By Les Tyler
The foreclosure market has made starting and running a Foreclosure Cleanup & Property Preservation company a very lucrative entrepreneurial venture - there were over 175,000 foreclosed properties last month alone! The banks need someone to cleanup and fix up these properties prior to putting them back on the market.
But banks often pay 30 - 60 days after you service the property, and this poses some cash flow problems when you're first starting out. The larger banks and asset management companies generally pay 30 - 60 days after invoices are submitted (although most of them pay around the 30 day mark). Now most of the time this is OK, because these larger companies are generally sending vendors 10+ properties to service/clean out per month, but if you're just getting your feet wet, you'll need your money faster.
Unlike banks and asset management companies, smaller companies and investors generally pay upon completion of the project or within 15 days. Unlike the larger companies though, they may only send a few projects your way, but this is fine if you're starting out and doing most of the work yourself (and in the beginning you will definitely have to do most of the work on your own. Many companies I know that just started out asked family/friends to help out instead of hiring staff as they are usually willing to help you out and willing to wait a bit to get paid).
I would recommend targeting investors who have bought properties that they are intending to rent out or flip and/or smaller asset management companies in your area. Here are some ideas for doing this:
1. Put an ad online on Craigslist or Kijiji saying something like, "ATTN INVESTORS - We'll clean up and repair your property for the best prices in ________ (name of city where you live)" or "We Clean Up & Fix Up Bank-Owned Properties" or even "We Clean Up & Repair Houses" and then in the main text, describe your services and contact information.
2 Look for companies or investors that "wholesale properties" - this is a group of investors will purchase a house (usually for cash) for way under market value and then turn around and sell it to another individual investor that is willing to put the time and money into the property to fix it up. You can find these companies by Googling terms like, "Wholesale properties + (your city)", "wholesale real estate + (your city)", "real estate investors + (your city)". You may have to sort through some unrelated links but this is probably the best way to locate these wholesale investors. Once you do, give them a call and tell them that you're in the property preservation business and you'd like to offer them your services. You can also tell them that if they refer your services to an investor that buys one of their properties that you'll give them a "finders fee" commission (usually 10% of the value of the contract). The best thing about these investor groups or individual investors is that they will sometimes give you a deposit (25%-50%) to start the project and then pay you the rest as soon as the work is done.
3. Contact Realtors and ask them if they know of any individual investors that require property preservation services. Make sure you follow up with a phone call if your first contact is an email, and vice versa.
4. While you have the Realtor on the phone, ask them if they have any current listings that need a move out clean or some minor repairs. Sometimes a regular seller (including homeowners and investors who currently own property) will realize that their house needs a good clean or a paint job in order to move it off the market. This is a good opportunity to get some "before" & "after" photos as well as a good reference for your services. And, as a bonus, these people usually pay immediately also.
You will definitely have to spend some time on the phone and on the internet (searching for potential customers and sending out introduction emails). It does take a bit of time to plant the seeds but eventually, something will grow. Also, make sure you get some business cards (try www.vistaprint.com) and give them out to everyone you know! If you belong to a church, sometimes they will let you advertise in their church bulletin for free or for a very small fee (i.e. $20). Let everyone you talk to know that you've started a business and that you would appreciate any referrals, no matter how small the job - word-of-mouth referrals is a very effective way to advertise (and it's free!). Again, you can also offer 10% finders fee as a "thank you" for anyone who refers you a job.
Another really important thing: when you do a job, invoice immediately and ask them when you can expect to be paid (on your estimate you should put payment terms, such as "Payment due upon receipt" or "Payable within 7 days of invoice receipt"). Don't wait around to get your invoice to them because the longer you wait, the longer it will take for them to pay you.
So, in summary, look for the smaller jobs first to help build up your "before & after" photos as well as your references. Since they usually pay faster, it's also a good way to build up some savings so you can afford to go after the big companies and then wait the 30+ days to get paid. You have to spend some time working at it, but you'll definitely see big payoffs if you put the time and energy into getting the word out. Once you have a solid portfolio and a steady stream of cash, you can start submitting your company information to the larger asset management firms.
Les Tyler has been happily and profitably cleaning out and fixing up REOs for over a year. She is the author of "Foreclosure Cleanup Cash", a 200 page e-book on How to Start A Foreclosure Cleanup and Property Preservation Company in 7 days or less with little or no money out of your pocket and also writes a blog and forum on REO Cleanups & Preservation which you can find at http://www.ForeclosureCleanupCash.com
You can reach Les at info@ForeclosureCleanupCash.com
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