Shotgun strategy

From: Apprentice Millionaire


Paul H did a splendid job with his post under the topic of "Some questions???"

I pulled out of his post the paragraph about the "Shotgun strategy". And it appeals to me.

So I have a few questions, and those of you who apply this strategy may like to reply (and I will be grateful for that!).

a) Paul writes that in an area that I would have researched, I would make a 75% of FMV on ALL properties. So to what depth do I need to research the market to find FMV? Can I not just make offers at 60-70% of FMV to compensate for my lack of research? If I am going to make offers which might be rejected in the majority of cases, then I should just go for it. Or should I not?

b) Paul says make offers on ALL properties. Surely that means that I may not be able to inspect each and every property on offer. Indeed, I would make the majority of my offers sight unseen! In order to avoid the ones that have problems, that would mean that I would obligatorily include a "subject to building inspection" clause in ALL my offers. Am I correct?

c) Paul also writes that novices "can do this; and also helps to get used to dealing with agents and the black-art of property negotiating." How much negotiating needs to be done? I would say that if I am looking at making 100 offers, and out of those I get 1 or 2 well-bought properties, I would not need to negotiate much. In fact, if the offer is rejected, I would just go: "Next!"

d) Making offers on ALL properties will call for some finesse and some scheduling. I cannot imagine myself dropping a bundle of offers on a RE agent's desk. How do those who use the shotgun technique do it? 2-3 properties per RE agent per week? Talk to different agents within the same agency?

Finally, the reason that this appeals to me is that the first IP I have bought was one of the "three D's" as Geoff Doidge puts it (Death, Divorce, Desperate). In my case it was divorce. But I only found out after settlement, and I was indeed surprised to see how my low offer had been so quickly accepted. This strengthened in me the strategy of looking for the motivated vendor, and this shotgun strategy could be very useful!

Cheers
Apprentice Millionaire
(aka Jacques)
 
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Reply: 1
From: Michael Yardney


Jacques
I'm not sure the shotgun strategy is sound.
I know it is proposed by a number of people, but I would suspect they are inexperienced property investors. The problems I see with it are:-
1. You don't want to buy a property just because it is cheap. That is not to say that you don't want to buy your properties well and below market value, but most cheap properties are cheap for a reason, and you don't want this type of property.
2. You will loose all credibility and rapport with agents if you keep putting in "silly offers." They are obliged to submit all offers to the vendor, and if you keep submitting ridiculous offers you are wasting their time. I assure you this won't build the sort of relationship that I have with a few agents who ring me first when they have a good property. I find many of the properties we buy are offered to us before they get to the open market because agents know we are genuine buyers(they also know I bargain and only pay below market price)
So what approach would I recommend?
I think the problem for most new investors is that they don't recognise a good bargain when they see one, because there is no sign out front saying "BARGAIN OF A LIFETIME" To recognise a bargain you have to develop a geographic "comfort zone", a patch of real estate that you know like the back (or front) of your hand. One where you know the prices of properties, rents, trends, etc and you can only do this through hard work and lots of inspections. It will take time, but when you make $20 - $60,000 on a property deal that you have bought well and everyone calls you lucky ....you will know different.
Michael Yardney
Metropole Properties
 
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Reply: 1.1
From: The Wife


Please find my notes interspersed thru the below post, covered by the ****, cheers!


On 6/16/01 4:47:00 PM, Michael Yardney wrote:
>Jacques

>1. You don't want to buy a
>property just because it is
>cheap. That is not to say that
>you don't want to buy your
>properties well and below
>market value, but most cheap
>properties are cheap for a
>reason, and you don't want
>this type of property.

*** Michael, Agree, A dog's a dog!no matter how cheap***


>2. You will loose all
>credibility and rapport with
>agents if you keep putting in
>"silly offers."

*** Good Lord, if you ask for anymore than 2K of the price they call it a silly offer!somebody needs to explain to real estate agents, what their position is on the food chain***

They are
>obliged to submit all offers
>to the vendor,

*** Oh please, dont get me started***

and if you keep
>submitting ridiculous offers
>you are wasting their time.

*** The only time your not wasting their time, is when you walk in ready to sign a cash contract, at the vendors asking price!***

I
>assure you this won't build
>the sort of relationship that
>I have with a few agents who
>ring me first when they have a
>good property. I find many of
>the properties we buy are
>offered to us before they get
>to the open market because
>agents know we are genuine
>buyers

**** I also have this wonderful relationship with a few agents, but they know I'm serious, they know I've got the wads to buy, and they know I'm a low baller, so they dont waste MY time, with vendors that wont budge, thankyou very much. Hello, who has the CA$H in this relationship (me) and who wants it? ( the agent) and ( the vendor)see how it works :eek:)****

(they also know I
>bargain and only pay below
>market price)

*** you big low baller you, Michael***

*** so Michael, low, but not to low...thats good, that shows balance, but how much profit, is enough profit??? as much as you can get away with I say, as much as the vendor will give me, some say yes, some say no, but lordy, show me the money!!****

