Smart Real Estate Investing: How To Identify Good vs. Bad Seller Leads

When it comes to real estate investing, one of the most valuable assets you can have is a qualified seller lead. Without these leads, you won’t be able to buy and flip property, which means that each one is vital to your success.

Unfortunately, not all leads are created equally, meaning that you have to make sure that you’re cultivating the best ones. At worst, you could wind up wasting a lot of time and energy on a lead that ultimately goes nowhere.

But how can you be sure that your leads are worthwhile? How can you make sure that you won’t waste your time and money?

Today we want to talk about how to identify good vs. bad leads and what you can do to minimize the impact that bad leads can have on your bottom line.

Step One: Set a Goal

The fact is that leads are not objectively “good” or “bad.” Instead, their value lies in whether or not they fit your needs. Thus, if you’re not sure what you’re trying to accomplish with the lead, then how can you possibly know if it’s worth your time?

The first thing you should be doing is determining what kinds of leads you want to get. Are you trying to buy a rental property for ongoing passive income? Or are you hoping to buy something that will get flipped and sold?

In the former situation, you may want leads where the property is in excellent condition and doesn’t require a lot of repairs. In the latter scenario, the quality of the building may or may not matter, depending on whether you’re trying to salvage the property or redevelop it altogether.

As you can see, there is a vast difference between these leads. Thus, what may be suitable for one particular situation could be bad for another. Until you figure out what your goal is, you can’t sniff out “bad” leads. After all, who’s to say that a “bad” lead doesn’t have the potential for the right buyer?

Step Two: Determine a Lead’s Value

When investing in real estate, you’re going to want to cultivate as many leads as possible. However, some are going to be much more lucrative than others, which means that you want to prioritize your leads based on their value.

But how can you figure out which leads are better than others? Simple – do your homework.

Let’s say that you’re looking for a rental property in a high-demand market. You want a multi-story house because you’ve already determined that high-income families in the area are willing to pay more for rental homes that have multiple stories.

Based on this information, you know that leads that match that criteria are going to be more valuable to you than ones that don’t. All things being equal, a three-story home is going to be better than a single-story one.

Now that you know which property is going to be more lucrative, you can focus your time and attention on it. Turning a lead into a sale requires a lot of patience and work, particularly when establishing a relationship with the seller. Thus, if you already know that the lead has more potential, you can focus more time and energy on it than you would with other, less qualified leads.

Overall, when cultivating your list, be sure to organize them by value and priority. This will not only help you be more efficient, but it will ensure that you’re targeting your leads the right way and spending more time on high-value options.

Step Three: Pay Attention to the Seller

Typically speaking, a “bad” seller lead is one that wastes your time and causes you to lose money on a deal that never happens. That being said, it’s almost impossible to know whether a lead will fizzle out until you know as much as possible about the seller.

For example, a widower looking to move into a retirement home is probably going to be much more motivated to sell than a family that’s casually looking to move into a bigger house in the next three years.

When looking through your leads, you need to establish contact with the seller and find out more information about the situation. Without understanding the facts and the context of the seller’s position, how can you make sure that you’re approaching the lead in the right way?

Overall, you have to tailor your tactics to meet the seller’s needs – otherwise, you’ll just be wasting your time. In that case, even a juicy lead could turn into nothing, which means that it went from good to bad because you didn’t handle it correctly.

Step Four: Follow Up on Every Lead

If you were hoping that there was a magic trick to know which leads are going to be duds before putting time and effort into them, then prepare to be disappointed. The fact is that real estate investing requires a lot more finesse than other industries. Selling a home or property isn’t something that a person just “does,” which means that you can’t treat leads as a disposable item.

The fact is that every lead can have the potential to be lucrative and rewarding. However, you’re not going to know until you put some effort into it. While you can probably toss any lead that doesn’t fit your goals and parameters, everything that fits into your category should be treated with the same level of respect and attention to detail.

Once you’ve done your homework and established connections, then you can start to prioritize leads and figure out which ones are more likely to close than others. However, circumstances can always change, meaning that juicy leads could fall flat while “dead ends” could wind up being the right fit.

Bottom Line – Research Matters

Overall, we could simply say that technically speaking, there are no “bad” leads. However, that ultimately depends on your circumstances and situation. Until you know what you’re trying to do and what the seller is hoping to get from the deal, you can’t label a lead as bad or good. Thus, be prepared to follow up and do your due diligence with each lead. Doing so will yield a much higher chance of success.