Expert: Russel Ray - 4/2/2008

Question
QUESTION: We, my son in law and daughter are wanting to start a business of doing trash out for foreclosed homes. I read your comment to Joe about getting started. That was very helpful, thank you. You suggested to Joe that he put flyers in the mail to different realtors to put his name out there. You also said to check out your competitons prices. My question is, how do I find out who my competion is? Would they be listed in the phone book or should I call the reality company and ask?

 What would you suggest we put on the brochures. Any imformation is helpful.

ANSWER: Hey, Debbie.

There are several ways to find out who the competition is, and if the competition doesn't exist in your area, so much the better, generally.

I did a quick search on Google and found this:

http://www.google.com/search?sourceid=ie7&rls=com.microsoft:en-US&ie=utf8&oe=utf

Scroll through the listings there and you'll find "eviction movers," "foreclosure moving," "eviction clean-up," "property cleanup." Click on the links and see what those companies offer and what their prices are, even if they are not in your area.

Also, check your Saturday and Sunday papers (and, in some areas, Thursday papers) under the real estate and open house sections and look for those ads using the same words as above. Some might even have web sites that you can go to, depending on how large your city is. Call them up and talk to them; be prepared for some of them to be a little defensive, perhaps even rude, since they don't exactly want to help their own competition get started in the business, especially in this economy and where it seems to be heading.

Next, check the real estate magazines that you can find in most cities at the front of the grocery stores. Look for ads from the competition as well as from Realtors who specialize in foreclosures and short sales. Call anyone and everyone to try to get the information you need. Just remember that you are doing a form of cold calling, and as with all cold calling, there's a measure of hostility and rejection from many of those who you call. But if you're going to go into business for yourself, you might as well start now in learning how to handle the rude, crude, and impolite (read "A Complaint is a Gift").

Next, know your own costs of doing business. There are many web sites and programs out there that can help you determine that.

And finally, once you know what the competition is doing, and your own costs of doing business, price yourself accordingly. Almost anything dealing with real estate is price sensitive. After all, we'll haggle over a few thousand dollars in the price of a home which, when amortized over a 30 year loan, is $10 a month or so.

So if you can undercut the competition on price, that alone will get you started, just like "Grand Openings" do for retail businesses. Everyone goes to Grand Openings for the price, but the business is hoping that the store layout and the helpfulness of the employees will keep those people coming back after the Grand Opening is over with.

As far as what to put in the brochure, contact information is fire and foremost. I've seen waaaaaaaaaaaaay too many "professionally" designed marketing materials where the contact information is the smallest thing on the item. It doesn't matter how good or how price-competitive your services are, if one has to get out a magnifying glass to read your contact information, you'll lose 99.9% of them.

Don't go overboard the other way either, though. Too large looks too egotistical.

Put your services on the brochure, your hours of operation, etc. Make sure that you emphasize whatever it is that you do that your competition doesn't. For example, if I were getting started in the property clean-up business, I would emphasize several things:

Clean-up appointments available 7 days a week - I do that because I know that I'm one of the few people in America who work when people want me to work. That's one of the nice things about being self-employed; I always have the keys to the building and can come and go as a please.

Even if you're extremely religious and would never, ever work on Sunday (or Saturday, if you're Jewish), I would submit that the opportunity to work and make a living might sometimes outweigh religious concerns. If I were to work on Sunday and felt guilty about it, I'd probably take 50% of what I made and donate it to my church, or the Abused Women and Children Shelter, or Breast Cancer Research, or Muscular Dystrophy Association, or the Special Olympics, or the SPCA. Just many, many ways to relieve my guilt for the good of others.

I would probably advertise 24-hour turnaround time: "Make an appointment by 5:00 today and have the property clean by 5:00 tomorrow." That, of course, would mean that you would have to have a team in place that can work on that time frame, and have access to the dump or someplace to store things until the dump opens.

Also be aware that there is minor clean-up and major clean-up. Minor clean-up would be simply scrubbing down the place--kitchen, bathrooms, showers, bathtubs--vacuuming, cleaning windows and window sills, picking up trash around the property, etc.

Major clean-up would involve removing abandoned furniture, appliances, dangerous chemicals (paint, gasoline, chemicals, etc.), pictures, clothes, broken bicycles, etc. Some people leave rapidly and just abandon everything, so if you have a sorting yard, you can get some good returns on abandoned items by selling them on eBay or donating them to the various second-hand stores. I prefer that over simply throwing everything in landfills, but, again, it might take a large area for sorting purposes.

Don't just nonchalantly think that everything you are removing is trash for the landfill, though, because sometimes your trash can be financial windfall. For example, I did a home inspection several years ago for an elderly woman whose father, grandfather, and great grandfather were plumbers. There was all sorts of plumbing stuff from the 1800s through the Vietnam War, all of it books, papers, scratchpads, pens, pencils, etc. They were throwing everything away in boxes out at the street curb. I told them about eBay and offered to take it, sort it, list it, and share profits with them. Well, it was more valuable than even I had imagined, and they were ecstatic when I took them an itemized list of what they had and what it had sold for, and gave them half of what I had earned. You might have read the story recently about a potato chip that sold for $1,350 because it was shaped like Wisconsin or Michigan. That's the craziness of the world we live in, but also the beauty of the Internet. Old papers and books are particularly valuable, and with the Internet you have a market of about six billion people.

Okay, now that I've put visions of pots of gold in your head, back to reality. In many cases you'll get interest simply because your contact address or area code is near the property that needs to be cleaned up. Keep track of all the properties you have cleaned up and feel free to use them, and the Realtors involved, in your marketing.

Always follow up with the people using you to make sure they are satisfied. I do follow-ups about seven days later. I think I get a truer response because it will be a less emotional, spur-of-the-moment response.

Hope that helps. Check back if I can do anything else to help you.

---------- FOLLOW-UP ----------

QUESTION: Hello Ray,

  One more question please. Do we have to be bonded and if so how much is needed.

Thanks so much,
 Debbie

Answer
Hey, Debbie.

Considering that you would be removing stuff that has been abandoned--i.e., considered worthless by its owners--I suspect that you don't need bonding insurance. However, in some cases you could be accompanying the Sheriff's Deputies and removing everything from the house while they stand guard. That doesn't happen often, but if it does, you certainly would want to be bonded.

Bonding insurance is actually quite cheap, all things considered. Mine gets bundled with all my other types of insurance, but it costs me $72 a year for $1 million coverage. Simply tell your insurance broker that you need auto, life, AD&D, workers' comp, and tools-of-the-trade insurance, in addition to bonding, and you should get a pretty good rate.