This is just one tiny excerpt from “How To Market Your Mortgage Broker Business” (a 2 hour audio training course) that you can download for free.
Jassen: That is very true. The next thing that I want to discuss here on our next slide is when you have your list you say all the time you can’t be all things to all people, but when it comes to building your list and marketing to that list, you can segment your list into different chunks and so that you can be different things to different people. This is list segmentation and really using niches to market yourself. Explain to our listeners how a mortgage broker could niche themselves out and how they kind of go about talking to these different segments of their list.
James: Well, I won’t address specifically how to talk to those different lists. I am going to leave that to you to find your own voice, because it really is unique to each person. The way I talk to my particular list is going to be significantly different than the majority of other people just because my personality is probably different than most of you. However, I will tell you that you should segment your list into different segments, and I will talk about some of the various ones that I will definitely recommend you do and then give you some ideas of general ways you can communicate with them.
So as an example, one niche you could focus on as a mortgage broker are brand new first time home buyers who have never qualified for a loan before, who are currently renting property and need someone who will hold their hand and walk them through the whole process of what is/does the qualification process look like. Do I need to get prequalified before I go out and start looking at houses? How do I do that? What do I need in order to do that? What are the advantages to me of bringing a prequalification letter to writing an offer on a property? What is the definition of a point? How does the difference between a variable rate loan work and a fixed rate loan? You will be doing a lot of educating in that capacity, so that is one example of picking a niche.
Another niche which is probably on the other side of the extreme is go after real estate investors who want to do multiple loans per year because they are trying to buy multiple properties. They need to be buying it all the time and bringing it to their portfolio and so you are not going to need to educate them nearly as much about the basics, but you are probably going to need to explain to them some more creative financing approaches, ways to do short term loans, ways to even do hard money or private money, if you are actually going to focus on that as another niche, which I think there is a huge opportunity right now for focusing on brokering private money loans, which we can talk about if you want to. There are a lot of different niches like that you can focus on. You could focus on commercial property, you can focus on second home buyer vacation home properties. So there are lots of different niches you can focus on, and are we going to talk a little bit later about doing different marketing to target those different niches, or should I talk about that now.
Jassen: Actually, if you could go into that briefly now, but before that I wanted to throw something out there about what you just said. Are you saying, James, that there is still money available for financing for investment deals?
James: Yes.
Jassen: That is an inside joke for folks that are new to us.
James: Yes, there’s tons of money out there for investors, and there are not a lot of the traditional 100% financing programs. They have mostly gone away. There is not a lot of these really crazy 80% loans, plus a 15% loan plus a 5% loan in order to get 100% of the finance. Those crazy loans for real estate investors doing 100% financing, they are much harder to find. There is probably one or two lenders doing crazy stuff out there, however, there are other ways to do financing for investors. One of the things I actually got licensed for last year is I went down and I got licensed so that I can talk to private individuals and raise private money in order to lend out secured by real estate. So I actually have a broker dealer license here in Colorado, and I am able to go and broker those loans. Now, if you as a mortgage broker were to go out and make sure that you were licensed to do that, couldn’t you go raise special funds in order to be able and go and finance these types of properties and offer…
Jassen: Definitely.
James: Whether it is hard money or whether it is private money loans and cater to that very specific niche of investors who are looking for those types of deals? Yes.
Jassen: Most definitely. In this case you become the underwriter right? That is what you are talking about.
James: Yes, when I am doing the loans for myself.
Jassen: Right.
James: I mean that is one way to look at it, but I mean let’s talk about the mortgage broker side. Forget about me.
Jassen: Ok…
James: Let’s talk about how they can get business, and if you go make sure that you are able to do that now you can go and target people that have money that are tired of getting one, two, three percent on CDs or negative 50% in their stock market portfolio if you take certain time periods in their stock market you can easily see that it is a negative 50% return, but you can go ahead and talk to them and say look, how would you like to earn six, seven, eight, nine percent, ten percent, whatever it is that you want to do for your real estate investors and then put the two together and you can broker really nice mortgages by doing that. That is just one part of the business. You don’t have to go do that. You can use more traditional banks and focus more on first time home buyers or commercial loans or real investors that are putting 30% down, but there are a lot more investors who would be very excited to see 100% financing on really good investor deals, and you would have a very strong niche marketing advantage doing that if you decide to go and do those extra steps and get licensed and make sure that you can do that.
Jassen: Ok. Some people might be listening to this going, “Ok, I understand the specialization concept,” but they are asking, “Why would I want to do that?” What are some of the advantages of becoming a niche specialist for a mortgage broker.
James: Well, one of the advantages is that you can save money on your marketing costs. It is a lot less expensive to target very specific groups of people and use that as your marketing advantage. You will get increased response by offering a very specific nice or widget toward a very specific group. For instance, if you did decide to go and raise private money and offered that loan it is easier for you to reach real investors if you go and target those guys rather than doing general solicitation to anyone who needs a loan. You can go and focus on those guys, have a very specific product in mind and get a much better response rate by doing those types of marketing. So that is one of the advantages. The other advantage is that you get to be a big fish in a small pond which you become very well known in a very small, very active community of people that would want your product more so than others so you can go and dominate a market by just focusing in on a smaller area and then expand out into multiple niches simultaneously. You don’t need to be stuck in one niche, you can have multiple niches. You can focus on first time home buyers and investors or first time home buyers and commercial or move up home buyers, second home buyers. You can have multiple niches focusing on those simultaneously.
