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The Discount Property Investor Podcast Episode 18! Thank you for sharing some time with us today. Today we discuss running appointments and determining repairs. You can not be afraid to set appointments when you are the phone with sellers. Set appointments and go look at properties!
David: Today’s topic is — Mike what are we talking about today?
Mike: We are talking about running appointments and determining repairs. So — it’s basically what do you do when you get this far? So we will do a brief recap. Last week we talked about talking to sellers and — your goal for talking to sellers was basically to set appointments. Well now, you are running the appointments so what do you do? My — philosophy on running appointments, Dave is the preparation to the appointment is the key to how that appointment is going to go.
Mike: So — after you get off the phone with the seller, you can — again and literally just jump into your pre-work for that appointment. What that involves to me then, I mean it is several different things. So I am going to say you want to show up with the contract, I like to show up with a contract that is pre filled out, where you have the property address in it already, everything except for probably the price. So I mean — you want to be ready to close on the property, you go in there with the intent to purchase the property, and you want to convey that to them. You want to make sure the seller knows that you want to buy this property.
David: When you pull a contract out at the kitchen table to, it conveys a lot of things like — confidence of course, as well as your intent. The intent of me coming here is to purchase this property.
Mike: Also I mean – it’s preparation, it kind of conveys your professionalism as well, that you came prepared, you know what’s going on, you are the one that is going to handle the transaction, because you are not working with a real estate agent, so you have to be the expert for the home seller. So you want to show up again, show up with the contract, show up with comps — if you are not going — you may not actually use them when you are discussing the property with the sellers — if they — if you are at already at a price that works for you, or if — there is a lot of reasons, you may or may not need them, but the point is, run your comps so you know what you are able to pay for that property. That is one of the reasons you are going to go with the contract. You need to know what you are going to pay for it.
David: Yeah, I like to at least — even If I don’t bring the comps I will always run them prior to the appointment to try and get a brief idea of what the properties in the area are selling for. If you can bring them with you, it’s not a bad idea because — for any reason you are at the kitchen table or whatever and you are negotiating with the seller, the comps might be a good tool for you to negotiate, you can always pull them out and say, hey Mr and Mrs seller, I know you are asking this for the property — however — this is what properties in the area have sold for. Whenever you do that, one of the tips I like — or one of the things that I like to do is I always try to convince the seller that — listen it’s not me versus you. We are on the same team; it’s me and you versus the market. So if the market will only bear this amount for these properties, as an investor it wouldn’t make sense for me to pay that price or more, I have to get it at a little bit of a discount.
Mike: Absolutely. And that kind of goes into my next — kind of talking point I guess you would say for — your running your appointment. What are your goals? So just like the previous episode we talked about our goals for the — phone call. You got to have goals for your appointment too; one of my primary goals is always going to be — building rapport. So you want to make a friend with that person and as Dave said, you want to make it very clear it is not you versus them, you want to create a win:win situation. You want to create the best possible outcome for them and for you. Again, you can’t buy it, you can’t pay over market value, you need to make that clear to them that you are an investor and that is how you feed your family by buying houses and fixing them and reselling them —
David: But that pitch is so easy, I was just telling another guy in the office here. That pitch is so easy whenever you say, listen i am an investor, I don’t pay retail. However, there is tons of advantages of working with me. I am going to pay cash, I am going to close fast and I am going to buy it as is. I am going to take all of your problems away, this is a property that you don’t want or need to get rid of — or its distressed, or your distress, whatever the case is. I can come in and I can help you — again like Mike said, you are always looking for that win:win — obviously the lower price you get the property for the more money you can make on it. But at the end of the day you are truly helping somebody that is in need of selling or moving their property and — you are going to be the buyer.
Mike: Absolutely. So then your goals for the podcast. I’m sorry; your gaols for the appointment — you want to make a friend, build rapport — make sure you guys are kind of getting on the same page. Then I mentioned earlier — there is reasons you don’t necessarily fill out the price ahead of time. That is because you don’t necessarily know what you are going to be able to pay for the property.
