We get a lot of questions from students about mailing postcards versus mailing yellow letters for direct mail. The reality is that the cost of mailing postcards is about one third to one half of what it costs to mail yellow letters. So the response rate will be higher on a yellow letter, but dollar for dollar the results will be similar.
For example, if your average cost of mailing a postcard is 50 cents and your average cost of mailing a yellow letter is $1, then even if the yellow letter gets a response rate that is twice as good as the postcard, your net cost per lead is the same. This is the reason why so many of the big real estate investors only focus on mailing postcards. If you are a smaller investor mailing 500 to 1,000 pieces then you will stand out more if you use a yellow letter versus a postcard since most of the competition is using postcards.
If you are scaling big and mailing out 10,000 or 20,000 items then you are probably going to want to do post cards since it is more cost effective and you can get your mail house to mail at a reduced rate. For example I pay 34 cents to mail postcards but the mail house requires around 20,000 pieces to get this price point. When comparing pricing at different mail houses pay attention to details. How large is the postcard? How thick is the paper? What stamp are they using? At the end of the day you get what you pay for and cheaper is not always better.
Post cards work. So do yellow letters. The key is to actually MAIL THEM instead of reading about it and doing more research. Many new investors get stuck in the paralysis analysis of research mode and never do anything with the information that they learn. What amazes me is that these same students are then surprised when they are not making any money. If you want to make money wholesaling and flipping houses, your first step is to get motivated sellers calling you. And the easiest and most consistent way to do that is with direct mail.
Buy a list of absentee owners from Listability
Mail this list some postcards using our mail house at Lex Direct Mail
Here are some sample post cards that we have used and that work well.
Front of the Post Card (click on the image to see a larger version)
Back of the Post Card(click on the image to see a larger version)
This card has worked well for us (click on the image to see a larger version)
So has this one… (click on the image to see a larger version)
And this one….. (click on the image to see a larger version)
I don’t think the type of post card you send matters that much. We get about the same results no matter what type of card we send. What is much more important is CONSISTENCY of your mailings. I would rather see you spend $250 a month mailing 500 postcards a month for 6 months (total ad spend $1,500) than I would seeing you spending all $1,500 in one mailing and then giving up if you don’t get a deal (which is what a typical new student does).
The first method of marketing is consistent and measurable. The second is not. When you get calls, you will need to learn how to get comfortable talking to sellers. You will need to have a script and you will need to practice it until you know it by heart and are comfortable talking to sellers. You will need to factor in how you will answer the calls while you are at work, when you will return calls, and when you will go on appointments. So you should be consistent in order to track your results.
And you should have more than one channel of marketing to motivated sellers. You should be making offers on listed properties and properties on online auctions sites, you should be putting out bandit signs on the weekend, posting ads on Craigslist of houses for sale and doing whatever you can to get motivated sellers (and cash buyers) to call you.
It is important to only mail out the amount of post cards that you can efficiently handle. If you have a 1% response rate then 1,000 post cards will result in 10 phone calls. If you can handle 10 phone calls a week then mail 1,000 post cards a week. If you cannot afford that, or if your time is limited then start small and mail out 250 postcards a week. But be consistent. There is no point in mailing more than you can handle since if you can’t follow up on the leads then you will waste your marketing money.
BEFORE you mail make sure you know what phone numbers or web sites you are using (if you are putting web sites on your mailers – we usually don’t). Also make sure you know what you will say when sellers call you (use our script). When you start out mailing you can use your cell phone but it is better if you track your calls with a service like Call Rail since you will be able to track how efficient your marketing is and you will never lose any leads.
Remember to track how many calls you get for each mailing, how many of those calls with sellers turn into appointments and how many appointments turn into deals. These are your key performance indicators (KPI’s) and they are crucial for you to keep track of. You could use something as simple as a spreadsheet to track your leads but if you are serious about your marketing and you are looking to build a real estate business then you should have your leads go automatically into a CRM like Investor Fuse
As your business grows, and your profits increase you will want to consider hiring someone to answer the phones on go on appointments for you. I know wholesalers who have never hired anyone since their business has not grown to the level where they ever needed to. But if you start scaling your business and mailing more and more postcards, then it will soon become impossible for you to answer the calls, follow up on leads and go on appointments by yourself.
