In a previous article in this series (Real Estate Investment Strategies My Mother-In-Law Taught Me – Part 1) I explained the story of how my mother-in-law taught me basic real estate investing strategies. I covered three key strategies she used:
1. Asking the right question to determine if the property was priced realistically
2. Asking the right question to determine how much equity there was
3. Ready to let her feet handle the response by walking away
Now I will expand this and reveal some more strategies she used that was just brilliant.
A quick recap. We are at Mrs. Moore’s house. Strategy 1 revealed that a fair price was $71,000. Strategy 2 revealed that there was $56,000 ($71,000 – $15,000) in equity.
Then my mother-in-law began looking around, she even looked under the sink, although I couldn’t imagine why. She came back to Mrs. Moore and asked, “If I paid you the $71,000 and took over your mortgage so we can close quickly, how fast could you get out of the house?”
Key Point: This is another basic real estate investment strategy because this final question lets you find out if the seller is highly motivated to get out of this property. You want to know that they would be out of the house as quickly as possible.
What you don’t want to hear is something like, “Well, let’s see, this is February. The kids are in school, but they get out June 12. I guess we could be out by the 4th of July.”
In fact, Mrs. Moore really said, “Are you kidding? I can’t get out of here fast enough. My husband has been up in Detroit for the last five months with our son. I am stuck here with our daughter, Becky, and you can imagine how that relationship has been going. My husband just closed on a house up there, so now we have two payments to make every month. I’ve been trying to sell this thing for 20 weeks.
So, the three right answers you want to hear are that the seller has:
— Realistic idea of what the property is worth
— Lots of monopoly money to play with (equity)
— Plenty of motivation to get out of the property immediately.
So my mother-in-law finally got her three correct answers. You would think that she’d whip out a contract and have Mrs. Moore sign on the dotted line. However, she did nothing of the kind.
I am setting my glass of ice tea down and the door shuts. She hasn’t said, ‘Thank you” or “Good bye” or “I’ll see you later”-she just leaves the building. The car was already running when I got in.
I said, “Wow, I thought you were going to make an offer on that one.” She just looked at me, said, “No,” and drove on. We still went to four more places, but no one else was able to get to Question Number Three.
By the end of the morning, we had been out there for about four hours. We’d been in eight houses and only gotten to third base once. As soon as she got the wrong answer to any one of these three questions, she would leave the building.
Some sellers actually got past the first question, but then made the mistake of answering her second one by saying something like, “Oh, you know, we love this, we’ve just refinanced the house. For $500, you can take over the payments.” When that particular statement was made, I was still digesting the response when I heard the front door close. I seemed to spend most of the morning catching up with her.
Although this behavior seemed very peculiar to me, I knew that she was actually extremely successful with her Saturday hobby.
So just before she drops me off at the house, she says, “Well, are you going with me tomorrow?” I was startled into saying, “I thought you only did this on Saturday.” She says, “Well, mostly, but I have to go see Mrs. Moore tomorrow.”
I thought this meant that she had a policy of not making an offer the same day she found a property, so I agreed to go again. She said that she would pick me up at 6:57. Since I always went to the 8 a.m. Mass, I knew that wouldn’t work. Then, she let me know that she meant 8:00 that evening.
Key Point: Don’t be a motivated buyer! By letting her feet respond my mother-in-law showed that she was willing to walk away. In so doing she took emotional control over the seller. Do you think that Ms. Moore was glad to see us again? Was she happy to sign that contract?
Remembering these basic real estate investing strategies, will help you analyze potential deals and determine if they are deals or not.