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"Finding good investors is more important than finding good homes. . ."
By Monica Feid  | | Craig Jennings | | Last summer, Craig Jennings, of HomeBuyers Express, Memphis, TN, couldn't sleep. He would find himself on his home computer at 3 a.m., desperately searching the MLS for what he called a "homerun." With bright notions of a successful launch as an HVA franchisee, he quickly found himself undercapitalized and in trouble in his first year of operations. "In August, I thought we were about to go under," Jennings said. "I had a lot of sleepless nights." Sure, he was getting leads as a result of his HomeVestors advertising. But Jennings said his leads were nothing but lemons. They were run-down shacks that, even if rehabbed, would mean little financially. In a bear market like Memphis, there just weren't enough of the homeruns to make it day-to-day. "It's really easy to make money on hundred thousand dollar properties that you can get for sixty-five thousand," Jennings said. "That's a no-brainer." But in a depressed economy like Memphis, a typical rehabbed home might fetch $70,000 to $80,000. Jennings said there's not a lot of room for error, and there are not a lot of buyers for the effort. "I was getting killed when I was trying to buy, rehab and sell properties," Jennings said. "I was running all over town, chasing down contractors, realtors and more." All his concentration was on homeruns, which were few and far between. And when he had one, he had to sit on it longer, make better decisions and have more operating capital. Meanwhile, the clock was ticking on his business. Jennings was so busy rehabbing for resale to the general public that he put off developing an investor list – a critical mistake. But all of that changed when he asked his closing attorney to refer "junk buyers" that she worked with who were buying a lot of properties in low-end neighborhoods. What could it hurt for her to seek permission to relay some of those names? Her clients could buy more houses, Jennings could sell more, and she could be the closing attorney. Everyone would come out a winner. That one conversation turned into a whole new approach to business for Jennings. After a couple of solid names for what Jennings respectfully calls "bottom feeders," HomeBuyers Express began mounting a comeback. Jennings said his investors are guys that own 300 of these homes and don't mind spending $15,000 on a rehab to put it under Section 8 housing and rent it out. It was a match made in heaven for Jennings and his new contacts. Jennings may not have been getting a lot of homeruns, but when he went back through old BMS leads from day one, he found plenty of so-called junk properties for his investors. That's when he got busy on skinny deals. In his words, he turned lemons into lemonade. Today, he might buy a house for $7,000 and turn around and sell it to one of his investors for $10,000. The past two months, he bought 10 houses each month, and 75 percent of the homes came from old BMS leads that Jennings originally passed over! Additionally, his business has grown leaner and more efficient. HomeBuyers Express moved out of big space in an office park and into a shared suite. Jennings now has low overhead and does most of his deals on paper and over the phone. By focusing on investors, Jennings has transformed his franchise and boosted his operating capital. If a homerun comes along, now it's considered gravy for the business rather than a necessity for staying afloat. "Finding good investors is more important than finding good homes," Jennings said. "I would rather find a good investor than a good property, because a good investor can get you long-term business over and over." Jennings assigns most of his houses to investors. "If it's a property I want, I will close on it," Jennings said. But he added, "I spend a good part of my day just calling investors asking what they're looking for." Jennings discovered that finding ugly houses for his investors was good repeat business. It was also a world apart from trying to hit a homerun with a rehab and resale it to the general public, one-time customers on any given day. As for all of the BMS leads he had previously considered useless, Jennings said, "The answer isn't always how many leads you get. It's if you know what to do with the ones you have." . . . Monica Feid of BizCom Associates handles public relations services for HomeVestors and its franchisees.
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