DIRECT MAIL FOR REAL ESTATE INVESTORS – INTRO TO DIRECT MAIL MARKETING
Before you start a direct mail campaign, you should have a general understanding of how a direct mail campaign works. The video above shows you all of the steps of a direct mailing campaign to show you how a direct mail campaign works from start to finish. Keep in mind that if you are just starting out then you are probably doing all of the steps in this video by yourself. As you grow and generate revenue, you will want to hire people to answer the phone (lead manager), go on appointments (acquisitions manager) and sell houses (dispositions manager).
The concept of direct mail is that you are mailing a list of property owners in order to find the sellers that are the most motivated to sell. Usually the most motivated sellers are the ones that have some form of financial distress (hence the term distressed sellers). Properties that are damaged by fire, flood, water, hurricanes, etc often are so badly damaged that the homeowner cannot live in the property. However they still need to make their mortgage payment, so owners of damaged properties are also considered motivated sellers.
When you first start out marketing to motivated sellers you will tend to think that every seller that is calling you is a lead. However after taking 20 or 30 calls like this you will soon realize that not everyone that is calling you is motivated. Some people call you to tell you not to mail them anymore. Some call you to tell you that they already sold their house and some call you just to “see what you would offer”. So remember, you need to be talking to motivated sellers. These are sellers that HAVE to sell not sellers that want to sell (there is a big difference). Why would someone have to sell? There could be many reasons. They could be in foreclosure and their house could be up for sale next week at the courthouse. They could have a job transfer and have already purchased a house in the new city and their job could be starting next week and they still have not sold their old house. They may have lost their job, become disabled or facing some other medical or financial condition that is putting them in financial distress where they can no longer afford to keep their house. Their house could be damaged by fire, flood, hurricane. There could be so many reasons why someone HAS TO SELL. Don’t concern yourself with why. Just know that some sellers will be really motivated to sell and will be willing to sell their house at a discount for the convenience of a quick sale.
When you are talking to sellers ask yourself this simple question: “Is this seller really motivated”. Do they have a financial crisis going on in their life that is causing them to be motivated to sell? Are they in foreclosure? Is their property damaged? Do they need money fast? Most sellers will not be motivated enough to sell at a discount. Our statistics show us that for every 1,000 postcards that are mailed we get approximately a 1 percent response rate (10 calls). Not all of those 10 calls are sellers. 4 out of those 10 calls will be people telling you not to mail them again or solicitations. That leaves 6 seller leads (people that want to sell their house). That is only 0.6% of the 1,000 postcards that were mailed. out of those 6 sellers that want to sell their house, 4 of them will be looking for a retail price (they want to sell but don’t have to sell). The other 2 sellers will be motivated to sell. That is only 0.2% out of the 1,000 postcards that were mailed. But those 2 sellers is where all of the profit is.
When you start putting together a direct mail campaign, the first and most important component of your direct mail campaign is your list that you will be mailing to. You have to have a good list, and your list needs to be targeted for your approach. If you are a landlord looking for section 8 rental properties, your list will be different from a rehabber who is looking for properties to fix and flip. So put some time into thinking about your list (most beginners don’t do this and that is a huge mistake).
If you are wholesaling, you are flipping houses to cash buyers. So ask yourself what your cash buyers want and the type of properties they are looking for. This will dictate your approach. Generally speaking if you are wholesaling your cash buyers are either landlords looking for rental properties or rehabbers looking for fix and flips. So one of the first steps of defining your list is identifying what you are looking for which can be very different if you are looking for fix and flips for yourself versus wholesaling to other investors.
So your list is very important. You need to know what type of properties you are looking to acquire and then target those properties and the owners of those properties. When you first start out one of the easiest lists to obtain is the absentee list on List Source (http://www.listsource.com).
Many new investors start out with the absentee owner list (also known as absentee landlords). If you are a beginner this is a great place to start. The concept is very simple. These are properties where the owner of the property does not live in the property. They figure this out based on where the property tax bill is mailed to. This is a very easy and cheap list to obtain and it’s a great place to start. However it is also the most frequently mailed to list – so keep that in mind.
Once you have your direct mail list, the next step is to figure out what you are going to mail to that list. Postcards will cost you anywhere from 40 cents to 60 cents each including postage and yellow letters will cost you around $1 each. You will get better results with hand written yellow letters than you will with postcards, however the cost of the yellow letter will be at least double and usually close to triple the cost of the post cards. If you are mailing 10,000 pieces a month then mailing yellow letters will become very expensive. However if you are mailing 500 pieces a month it might make a lot of sense to use yellow letters. That is how I started out, by mailing 500 yellow letters at a time. And on average, I would get at least one deal per mailing. Some mailings I got zero deals and other mailings I got 2 or 3 deals but after a year of looking at the numbers we were consistently getting one deal per 500 letters mailed. With postcards, our numbers are 1 to 2 deals per 1,000 to 2,000 mailed.
