they are fairly accurate. It’s quite a straightforward thing to do and it doesn’t take that long to do but it could save you literally thousands.
If you are sourcing for yourself, another really big thing to do is be strong with your numbers. Don’t try say, because the property isn’t cash flowing properly, or the yield isn’t high enough, to force a rental figure that is not average for the area. Now you may be able to eke that out and you maybe able to get another ten pounds per person per week or you maybe able to resell the property on a flip for an extra twenty thousand pounds but the problem is it’s all maybes. Ifs, buts and maybes are things that I do not feel comfortable with in the sourcing world. We need to work on facts, and in order to work on facts we need to make sure we’re doing the numbers properly.
Like I said, be strong, stick to those numbers, put the offer in and don’t keep going up because the Agent’s making you go up or the Seller’s making you go up. In tune with that, be patient. The deals will come, so do the numbers properly, be strong with the numbers, be strict with the numbers and the deals will come and you won’t be stung in the future with properties that are empty or properties that don’t resell because all of your numbers will have been based on the Sell It Quick. Any bonus will obviously be a bonus. I hope you found that useful and like I always say: Happy sourcing!
Brad: Hi and Welcome to this episode of ‘In The Lab With Brad’: Online Lead Generation 101. The 7 steps to consistent and predictable property deal flow.
Now in this episode I’m talking Online Lead Generation and how you, as a property sourcer can use cutting edge online marketing and specifically, lead generation strategies to build a consistent and systemised flow of property deal leads, whatever your strategy is.
In property podcast Session One of “In The Lab With Brad”, I talked you through the Beginners Guide on Marketing. Now if you haven’t listened to that yet, it would be well worth your time to do so. In that segment I zoom out and I talk about what I call the 6 Buckets of Online Marketing. Now in this segment, we’ll zoom in on the specifics of sourcing of property deals through online lead generation methods specifically.
Online Marketing in the Property Industry
Now I mentioned in session one and it’s worth repeating again now, the property industry is lagging way behind in it’s levels of sophistication when it comes to online marketing. Now I’ve pondered on why this might be the case and I could only surmise that when someone decides that property or more specifically, property sourcing is something they want to do, in their head they are getting into property. Now, they like property, they enjoy working with properties, looking around them, estimating refurb cost etc. etc. but it soon becomes very apparent that none of those property deal leads exist without having generated the lead to find the deal. So as a property sourcer, your business lives or dies by the flow of deals that you can generate. So you have to develop the skills of the marketer in order for your business to grow.
Capitalise on the Opportunity!
In reality, a property sourcing business is as equally a marketing business as it is a property business. Other industries have embraced the online lead generation strategies and are way ahead of the curve in that area. Now the property sourcing industry is way behind so that represents a fantastic opportunity for you to not only find deals that other sources can’t reach, but also systemise and automate your lead generation to give you a consistent and almost endless flow of property deal leads.
Okay, so hopefully I’ve convinced you suitably that the opportunity of generation leads online and what it can do for your Sourcing business.
Let’s look at these 7 steps on how you can actually do it:
Step 1 – Targeting Specificity
An effective online lead generation strategy requires targeting specificity. So start by being clear on exactly what Properties strategy you want to generate leads for. Are you looking to package and sell rent-to-rent deals, below market value property deals (BMV), flip deals, which will it be? Think it through and pick one.
Step 2 – Target Audience Persona
Now you know what strategy you want to generate leads for, you need to think through the type of individual who you need to target. Remember, we’re targeting a person when we generate leads. Now this is called creating a target audience persona or an avatar. So think through, who are they? Are they male, female, a mix of both? How old are they? Where do they live? Are they single, are they married, do they have kids, really think this through. Now a key part of the stage is also to clearly identify what problem the audience has. So let’s say you were targeting leads for a rent-to-rent strategy, you would be targeting landlords of course. So what frustrations, irritations and annoyances does that landlord have? What is it that eats away at their thoughts and wakes them up at 3:30 a.m. in the morning with worrying and indigestion? Is it void periods? Difficult tenants? High maintenance cost? These are just three; you need to think through a number more of those. The more information that you can gather, the easier it will be to create content and a message that is attractive and will resonate with your target audience.
Step 3 – How to find the Target Audience
Now you have built a clear picture of your target audience persona, you need to think through: Will you be able to find them? Where are they? Think of all the possible places online where they hang out - do they belong to any groups or forums? What types of blogs do they read? Would they use Google to search for an answer to that specific problem? Are they on Facebook? Really think that through and make a note.