Jassen: Ok, now the next thing that inevitably is going to come up is this whole concept of you have got this database that you talked about a few minutes ago and maybe you have got it split up into your first time home buyer pool, your investor pool, your second home buyer pool, whatever different niches that you are focusing on. But obviously what is going to come up, people are going ask “Well, ok, how do I build that list?” Now you like to break things up into offline and online lead generation because that is a natural fit for how you do business.
James: Right
Until my next post,
James
P.S. This is just a small part of what you’ll learn in the full training: “The World’s Greatest Mortgage Broker Marketing Course”.
Just a quick reminder that we do have a free webinar on raising private money coming up in two weeks on February 11th, 2009.
I’ve invited Patrick, an experienced real estate investor that has raised a ton of private money on for the webinar and he will be training us on the best ways to find private money lenders, how to present to them and much more.
There really has not ever been a better time for raising private money for all your deals because interest rates are extremely low and there are more great deals out there than ever before.
Register for the free webinar using this link: https://www2.gotomeeting.com/register/321236082.
Until my next post,
James
If you have a property that you need to fund and you have been growing your email list of potential private lenders, use the Email Blast for Private Money Checklist to contact them to line up someone to fund your deal.
In this checklist we cover making sure you have setup a webpage or at least a single PDF sheet about the deal so that you have something to show your potential lenders about the basics of the deal.
We walk you through using your email broadcast service—and definitely not your regular email account—to send out the email message to them.
We remind you to check your key information in the email like your links and contact information. We have you check each link to make sure that you are not about to send out an email with an invalid link.
We also remind you to send yourself a copy of every email blast you do and to archive them so you can look back through them if you ever need to.
And finally, we remind you that you need to process all remove requests from people that no longer wish to receive your emails to be in compliance with the law. This is just one of many reasons why we do not recommend you use your regular email account to send out these emails, but insist that you use a professional email broadcast service.
Until my next post,
James
P.S. We have a huge amount of information on how to raise private money for our Real Estate Investor Bronze Members in the Real Estate Investor Wiki.
We use the How To Hire A Private Money Coordinator to hire our private money coordinator. A private money coordinator will be responsible for raising all the private money you need to fund your deals as a real estate investor. It is their full time, commission based job to go out and raise money for deals for your business and that is their sole focus.
You will want to create your private money program first or have that be the first step for the private money coordinator you hire.
I recommend that you provide potential private money coordinators with written documentation of your program, what you would expect from them, ways other investors and private money coordinators have gone about raising private money, sample elevator speeches and so on. They should read through this material and get questioned on it with you before you sign an independent contractor agreement with them so that they fully understand what they are going to be doing.
I also insist that our private money coordinators call their local state securities office to find out what licensing, if any, and what they need to do to be in compliance when raising private money for us.
Until my next post,
James
P.S. Raising private money is an extremely popular topic right now in the real estate investing community. We have checklists, independent contractor agreements, sample private money programs and so on for our Real Estate Investor Bronze Members in the Real Estate Investor Wiki.
We use the Marketing for Private Money checklist to remind us to do marketing to make sure that we have all the private money that we need to finance deals.
IMPORTANT NOTE: Please make sure you are properly licensed (if required) in your state before actively marketing for private money. We have additional information on that for our Real Estate Investor Bronze Members and/or contact your attorney for details.
Or, consider hiring a Private Money Coordinator using the How To Hire A Private Money Coordinator checklist to raise all the private money you need for your real estate investing business.
A Private Money Coordinator is someone whose sole job is to go out and raise private money for your business. Sometimes they are experienced mortgage brokers that are accustomed to raising money for other clients and you are just one of their clients. Other times they are working exclusively with your financing needs in mind with you as their only client.
We have extensive additional checklists, independent contractor agreement samples, private money presentations and much more in the Real Estate Investor Wiki if you are interested in hiring a Private Money Coordinator (or to use yourself if you want to raise your own money).
Until my next post,
James
There are 9 risk categories associated with investing in trust deeds or becoming a private lender and the one we will be discussing here is the risk associated with senior encumbrances.
A senior encumbrance is a claim against the property that has a higher priority than your investment in the property. Whenever you lend on a property that has a senior encumbrance you need to be concerned about some additional risks associated with those senior encumbrances.
Specifically, if a senior encumbrance is not paid as agreed by the borrower, to protect your investment as a junior lien holder and minimize the potential of loss, you must pay the amounts necessary to cure the default and keep the senior encumbrance in good standing. If you fail to do so, you could lose your entire investment if the senior lien holder forecloses.
So, how do we significantly reduce that risk as a private lender? Well, the first thing that comes to mind is to opt for investments where you are the senior encumbrance. Be cautious when you are presented with an opportunity to invest where you are not the most senior position. Can you be in first position as the most senior lien holder and have someone jump you in line? Usually no, but there are exceptions like property taxes. If your borrower fails to pay property taxes on the property than the county can put a lien on the property and that lien is a priority lien above mortgages. So, even in first position you need to be aware of what can happen and what you will need to do to protect your investment.
It is also important to review senior encumbrances before lending in a junior position since some can include clauses that forbid junior liens completely or insist that the senior encumbrance be paid off entirely if certain conditions are breached.
While there is definitely risk associated with senior encumbrances when investing in trust deeds, often the higher, fixed rate of return still makes these investments very attractive to investors.
Until my next post,
James
