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As winter descends on most of the United States, our work selling DBNR’s distressed properties has to heat up. The cold weather is - pardon the expression - crystallizing some of our priorities.

One of our first big challenges is making sure the properties in the coldest part of the country are prepared for the change in weather. Some of them are already winterized, but others aren’t - and as someone who has lived in California for many years, the to-do list is an unfamiliar one.

An even bigger challenge is the prospect of some of the properties figuratively going cold.  It’s time to get creative. I’m shifting my efforts, putting the Internet marketing skills I’ve been learning to work. I’m not sure what will happen, but I know what I’m going to do. I’m going to use the Internet to spread the word - ask questions on social media network, post information on the sites of investment clubs, get information on other ways of publicizing and selling these properties.

I’ll research municipal governments that buy depressed housing and convert it for Section 8 (low-income) recipients. I’ll see if eBay presents any opportunities. I need to converse with other investors who are doing something like this and find out how they’re dealing with these opportunities. I’ll make both human and neural connections and the answer will come through.

I’m confident I will stumble on something cool, and that I’ll know it when I see it.

Even as I’m working on finding prospects who will be passionate about acquiring distressed property, I’m knee-deep in administrative activities to ensure the success of the project. Here’s a progress report of what’s been happening.

I’ve sent lists of our properties to a couple of different wholesalers - one in Florida and one in North Carolina - who will post them on their Web site and add their fee to the purchase price. This effort has made me realize that we need to have photographs - not just listings - of all our 33 properties posted on a Web site. But we’ve gotten as many as three dozen photographs per property, and it’s time-consuming not only figuring out which ones would be best, but uploading and captioning all of them.

I’d really like to find other wholesalers, as well as other on-the-ground services to help out. Unfortunately, Stonecrest, the originators of this project, are keeping all the people at DBNR’s level isolated from each other. They are concerned that if more inexperienced investment groups have access to the more experienced ones, the latter will be bombarded with queries. I understand the logic, but I don’t agree with it. In the meantime, Web communities such as Bigger Pockets are filling in the gap somewhat, but there’s a lot of information there to sift through.

We’ve been wrangling over customer-relationship management (CRM) systems as well. We started out with a product that Stonecrest recommended, but that proved inadequate. We’re now working with ACT, but need to be able to upgrade to SugarCRM at some point in the future. All we really need is a database that everyone can access remotely, and one that is updated regularly, and it’s proving to be tougher than I thought it would be.

This project is also turning out to be an education for my management and leadership skills. Coordinating the activities of salespeople is still not the same as me doing it myself. For someone who’s worked independently for so long, I find myself getting impatient when people don’t file their sales reports. I anticipated that it would be challenging to manage a remote staff - and it is. We’re all learning together.

I have finally chosen someone to provide title information. That was my second-to-last piece of infrastructure work. This was also tougher than I thought, because some provide niche services for escrow companies and lenders, and charge more simply because they can. But other people are putting information on the Web and charging as little as $100 per month, which is a third of what industry leader First American wanted to charge for the same information. I went to First American and told them about this discrepancy, and to their credit, they gave me a contract at the lower rate.

The last piece of infrastructure work? To find someone to do evictions, if that becomes necessary. That’s something that, thankfully, doesn’t have to be done right now.

It’s clear from my work on our DBNR project - buying and reselling distressed properties - that the recent meltdown has changed the rules of real estate considerably. If nothing else, the people we’re encountering and the work we’re doing across the country differ greatly from what I’m accustomed to here in the Bay Area. Further, I’m finding that our project requires a different kind of due diligence - one that incorporates judging both qualitative and quantitative qualifications.

Take, for example, our property in St. Louis, Missouri. Generally, before any kind of a housing transaction, you request a credit report to see what someone’s payment and credit history has been. We had five prospects, four of whom supplied four credit reports. In the Bay Area, a credit score of less than 620 is cause for alarm. The highest score of the four in St. Louis was 524, and the lowest was 390; frankly, I didn’t know credit scores went that low.