So make a decision on what mail piece you want to use and decide if you want to use yellow letters or postcards. Once you have made that decision, your next step is to choose a mailing house. We have one for our students at http://www.lexdirectmail.com There are many direct mail houses out there (just Google Direct Mail For Real Estate). How much you pay will depend on how much you mail. If you are mailing a few hundred postcards at a time expect to pay around 50 to 60 cents per postcard. If you are mailing tens of thousands of postcards you can probably get your rate down to 35 cents (or less). Yellow letters will usually cost you around 99 cents a piece. So you can see that in scale with large volume the cost is almost exactly 3 times higher to mail yellow letters than to mail postcards. However if you mail smaller amounts the cost is only twice as much and the results generally pay for that extra postage spend. It is also more unique (although many investors use yellow letters). For Yellow Letters we use Yellow Letters Complete and we have had good results with them.
Before you start your first mailing, put some time in to thinking about the phone number that you will use. Who is answering the calls? You or someone else? Will you always be able to answer? Or do you have a job and need someone to answer for you? These are all considerations that you should think about BEFORE you mail your first direct mail campaign.
Whatever phone number you use, even if calls are coming to your cell phone I highly recommend that you use a call tracking service like Call Rail so that you know which marketing piece generated which phone call. For example you may have multiple campaigns going. One month you might mail postcards and the next month you might mail yellow letters or put out bandit signs. But you need to know how many calls you are getting so you can analyze your data and keep track of your KPI’s (Key Performance Indicators). You need to know how many pieces were mailed, how many leads came in, how many appointments were set, how many houses under contract and how many houses sold. Ultimately you want to see the profit you made and compare that to what was spent on the mailing. So tracking is very important and that is why you want to use a call tracking service.
Once you have your list, your mail piece and your tracking number you are ready to mail. The key thing with mailing is consistency. I have seen many beginners that start out strong mailing 5,000 pieces for a month or two but then they quit. You are much better off mailing 500 pieces a week for 6 months and then analyzing your results. If your campaign cost you $250 a week and after 6 months your total cost was $6,000, but resulted in 5 deals which made a total profit of $67,000 would you mail again? Of course you would. So make sure you are consistent. Figure out your budget and what you can realistically afford (including the cost of postage and the cost of the list). And then set yourself a minimum of 6 months.
The rest is theoretically easy. Sellers call, you go on an appointment, meet the seller and come to an agreement on the price you will pay for the House. You then market the house to your cash buyers, flip the house and get paid. I say theoretically that it is easy because as you can see in the video, the process is really simple.
Here’s the hard part. When you offer $100k and the seller wants $130k, at what price do you agree to buy the house? How do you decide if the price is too high and to walk away? That is where knowing your After Repair Value, comparable sales, repair costs and knowing your target market becomes critical. And most beginners don’t learn these things. It will take you time to learn what a house is worth and how much to offer and I encourage you to invest in your education of learning how to understand After Repair Value (ARV), Comparable Sales and Repair Estimates BEFORE you mail. That way when you do speak to sellers and go on appointments you will actually know what to do and won’t be wasting your time (and money). I have a Wholesaling Real Estate Boot Camp every May and October where I personally spend 3 days teaching the above three topics. You can find out more about the wholesaling Real Estate Boot Camp also known as the Distressed Real Estate Boot Camp by clicking here
When you speak to sellers, you will need to keep track of your calls. For that you want to use a Customer Relationship Manager (CRM) which is software that can help you keep track of your leads. We use Investor Fuse and are very happy with it.
The goal with the CRM is to have all of the information about every single call logged into the CRM. Every time you speak to a seller you should note the mailing piece that was used (from the tracking number) and you should make sure you save the seller’s address, name, email address and phone number. All notes from your conversation with the seller should be typed out and saved in the CRM. By having a CRM you will be able to track your KPI’s and you will be able to never lose a lead. If you don’t have a CRM you will scribble notes down on a notepad and a month from now you will have no idea where those notes are. That is the value of having a CRM. You need a system.
Direct Mail works. A lot of beginners will tell you it doesn’t because they mailed once and quit. But all of the pros are doing direct mail. In my Collective Genius Mastermind , we have 160 of the biggest real estate investors in the country. Every single one of them is using direct mail and many of them mail north of 100,000 mail pieces every single month!. Direct mail works. Don’t kid yourself into thinking that it doesn’t. Just remember that the most important thing is to be consistent with your mailings.