Pre-Foreclosure Investor Marketing

Now that the real estate market looks like a disaster a second round of real estate investors are swooping into the market to sweep up the destruction. The pre-foreclosure market is surprisingly competitive. Traditionally pre-foreclosure investors have focused their marketing on two strategies: Signs and Letters.

Investors have seen consistent results in signs (roughly one house per $100 spent) and Letters (about 1% success rate or one house per every $50 spent). These results are highly contingent upon consistency and quality of sales copy. One should expect much lower results if in experimental stages of sign placement and letter design. Also, it is very important to recognize the fierceness of competition. The pre-foreclosure investing community is somewhat infamous for the viscousness inherent in their competition.

Pre-Foreclosure Investing Is Very Competitive

Before the real estate bubble ever inflated, pre-foreclosures in most markets had already been competitive enough. However, thousands of realtors are now trying to justify their licenses by competing with investors on Short-Sale listings. The result is that investor's ROI of advertising is decreasing and investors must seek more cost effective ways to pick up houses.

You might be thinking that "a hundred bucks to pick up a house ain't bad". Before the bubble it wasn't. Many investors were able to accomplish success rates on their short sale investments in the 80% range. However, these same investors are seeing success rates in the 30% range in our current market.

Success Rate Declinging

Most of the decline in the probability of success has to do with finding buyers. Prior to market instability investors negotiated Short-Sales with a plan B in mind. Their plan A often was to sell the property the same day the note was cured through a simultaneous close. Plan B was to find a hard money loan to satisfy the Lender's terms if a buyer couldn't close within the bank's demands.

Today investors are highly unlikely to use a hard money loan to cure the notes for fear of the scarce buyer traffic. Investor's can lose their profits within three or four months of marketing the property after a hard money deal is used to close with lenders. This makes the risk far too high and far too unappealing to put their own skin in the game.

This trend is changing the way investors approach their entire business model. Their advertising money is being monitored like bankers in the great depression and their risk tolerance has changed from that of a sky diver's to a frightened accountant's.

Networking

How ought investors change to deal with the unpredictability of the market? Networking. Networking is by far the cheapest way to advertise. Networking with professionals in the General Market is saturated with competition. Many Realtors, Loan Officers, and other Real Estate professionals have aggressively sought out business with the investor community. Therefore, a deeply entrenched buddy system makes it especially difficult to shop for deals among this group. (There are still many options for pre-foreclosure investors to network...it is like selling insurance though. Most of your contacts will have a family member that they send their pre-foreclosure deals to already. The General Market is a valuable network. The unconnected real estate investor is simply going to have a much more difficult time opening the door.

Hispanic Market

This leads me to mention the most under utilized resource in the real estate investing market: The Hispanic Network. Many Bilingual real estate professionals are eager to meet investors. They have been so busy serving first time home buyers that they never became acquainted with investors during the scorching 2005-2007 season. Most of the Hispanic professional service community is (ahem...how do I say this politely?) several years behind the general market with information trends. To put it a little more harshly...the Hispanic Professional service industry is under informed and is, therefore, unable to point their previous clients in distress in the appropriate direction.

I have also noticed an extremely high success rate in "coachability" with Hispanic professionals. To their credit, even though they might not be as up to date with accommodating the latest market trends (ie short sales) they are eager to learn and eager to help their clients. Many Hispanic professionals are more concerned with the well being of their clients than they are with their ability to make deals with investors. This serves as an additional benefit for you. Investors can ask more from Hispanic professionals and give less in return than the alternative general market networks.

Hispanic professional networking opens the possibility of many other resources for the pre-foreclosure investor as well. A small portion of the real estate market is relatively healthy and predictable amidst the storm. First time homes within the blue collar communities are still quite substantial niche areas. Although home prices have suffered there, houses are still selling within 90 days.

Cities that have experienced rapid Hispanic growth tend to attract Hispanic buyers to these neighborhoods. Hispanic buyers are very price sensitive. Capturing the Hispanic Market means that you must give buyers a better price than its competition. Hopefully you can see the advantages in being the lowest priced seller in the community. Investors need to turn properties more than they need to wait for better prices.

If you have read any of Seth Godin's books you will recognize that this is a purple cow. Investors doing short sales are buying houses lower than the competitors and have the ability to sell for less also. This makes an investor a resource to buyers, loan officers, and Realtors. If you can consistently provide properties for cheaper than the rest of the market, then, you will be able to create a long list of buyers who line up to purchase the properties that you pick-up, discount, and prepare to sell.

Conclusion

Since the Hispanic Market and its professionals are especially in need of this resource and since the Hispanic Market buys the kind of houses that are still selling, then, the Hispanic Market is really a good fit for most investors.

I could name the power of the Hispanic Community's referral network, loyalty, low maintenance post transaction, and many other reasons to consider the Hispanic Market as a very valuable Investment Niche. Truth is that if you can't see the value simply for the networking demand within the Hispanic Professional Community, then, you are unlikely to see the value in any of the other Hispanic Market's benefits.