Mike: Just because someone told you that the property is in good shape, their opinion of good shape is very different to what the comps sold for — so we are going to have to determine repairs.
David: Absolutely. So let’s recap real quick. So you have done your marketing, — people have called, these motivated sellers have called you. You answered the calls, you have talked with them. You have found someone who has a high level of motivation; hopefully you built a little rapport with them on the phone, and then set the appointment. So at this point you have gone out, you have met with the property owner or seller, you have built some rapport — and at this point you are going to start determining the repair cost so at the end of your appointment you can make them an offer. Just like Mike was saying, definitely want to build a little bit of rapport — let these people know that you are there to help them. You don’t want to go in with the mind set of oh; I want to go make ten grand on this deal. Hopefully you do but the mind-set is, I am going to buy this property, I want to help you — fix whatever problem you have.
Mike: Dave is really good at — it is very genuine —
David: I can talk for days so it is easy for me to build rapport, just keep talking.
Mike: You want to be really genuine with them.
David: So great, once your there and you build a little bit of rapport — not you need to determine repairs. So on that call, whenever you set the appointment. Hopefully you ask this seller, tell me a little bit about the property — have there been any updates? Does it need work? Hopefully you just have a little bit of information about the property. But now you are standing in the property. What do you do next? Personally I like to walk the perimeter of the outside of the property first. Just get a good idea of the outside conditions. So whenever I am walking the property, I am just kind of noticing the outside, is it brick? Is it siting? If it is siting, what kind of siting? Does it look good? What do the colours look like? Are the gutters hanging off the side of the house? The facial boards which are just the boards that go on the edge of the roof — do they look good? Are they present? Are they painted? The [00:07:57.15 – inaudible] and those of you who don’t know what [00:07:58.14 – inaudible] is, it is the material, usually make of aluminium, it could be made of wood, but it goes beneath the roof and it connects the roof to the house. Is there [00:08:08.25 – inaudible]? How does it look? Is it in good condition? Is it painted? Then of course the roof. Does the roof look like it’s fairly new? Is it worn? Is it missing shingles? Then of course siting hanging off the house? Does it look good? Is it nice and well kept? Then when it comes to brick, you just want to look at the brick and make sure there is no major cracks in the brick — and or the mortar in-between the bricks is in good condition, if it’s not — then you will need to do what’s called ‘tuck pointing’ but again, you are just looking at this, it’s just an overall thing you’re not spending more than — I don’t know Mike, when you do an exterior walk around, what do you spend? Three minutes?
Mike: I’m pretty quick — two or three minutes walking around. So on the appointment also I like to take photos.
Mike: You want to get the owner’s permission, just say hey I am going to start on the outside of the house, quick walk around, is it ok if I take a few photos while I am walking around today so I can remember what I saw?
David: Absolutely. People are usually not going to care as long as you build a little bit of rapport with them. You say, listen I — want to buy this house, I am going to make you an offer at the end of this appointment — however I have partners so I need to be able to take some information back to them, just to verify — we are good to go. Usually if you build a little bit of rapport you don’t even need to tell them that. They usually say, yeah go ahead, take as many as you want. So — back to the exterior walk around. You also want to be noticeable of window AC units, and or a condensing unit and the condition of those. It is very easy to tell if a house has an air-conditioned or not — if they have a big AC unit that’s in the back. Often times they will have AC units but they are just all rusted out and look like hell. You know you are probably going to need a new air conditioner at that point. Also another thing to be aware of is the windows. You can have newer vinyl windows — that are going to be more energy efficient, they don’t need to be new — they can be 10, 15 years old — they have been making vinyl windows for a long time. But if they have the old wood windows, they are probably going to need to be replaced, most of the time. That is kind of it, that’s all I look for. Gutters, roof, siding, brick and windows. That is kind of the main stuff that you are looking for whenever you are doing your exterior walk around. You also may want to be — be aware of any landscaping but again, you are going to take a ton of pictures.