You want to be convinced that someone can make their payments on time. The report should show whether there are late payments, and if so, with what frequency? Mostly, we want to see if there were any evictions, which would indicate they’d stopped making rent or mortgage payments.

With this group, though, we had to dig a little deeper and see if there were mitigating circumstances. I learned a lot by asking such questions. For instance, one woman had a foreclosure on her record, but it was because she had helped her sister buy a house, and it was her sister that hadn’t made the payments. Another prospect had declared bankruptcy, but was quite upfront that he’d done it to protect his assets from his ex-wife. In other situations, there have been medical debts that remain outstanding.

You might be surprised to know which prospect we finally chose - the one with no credit score.  He had a good explanation - he had always worked for cash. While he had no credit score, he not only had documented income, but he was able to document that he’d owned other properties. We negotiated a $38,000 purchase price, with $500 down and $600 per month.

We also came up with what I think is a highly creative way to ensure his passion about his property. If he makes his payments on time for a year, and documents the repairs he’s going to make, we’ll reduce the balance by $5,000. That gives him a purchase price of $33,000, for a property he believes may be worth as much as $50,000 once it’s fixed up.

This is someone who’s passionate about owning a house. Given the number of people who have chosen to walk away from their homes in this crisis, perhaps this is the way the mortgage industry should have been qualifying homeowners all along.

DBNR investment group’s current project - buying and flipping distressed properties - always had a bit of a grab-bag aspect to it. The idea was always to gather up properties (33 of them in 14 states), extract them from the balance sheets of overwhelmed lenders, and sell them to interested and committed buyers. We never had any control of the what and the where, which has yielded some interesting treasures and potential troubles.

Cleveland, Ohio

We have an old, gabled house sitting on a 6,000 square-foot lot on Church Street in Cleveland. The house is white with vinyl siding, the kind of place that’s common in the Midwest. I got a call from a carpenter who’s interested in the property because it reminds him of the home he grew up in. He had an accent straight out of the movie Fargo, in which he unexpectedly asked me about the second house.

I wondered, What second house? We only received title to one address, but he said there were two houses on the lot and that both had address numbers. We each did some research and determined that not only did the local zoning rules allow for second houses, but it was a common practice to build second homes for an older family member. The second house’s address numbers - which apparently were unofficial - may have been added to keep the mail straight between the two houses. But that was a clear bonus.

Syracuse, New York

We were under the impression that only single-family homes were part of the packages. But when I looked at the picture of the property on McClennan Avenue in Syracuse, I realized it was actually a four-plex. A call from a woman whose boyfriend does fix-up work confirmed this. It needs sheet rock, flooring, and water heaters in the units, but we only paid $4,300 for it, and multiple units almost always have more value than a single-family home. Another surprise bonus.

Clearbrook, Minnesota

Not all of the surprises have been pleasant, I have to say. One of our properties in Clearbrook, Minnesota looks like a barn that was converted to a house. It’s painted a bilious shade of pink. As if that weren’t challenging enough, we got a call from a neighbor insisting that the structure has been mooching off of his utilities and there’s no easement on his land. Any sale is going to have to involve paying him something, he insisted. Interestingly, though, he said he’d be willing to take the property off our hands, cheap. We’re going to have to hire a surveyor and maybe a lawyer on the ground there to hash out the facts.  Or, we may just sell it to him, after all, it appears to be 29 miles from nowhere. . .

All in all, we’re finding that, if nothing else, it’s a big, diverse country out there. Some of the accents of people who are calling are so thick, we have to listen to the messages two or three times before we understand them. The ease with which that second house was built in Cleveland and the pink barn was built in Clearbrook presents a strong contrast to the difficulty entailed here in Silicon Valley of building a second structure on a property. I’m finding that there may be much easier places to live than here in California when it comes to real estate.

I’m also meeting lots of motivated people, and enjoying the surprises along the way - well, most of them. . .