When and if you get to this point, you will need to hire an acquisitions manager. You can have that individual answer the phone, speak to the seller, make the appointment and visit the property. You can also have them follow up on all of the leads from last week, last month etc.
You can’t hire an acquisition manager unless you are mailing enough to generate enough leads for them. This is a point where a lot of wholesalers get stuck. They want more deals and they want to hire someone but they are scared to spend the money. The reality is that after your first year or two of wholesaling, you should have a very good idea of how much money you need to spend in marketing and how much money that generates you in profits. And that is the point where you make the decision to scale. It’s really just a numbers game. And that is the part that is the hardest for most beginners to understand. That is why so many beginners quit.
Take a look at the Basic Postcard Math For Direct Mail
Understand that it’s all about understanding the KPI’s and Tracking Your Direct Mail Costs
When you understand that, you realize that you can track and anticipate fairly accurately how much profit you can make using direct mail. See the image below for an example assuming a 1/2 of a percent response rate (for example 50 calls for every 10,000 postcards mailed). Study this and understand it. Know that if you feel confident you can make a profit of $15,000 wholesaling a house, then you should not be afraid to mail more. However before you do, you need to be comfortable talking to sellers, you need to have practiced your motivated seller scripts, and talked to hundreds of sellers. You can’t talk to hundreds of sellers without mailing out thousands of postcards. Once you have many sellers to talk to, then you can make appointments to see the houses that look like candidates for you to purchase. Once you start going on many appointments, and start buying houses (and flipping them) then you will see that it’s all just a numbers game. Which is why I call it “basic math for postcards”. Click on the image below to see that displayed graphically for you.
And once you understand that it’s all just basic math, and you start mailing more postcards and scaling, then you will reach a point where you need to hire an acquisitions manager. A good rule of thumb for an acquisitions manager is to generate as much as 50 leads per week for them. That should result in them getting at least 10 appointments per week (if they can get a 20% appointment ratio). This should result in you purchasing at least 2 houses per week. If you could buy and flip 2 houses a week at a profit of $15,000 per house, then you would be generating gross profits of $60,000 per month (which is $720,000 per year). And all you need to do is flip 96 houses a year at an average profit of $15,000 to hit those numbers. I know wholesalers who do 5 times that amount every single year!
Assuming your response rate on your direct mail was 1/2% (like in the table above), then to generate 50 leads per week for your acquisitions manager would require you to mail 10,000 postcards per week. It will take you some time to have the confidence to work up to these numbers since the marketing spend at this level is significant. If each postcard cost you 34 cents to mail then you would be spending $3,400 per week or $13,600 per month. But when you get to this level you will be making really big money. If you ever get to this level I can guarantee you that you will have quit your day job and will be a full time wholesaler.
Look at the numbers. If your “job” makes you an annual salary of $70,000 per year, then to replicate that by wholesaling you only need to make $5,833 per month! That is the equivalent of flipping one house for a $15,000 profit every 3 months. So if you know that mailing 10,000 postcards would result in 50 calls, 10 appointments and 2 deals which make $30,000 in gross profit, then you would realize that the only thing stopping you from wholesaling for a living and quitting your job is mailing those 10,000 postcards!
But don’t mail them all at once. Rather take that 10,000 postcard mailing and spread it out over 6 months. Learn how to talk to sellers, practice your motivated seller scripts and learn how to go on appointments. Learn how to complete a purchase and sales contract and how to purchase houses directly from motivated sellers. Build up your cash buyers list and learn how to flip these houses to investors like me that are looking for houses to fix and flip. Investors don’t mind paying you a fee. They are looking for deals. And if you have a deal for them they will buy it from you.