Mike: You also — you are walking around to find things to. So one of the things you might find is the driveways cracked. Or if the walkway, if there is big cracks in that concrete, that’s an issue. So that is something that needs to be addressed, so snap a picture of that and keep moving on. So you can use that as something that is going to need to be repaired — again something to negotiate price on later on.
David: That’s a good point Mike, I kind of over — I touched right over that. The main point of determining repairs while you are on the appointment — is to find all of the repairs and add those up either on a piece of paper or in your head, so that you can use that for fuel in your negotiations a few minutes later. That is a really good point, now again obviously those repairs are going to be important if you decide to buy the property and or put it under contract. But again, you are really there at that point to get some pictures — and do some math and figure what those repairs are going to be.
Mike: Ok, so let’s keep going — we walk into the house after on the outside and one of the key things you are looking for — for me I am going to go in, snap pictures of — primarily the kitchen, I like to check underneath the sinks to see if there is any water damage under all the sinks. Same thing in the bathrooms and — the bedrooms. Not as many pictures of the bedroom, but you are going to look for anything that needs repair. If there is a hole in the wall or there is a toilet missing — who knows? You just don’t know what you are going to find.
David: Just go around and look around. You are going to get better and better at this as you do this more and more. I always look at the ceilings and see if there is any water marks on the ceilings, because it is a good indication that the roof is leaking, or has leaked. Like Mike said, check under the sinks, make sure there is no water in there. You go down the basement — assuming it has a basement. You want to get some pictures of all the mechanicals. You want to get a picture of the AC, you want to get a picture of the water heater, and you want to go over and take a look at the electrical box, make sure it has newer wires. If it doesn’t not a big deal, but that is just more negotiating power for you when you are going to buy this house.
Mike: Right. As you progress as an investor, you are going to learn more and more about properties — you will pick it up as you go.
Mike: So don’t worry about knowing everything on your first couple of appointments or even — I still learn new stuff. I mean it’s — you are always going to be learning stuff.
David: So we dive into this in a lot more depth on the Discount property university which is a paid course. We have tons of different sheets in there about how to easily go through a property and determine what the repair costs are. So if you are interested in that — check it on the website, freewholesalecourse.com has a link to the paid course. But again, you are just going go around and just take picture and look at what you have to repair in the event that you bought it. And again, use that for negotiation. So couple more things real quick before we wrap the inside of it up is — when I am in the basement — look for water, look for water stains, look for water residue. That is a great indicator of if the basement leaks or not.
Mike: Or if it smells like mold.
David: If it smells like mold there is probably mold there.
Mike: So we are walking through, we have determined ok this house needs a few things. So in your head you kind of figure up — just come up with an idea of what you are going to need to repair. So when you have your comps you can subtract that off your offer price and subtract off your profit on top of that and that gives you your offer. So that is basically where you want to — kind of begin your negotiations —
David: You want to get some round, really easy number for everyone to understand — let’s say that the comps on the — three or four local comps that you have found that are good and very similar were 100,000 and that was the average of those three or four. And you walk around the property and you determine that you have 10,000 in repairs, need some windows, maybe need some paint and — maybe it needs a new plumbing stack. Maybe — somewhere in that range. So let’s say you are at 10,000 and you think this is a really great area — so discounting it maybe more than 20% isn’t necessary. So you go from 100,000 to 80,000. Then you are going to subtract out your 10,000 which puts you at 70,000. That is the highest you can pay, that does not include —
Mike: You got to have a profit in there.
David: That’s my point that is the highest you can pay and — there is no profit in there. So if it was me I would say ok the highest I can pay is 65,000 because I need to make 5 on this deal. So 65 would really be my — maximum allowable offer, my MAO — that would probably start my bid at 55,000 cash. Emphasize that.
Mike: That’s great. So what Dave just did was basically the MAO formula. He just went through that pretty quickly and we have got that in the free course as well, I think we have talked about it in past episodes. So if you want to look into that or dive into that a little bit more, we have a sheet in the free wholesale course that will make those for you, generate those for you.