Step 4 – Create a Lead Magnet
Next you’ll need to create a valuable piece of information that your target audience will want in exchange for their email address. Now this is known as a lead magnet. So having taken the time to create and build out your target audience avatar, you know what their pains and their problems are. Your valuable piece of information should look to take the first step in helping to solve their problem. Now you’re not giving away the complete solution here. You need to give them enough to whet their appetite and for you to demonstrate your knowledge and authority on the topic. So, using our rent-to-rent example, we could create a lead magnet on The ten ways landlords can guarantee their rental income without the need to ever speak to a tenant or some compelling headline like that.
I’ve prepared an accompanying download to help you work through and create your first lead magnet. So if you go to goliathsourcingacademy.com/session4 you can download the Six Steps to Creating Your First Lead Magnet and along with that is a 5 Point Lead Magnet Checklist. So once you’ve created your Lead Magnet you can run it through the 5 Point Checklist to see if it’s going to be the right standard.
Step 5 – Create a Squeeze Page
Okay, so let’s move on to Stage 5 here. Now we’ve got our lead magnet, we need to create a page in our website to offer it to people on. This is known as a landing page, an opting page or you may have heard the term a “squeeze page“. Now they are essentially the same thing. The page has one purpose and that is to get the email address of the visitor or essentially your target avatar in exchange for your lead magnet. Now the page will generally have no menu navigation on it so that the visitor is given only the option to leave their email address or not. You may have come across pages like this. The term ‘Squeeze Page’ actually came from the idea that you are squeezing the visitor for their email address. You are giving them one option, to do one thing on the page and nothing else.
Step 6 – Drive the Traffic!
Let’s move onto the next step. Now with your page set up, it’s time to get some visitors in. Ideally we want to be driving very targeted traffic to it, so think back to stage three. Where does your audience hang out? There are two types of traffic we can bring to our opting page; there’s paid and there’s free. Free traffic comes from organic search results from Google or social media. There are more free traffic channels than that but they are the main two essentially. As the name suggests, you don’t directly pay for the click that results in a visit to the landing page with free traffic. Paid traffic on the other hand, is where you do pay every time someone clicks on one of your ads and visits your landing page. So you will have heard it described as Pay Per Click or PPC marketing. I’m a huge fan of paid traffic channels, as they allow you to control the flow of clicks and visits to your page. Facebook ads and Google ads are the two big paid traffic channels and platforms.
Step 7 – Start to Engage
Okay so let’s move onto the final step, which is step 7. We’ve now got our squeeze page, with our lead magnet on it and we’re driving traffic to it and we start to get people to leave their email address and opting in to receive our lead magnet. We’ve now created a lead. So we’ve now got a lead in exchange for giving away the lead magnet. The next step is to begin the process of engaging with that person. We start to get into a lead conversion phase here but it’s worth touching on this as we close this episode segment.
The first email you send to your new lead will include a welcome message from you and a link for them to get your lead magnet. If you have done a good job of creating a compelling lead magnet then you can make an assumption that this lead, or person, has a problem of some degree otherwise why would they have requested your lead magnet? So, in your first email you should also include a very clear call to action. A call to action, or a CTA, is an instruction that you give your prospect as what you want them to do next and why. So in our rent-to-rent example, we may have a call to action that goes something like, (this is at the bottom of the first email), “Excessive void periods and/or rent arrears eating into your profits? We can guarantee your rental income whether your property is empty or not. Either hit reapply to this email or call us now on….” and leave your telephone number. That is actually a very strong call to action.
Okay, so your job now is to begin to build a relationship with this lead by contacting them regularly with useful and valuable information. If you do this well and consistently, they would begin to know you, like you, and trust you. They would see you as an authority on the topic they are looking to solve their problem on. This is all done over email so it’s automated, it doesn’t involve you. Now if they don’t reply to your email, that’s fine - keep at it, keep sending them great information.
Now at each point, you should also include the call to action, so that when they are ready to get help to solve their property problem, there’s no doubt in their mind that it’s you that they want the help from. You might get some people contacting you very early on after becoming a lead or they might take a little bit longer, sometimes up to months, but you will fill your pipeline with the prospects that will eventually contact you.
So those are the 7 steps to online lead generation. I mentioned before that the property industry is lagging way behind on its levels of sophistication when it comes to generating property deal leads. Using the method I just laid out for you, you would be hard pushed to find many property pros actually implementing this and therein, lies a massive opportunity for you.