>So what approach would I
>recommend?
>I think the problem for most
>new investors is that they
>don't recognise a good bargain
>when they see one, because
>there is no sign out front
>saying "BARGAIN OF A LIFETIME"

**** Whilst I agree with the "people cant recognise a bargain" idea, there ARE signs all over the place, done by real estate agents, telling you, THIS is a bargain of a lifetime, THIS is the steal you have been waiting for, in fact, spoke to some newbies the other day, who told me, they liked a house, BUT, it said in the add, "investors only for this one"! and they wanted it to live in......goodness gracious me, after I slapped them about a bit for missing the house of their dreams, I explained, that just cause its in 'print' doesnt make it so, and just cause real estate agents are called, "industry professionals" ( oh please, what marketting agent came up with that tasty bit???? , bless their black little hearts), doesnt mean they are.*****


>To recognise a bargain you
>have to develop a geographic
>"comfort zone", a patch of
>real estate that you know like
>the back (or front) of your
>hand. One where you know the
>prices of properties, rents,
>trends, etc and you can only
>do this through hard work and
>lots of inspections.

*** AGREED!!****

It will
>take time, but when you make
>$20 - $60,000 on a property
>deal that you have bought well
>and everyone calls you lucky
>....you will know different.


***Cheers, TW****


>Michael Yardney
>Metropole Properties



~Life is a daring adventure, or nothing at all~
 
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Reply: 1.1.1
From: Gee Cee Cee


Agree with the 2x Michael's & the Old T.W.

Know the areas you work. Know what they are worth & know what YOU can afford.

When something comes up you just know it will work.

Agents love when they can just call & get a sale. No marketing or advertising. Vendors quickly satisfied. Commission/ Commission/ commission.

Talk about booms about.

Went to a auction today. Waterfront on Sth Coast near Kiama. Old 2b/rm fibro cottage. (Bobcat Job)

The street looked like a prestige Car Yard.

Sold @ $605k.

Guess it looked cheap compared to Sydney.


Gee Cee

P.S. That certainly is a lot of overtime shifts.

(The old, poor, unemployed conservative Bum)
 
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Reply: 1.1.1.1
From: Ian Findlay


The "Old TW"?

I've met her and she is not old, she is a lovely lady (OK TW thats enough
for your $5, I can say more nice things but it'll cost ya $10).

Make sure TW doesn't know where you live - she'll be a knockin on your door.
.. . .

Ian

Just a joke, whoops. Still trying to redeem myself for the lonnnggggg post.



> From: "Gee Cee Cee" <[email protected]>
>
> Agree with the 2x Michael's & the Old T.W.
>
 
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Reply: 1.1.1.2
From: Apprentice Millionaire


Thanks Michael Y, Michael C, TW, and Gee Cee,

Excellent stuff! So, if I have learned the lesson well, the key is:
- research your area well, thus avoiding the dogs and recognising the bargains of a lifetime (which come every fortnight)
- build a strong relationship with RE agents, so they know you are *serious*

Targetted shotgun approach, then. And in Paul H's post, I would remove the "ALL" bit, replacing it with: "On the area that you have researched: make a 75% of Fair Market Value (FMR) on TARGETTED properties offered".

Did I learn well, mentors?

Cheers
Apprentice Millionaire
(aka Jacques)
 
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Reply: 1.1.1.2.1
From: Michael Yardney


Jacques
You summarised it well. Your a good "apprentice millionaire"
There is one point I left out.
Look for truly motivated vendors. And as TW hinted at, these are NOT the ones the agents say are motivated. Those ads are usually a come on to entice the inexperienced. Really motivated vendors don't usually want to let you know that they are motivated.
For Melbourne investors I will be discussing how to find motivated vendors at my FREE seminar on 17th July - see the Meeting Point section
Michael Yardney
Metropole Properties
 
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Reply: 1.2
From: Michele B


Michael C - can I ask you this? Why would an agent acting in his client's best interests offer a property to someone like yourself at a reduced price when full price offers are probable the minute the property is offered publicly? Just curious.

Michele
 
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Reply: 1.1.1.2.1.1
From: Michael G


Michael,

Is this some subscriber database or serivce that is available elsewhere?

Michael
 
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Reply: 1.1.1.2.1.2
From: Apprentice Millionaire


Salut Michael,

Thanks for the tip on motivated agents around the 90 and 120 day mark.

>In Canberra I have a tracking service which tells me how long the property has been on
>the market. Gives an indication of potential motivation as well as other factors.

I wish I had something like this around Melbourne. I have started doing this with my own area (researching the "comfort zone" that Michael Yardney speaks of), but it is a lengthy task, getting the local paper every week, plotting where the properties are, how long they have been in the paper, etc.

A la prochaine,
Apprentice Millionaire
(aka Jacques)
 
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