Tuesday, August 25, 2015

Asking Questions

Many of the novice investors with whom I meet have fears around talking to Sellers. Especially if they are younger and used to communicating through email, texts and social media, rather than over the phone. Successful investors communicate over the phone or in person directly because these are the most effective form of communication. The novices are too new to know how to respond to questions they may get from Sellers. What do they say to them?

Most real estate investor gurus, like Ron LeGrand, provide a script for new investors that will help them get over this fear. It is better for new investors to follow a script by reading it out loud, rather than "winging it," until it becomes comfortable. If you do not make calls, you cannot succeed as an investor.

S/he who asks questions is in control. As the investor, YOU should be the one asking questions. I was reminded about this on a recent conference call between myself, my builder/equity partner, an equity firm in Chicago, and their investor in London. My equity partner jumped on the phone with a barrage of questions that became the framework for our entire discussion, and resulted in a $1.5 million decision by the investor.

Here are a few questions that help novice investors establish rapport with a Seller:
Tell me about this house. What did you like most about living here?

Determining motivation:
Why are you selling?
What is most important to you in a (sale, cash out, etc)?
What is important about that?
To make sure I understand, ultimately, what would (answer above) do for you?

(if they want cash out) What would you use the cash for? How would you invest it? (most sellers don't know) What kinds of returns would you expect there/after fees? What if I could offer you a better rate of return?

(If they want a retail price):
Why not list your house on the market? (listen for objections: I don't want to pay real estate commissions; the house is not in a condition to sell on the market; there is an elderly or sick person residing there; too many repairs, etc.)

If the Seller is not motivated, not in a hurry to sell, does not have a need driving his desire to sell, move on. There is no point in staying on the phone asking further questions. A simple "I don't think this will work for me. Thank you for your time," is a sufficient exit line.

Negotiating a price:
If I paid all cash and could close quickly, (avoiding the objections to listing as noted above) what is the best price/terms you could do?
Is that the best you can do?

Overcoming Objections:
Many novices perceive a question as an objection. But a question is simply a question, and nothing more. Respond to it factually and move on to your next question. An example might be:

Q: Are you planning to live in this house?
A: No, I typically buy houses as long-term rentals. Can you tell me what type of neighbors you have now? Renters or owners?

Closing Questions:
As Director of Expansion for another business, here are the questions I typically ask at the end of every presentation:

1. What did you like best, the product, the money or both?

2. Tell me more about that.

3. Do you want to make a little bit of money or a lot?

4. What for?

5. At your current job, how long will it take you to do (answer to #4 above)?

6. Where do you see yourself getting started, at the bottom slowly working towards your goal, or do you want to put yourself in the best position to allow you to accomplish your goals faster? 

By the time they answer these questions, they are ready to sign up.

Similar closing questions to a homeowner might be:
What if I could show you a way to have (motivation answers) by selling your house to me instead of listing it with a broker?

Would you be interested if I could show you a way to sell your house for more money?

I like to remind Sellers of the reasons why they NEED to sell (assuming this is not merely a WANT, and that there is real motivation), and why selling to me helps them achieve their goals and avoids the hassles they may encounter with listing their property for sale with a real estate broker. An investor needs to be asking the right questions to be able to prepare the right closing questions or statements.

And finally, I am not a proponent of making an offer on the spot, unless you are a very savvy and experienced investor. I like to "walk away" for a day or two to work up an offer, and preferably one that gives the Seller more than one option about how I could buy their house. So I usually end my meetings to a Seller with:
Let me play with my numbers and see if I can make this work. I will get back to you within the next day or two.

The good news, as with all things in life, is that practice makes perfect. Pick up the phone, and keep practicing! You will become better, more comfortable, and ultimately more successful as an investor, as you practice the art of asking questions.

Happy Investing!


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