David: Absolutely. It will generate it for you and it will also walk you through —
Mike: That’s the MAO, you have to start your offers pretty low to get going on it. Yeah that is pretty much it, I don’t know that there is much more to running appointments than that.
David: So that brings to a good point — I just made an offer five minutes before we started this podcast. I went and looked at a house yesterday and my offer was 77,000 and — the gentleman that I — made the offer to, on the phone told me 100,000 and when I went out and met him at the property and offered him 77,000 he then countered it at 93,000. So then I countered at 82,000 so I came up from 77 to 82, I believe that is 5000 I came up. He said ok let me think about it. So already, just from me going out and looking at the property, of course building rapport, I was there for 30 minutes, maybe more. I have already got this down — at least 10 grand, maybe —
Mike: Probably 18.
David: Hopefully we will get him down to 82, 83, 84 in that range. We will be able to sell this property for 95-100.
Mike: Was that [00:16:31.04]?
David: It was.
Mike: Excellent. We have a guy in our office we are working with and — one of his first appointments so — Dave was nice enough to run along with him and — help him get that one. Get that one going so —
David: Don’t be afraid is really the point of why I told that little story there is — don’t be afraid to make low offers. The reason is — now it’s coming back ot me. The reason is — because once you put an offer out, it is very difficult, especially after you have gone to the property and built rapport and determined the repairs to go lower. You can always, always go up on your offer — but once you make that offer — it is very difficult to say, you know I told you I would give you 85 grand for your property but — you know; now I feel like I can only give you — 80 grand. Well the seller is going to be pissed; they are not going to like that. All that rapport you just built with him is going to go out the window. So always start low, start at 55 with our previous scenario. If they say ok, well I need to get at least 66 grand because I owe the bank 66 grand. Well get what? Your MAO is what did we determine?
Mike: I don’t remember which property we’re talking about.
David: We started at 100, backed it down to 80 — took ten off so we are at 70 —
David: 65. So in that particular scenario — the most you could pay was actually — more than what they owed, or less than what they owed do it wouldn’t have been a deal. But if they only owed 59,000 — and they said I need to get 61 then — hey there you go, you could do the deal.
Mike: Unless they are willing to come to the table. Don’t be afraid to make the offer.
David: That is another good point. We are working with somebody right now who is coming to the table with 30 grand to sell this house, they are bringing that to the table. But at the end of the day they are happy to not have to deal with the taxes anymore or the trouble or the liability.
Mike: Again, you are helping them out.
David: I am just trying to reiterate what you said. You never know.
David: But start low at the offers, that is the main point I am trying to make here.
David: Well guys, thanks for checking out the podcast, hope you learned a little bit about running appointments and determining repairs. Don’t over think it, get out there do some marketing, set some appointments, walk through the properties. You will get better at determining repairs with every single property that you visit. Don’t be overwhelmed with it. Just get out there — often times if you build enough rapport with people — they will tell you what they need to get for the property or what they owe for it. Then determining your repairs is irrelevant — can i do this for what they owe? Yes or no? So —
Mike: That is a great point.
David: Just be active guys, get out there and do it, you are never going to do deals if you are —
Mike: I think our action item for this week would be, set an appointment if you have some marketing going and you have been talking to sellers — well if you haven’t run an appointment you need to. So set an appointment this week. To get started in wholesaling, if you haven’t done anything, check out the freewholesalecourse.com. Or if you want to see all our deals check out the discountpropertyinvestor.com.
David: And contact us. David@discountpropertyinvestor.com, Mike@discountpropertyinvestor.com. We would love to hear from you, and if you have any questions send them over guys, we are more than happy to help you out.
Mike: Alright Dave, let’s lead them out with a quote buddy.
David: A quote let’s do it. “The best preparation for tomorrow is doing your best today.”
Mike: Thanks for listening guys.
David: Thanks guys.
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