As you close more deals, your confidence will grow. You will mail more, you will hire people to answer the phones, screen the leads and go on the appointments. As you make more money, you will know when it’s the right time for you to quit your job and become a full time wholesaler. It’s different for everyone. But you will know when the time is right.
As you scale, you will eventually hire an acquisition manager. Expect to pay them a small base of around $2,000 to $3,000 per month (depending on your area) plus around 10% of your gross profit on deals. So if your gross profit is $720,000 for the year, then your acquisitions manager would be making 10% of that which is $72,000 in commissions plus their base salary of $36,000 per year for a total income of $108,000 per year. That might sound like a lot for you to be paying them, but keep in mind that they are answering every phone call, going on every appointment and buying houses for you. You can focus on selling the houses until that becomes too cumbersome and you hire a dispositions manager to sell the houses for you. Expect to pay them about the same as the acquisitions manager.
Your net profit for your wholesaling business would be your gross income, less the cost of mailing the postcards, the cost of their salary and commissions, plus the cost of your office, overhead, software, phones, etc.
It’s not hard to see why you can make a lot of money wholesaling especially if you scale. How big you scale is entirely up to you, your risk tolerance, how aggressive you are, and how much money you are looking to make. I know young wholesalers under the age of 30 that have scaled from beginners to $4 million in gross revenue per year in just a few short years. I also know many old wholesalers who work alone and make almost 7 figures. How you scale and how much you want to scale is entirely up to you. but one thing is certain. You can make a very good living wholesaling.
When you start out, you must keep track of your mailings and the lists that you are mailing to by using call tracking. We really like Call Rail for tracking numbers. Ideally get a new number for each mailing piece (type of postcard mailed) and also for each mailing list (for example absentee list, vacant list etc.). This way you can track your results for each piece and for each mailing. This is very important. If you start mailing consistently, you will see results. And tracking is key because you need to know which lists are working best and which mailing pieces are working best.
Make sure you mail the same list again every 6 to 8 weeks for at least 6 times. Most beginners give up mailing way too soon because they are afraid to spend the money on direct mail. Hopefully I have shown you in this article why that is a fallacy. If you know how to talk to a seller, if you understand comps, and if you know what price you would be willing to buy a house for, then you should not be afraid to send out thousands of postcards in scale. If you don’t know those things, then learn how and get some training.
Here is my challenge to you. Take me up on this 6 month postcard challenge. Mail just 10,000 postcards over 6 months. Use my script and after six months, let me know if you didn’t get at least one deal out of that 10,000 postcard mailing. If your response rate is 1/2% then 10,000 postcards mailed out over 6 months will result in 50 phone calls which should result in 10 appointments and 2 deals. This assumes that only 20% of calls are real sellers that you book an appointment for. And it assumes that of those appointments you only buy one in 5 houses (20%).
If you make just $10,000 per house, flipping the house to an investor then do the math! If you flipped two houses and made $20,000 profit then I think you would agree with me that the cost of mailing out those 10,000 postcards and spending $3,400 was worth it. Over 6 months that is only $566 per month. Submit the entire order to the mail house, but tell them to split it into monthly mailings (or even weekly if they will let you).
If you flip one or two houses from your mailing, I guarantee you that the next mailing you will mail out 2 or 3 times as many postcards because you would know that it works. And that is the hardest challenge for beginners. To see that it works. To understand that you can make money mailing postcards to motivated sellers. That is the biggest obstacle you have to overcome – your own inner skepticism of whether or not direct mail really works.
If you take me up on this challenge and you flip your first house make sure you let me know when you get that first deal done. Send me a picture of you standing in front of the house or holding the check at the closing. I will post it on our Facebook Page and I will send you a free copy of my Home Study Course. Every time we do that, it shows other new students that this is possible, that you can flip houses. That it can be done. And that is why I wrote this article. To show you that it is possible. You could be wholesaling too.
If you want to learn how to wholesale and flip houses, a great place to learn how to start is by attending our Wholesaling Boot Camp which is also called the Distressed Real Estate Boot Camp
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