REO real estate investments through social media

Sep 2, 2013
REO real estate investments through social media connections

There are many real estate investors who look into foreclosures as the primary method to make money in this economy. And these days, there are so many foreclosed properties out there that you can get lost just choosing what form of distressed properties to buy.

One of the best ways to invest in foreclosures is to avoid the pre-auction stage and instead, buy properties with free and clear title after auctions, directly from banks and other financial institutions. These banks own hundreds to thousands of properties (internally known as non-performing assets) and want nothing but to take these properties off their books. Most investors and bankers refer to these unwanted assets as REOs (Real Estate Owned).

The key challenge is to find these properties without competing with thousands of other investors. When a large bank such as Bank of America wants to sell these REOs, it usually hires a realtor to market the property. At this point, when the realtor is in the picture, your chances of buying a REO at a great price is very low, since the real estate professional hired by the bank attempts to market the property to as many investors and home buyers as possible. Not a great situation for you!

On the other hand, some smaller banks keep the news about such non-performing assets to themselves and a few other insiders. Your chances of getting a great deal on a REO from a small bank in a small town, is simply much greater given the less competition that you might face. So the key question is how to find such small banks and how to approach them as a professional investor or a first time home buyer.

Let’s use the social media site such as www.LinkedIn.com to help us with our investment approach. If you don’t know much about LinkedIn, look at one of my previous articles for Trump University that covered this great business networking site. Just search Trump University blog using my name (Koz Khosravani) to find the article.

A great business networking site such as LinkedIn allows you to find and connect with hundreds of bankers and VPs in such institutions. However to be successful in using social media for your REO investments you must follow these simple rules:

•   You must create a great profile for yourself. Your profile should be very professional so that it would give you an instant credibility in the eyes of bankers and other VPs in these financial institutions. The first thing they do when you approach them on LinkedIn is to glance at your profile. Yes sometimes in life the first impression is all you need to fail or succeed. Just ask yourself if your profile would give this banker a great first impression or not. Your profile should help you establish rapport, trust and connection with all your other contacts on LinkedIn. So no short cuts here – spend as many hours as needed to make it look great without lying or inflating your credentials.

•   Use the search feature within LinkedIn to look for all those who work in the financial industry. What I love about LinkedIn is that you can search for individuals, companies, industries, geographic locations and more. As an example, when I look at my own contacts on LinkedIn (used the contacts link to view the list of all your direct connections), I can see that I have close to 200 contacts in “financial services” industry, 130 contacts in the “real estate” industry, and 47 in the “banking” industry. In the banking industry, there are over 15 individuals who are at the VP level or higher. Of course, these are my immediate contacts. There are hundreds to thousands more who are members on LinkedIn but are not my direct contacts. Every one of these contacts can refer me to the right individual in their bank who is in charge of selling REOs.

•   Of course if you are not connected to such individuals, you can always use the LinkedIn’s great system to be introduced to your target person through people you know. I always make introductions between these bankers and my investor students when I know my students are serious, honest and who would act professionally. You can even pay a small fee directly to LinkedIn to introduce you to your target banker. Feel free to contact me for introductions by emailing me at koz@web2marketingsystems.com. And don’t forget to take courses from Trump University who teach you about all aspects of real estate investments.

•   Next step is to approach your connection in the banking industry and ask her for referral to the right individual within her bank who can help you with your REO investments. The way you approach the banker and the language you use is very important however. If you do it right and sound both knowledgeable and professional, the banker will most likely help you. Here is a sample of what you can say to this person but don’t just copy what I write here. Feel free to use your own language and experience.
o   Dear Mr./Ms. XXXXXX,
o   I am a real estate investor in ______________ area who is looking for _______________ properties in or around the city of ______________________. My investment partners and I are looking to purchase your institutions’ non-performing assets with reasonable offers. We are able to close the transactions fairly quickly. Could you kindly refer me to the right person at your bank who coordinates the marketing of your non-performing assets. I like to thank you in advance for assisting me in this manner. Regards, John Doe

•   Now let me explain a few things about the message above. First thing is that you want to use the right language such as “non-performing assets” instead of words such as “properties”. Such "insiders" language will show the banker that you are a seasoned investor who knows about banks, REOs and who has had experience dealing with bankers.

•   The second thing is that you should be more precise about your investment requirements. For example, you can get specific and mention that you are looking for an office building, strip mall, apartment building or other forms of real estate. By specifying what you want, you set yourself up for success. The banker would know that you are not just an amateur calling and asking for anything that is available! A professional investor always focuses on certain area of investments based on careful research, market analysis and goals. And bankers would rather work with a professional who knows what he is doing. .The last thing they want is to finance and sell their non-performing assets to you and then being forced to foreclose again from the new clueless buyer!

•   You also might want to mention your investment partners if your credit rating is not good and/or lack adequate amount of money for down payment. Remember you do not need lots of money and a great credit profile if you can find a great deal. Investors with money and perfect credit are out there if you can show them that as your partner, they can buy a property for 70 cents on a dollar or even less.

•   The next step is to contact whoever that your LinkedIn banking connection asked you to contact to. In this case, you have such a great advantage compare to all your competitors. When you call the person in charge of the bank’s non-performing assets, you can honestly say that for example the bank Sr. Vice President asked you to call him! Wow – an instant credibility that will open the door for you. Whereas your competitors have to make a cold call (like vast majority of investors). The person in charge of REOs will treat you well and at least listen to you if you were referred to him by his superior. For this reason alone, when I make connection to bankers, I do my best to connect with bankers at VP level or higher. I want these high-level bankers to open the gates for me and act as a reference.

•   Finally remember to negotiate well and submit a reasonable offer. Nothing will turn off a banker like an amateur investor who is offering an absurd low offer on a property. Remember the bankers will accept loss on a REO in this market but the market will eventually dictate the reasonable price range for various kinds of real estate. Even in the case of REOs, the old concept of supply and demand still applies.

A social media site will not by you a property. It will simply help you establish relations with people in your chosen industry, in a level and geographic area that was just not possible only a few years back. Once you establish the connection, you are on your own. Act wisely and happy investments!