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When you're starting out in real estate, finding quality investment properties can be challenging. There are several sources for finding deals outside of the MLS, but one of the best methods to find investment properties is through direct mail campaigns.
Whether you’re an experienced investor or just getting started, this guide has everything you need to know about how to use direct mail campaigns to find investment properties.
We'll start by talking about direct marketing, and then get more specifically into direct mail.
What is a direct marketing campaign?
In real estate, direct marketing campaigns find potential investment opportunities by marketing to likely sellers. Direct marketing campaigns can be digital ads shown to a target audience on Google, Facebook, LinkedIn, and other digital platforms, or they can be sent by mail via letters or postcards.
What is direct mail in real estate?
Direct mail is the most common way to target and market to potential sellers in the real estate space, and for good reason. According to the 2018 Response Rate Report conducted by the Association of National Advertisers (ANA) and the Direct Marketing Association (DMA), direct mail delivered higher response rates than all forms of digital advertising.
In 2018, the United States Postal Service (USPS) delivered over 77.3 billion pieces of marketing mail. Prospectus lists had an average response rate of 4.9% and house lists earned 9%, according to the ANA/DMA study. Many factors contribute to making a marketing campaign profitable. To help you make the most of your direct marketing campaign, let's look at the factors involved and how to use this type of campaign to find investment properties.
Create a list for your direct marketing campaign
You need to identify the audience you want to target. In real estate, several audiences can be classified as potential or likely sellers. Your audience will vary depending on the type of investment property you want to purchase.
For example, if you want to buy fix-and-flip properties, you may target owners of vacant or run-down single-family properties in a specific zip code. If you invest in mortgage notes, you could send letters to individuals who created or own an owner-financed mortgage.
No matter what type of property you want to buy, identify the area you want to acquire investment properties in. This can be a specific zip code, an entire county, or the whole state.
Here are a few common target audiences:
- Owners of probate or inherited properties
- Owners of properties in pre-foreclosure
- Owners of zombie homes (vacant and distressed or in poor condition)
- Out-of-state owners
- Banks with REO properties
- Holders of seller-financed mortgages
- Long-time owners of properties (30 years or more)
- Owners whose homes are owned free and clear (no mortgage)
- Owners with tax liens or tax deeds (especially if the property's about to go to tax deed sale)
From there, develop a list. If you're targeting local properties, you can create your own list by "driving for dollars," which is essentially driving around your ideal investment zones and writing down potential homes to target, then researching the properties further to determine which ones are qualified leads. From there, you’ll need to find the best mailing addresses or points of contact for the property owners.
If this seems too time-consuming or you want to target sellers beyond your local area, you can purchase a list from a reputable source. ListSource.com, DataTree.com, and MelissaDirect.com are good bets, although there are many others to choose from. These sites let you build a list based on your investment criteria, including the following:
- Property type
- Property demographics (beds, baths, square footage, year built)
- Location (by zip code, county, city, or state)
- Out-of-state owner
- Pre-foreclosure or foreclosure flag
- Mortgaged or owned free and clear
- In probate or recently became an estate
The cost to purchase a list like this varies depending on the number of leads you buy. Buying 1,000 or more lowers the cost, which can range from $0.10 to $0.15 per result. If you purchase just a few hundred leads at a time, expect the cost to be higher -- around $0.30 per lead.
While these lists can be an incredibly helpful tool for targeting likely sellers, they're not 100% accurate. In my experience, there's an error rate around 10% to 20% in the data industry, which means up to 20% of the leads on the list could have misinformation and not be a qualified lead. For this reason, you should follow up with a secondary "scrub" of the list, confirming you have the best address for the seller and that the property hasn't been sold or paid off.
Building a qualified list is one of the most important factors in running a direct mail campaign. Your ad or marketing piece matters, but not as much as your list. After all, if your well-designed, high-converting marketing campaign is reaching the wrong leads -- or no leads at all -- you're just wasting money.
Plan and design your direct marketing campaign
Next, plan and develop your direct marketing campaign. Determine what forms of ads you'll be using, how often the target audience will receive them, and the message you want to convey.
Create a direct marketing campaign that gets seen
What kind of ad will you use? You want your message to be seen and read. This means you need to create a visually appealing, easy-to-read, and attention-grabbing ad.
You're probably not the only person marketing to your target audience, so make your marketing piece stand out. Use multiple ad formats, like:
- handwritten letters,
- formal typed letters, or
- a combination of these.
The delivery of your ad matters, too. Try different colored envelopes, perhaps with designs or colors that match the season. Try different envelope sizes or address fonts.
Some popular ways to send direct mail include:
- #10 (standard) business envelopes,
- A2 envelopes (like a party invitation),
- 6" x 9" manila mailing envelopes, and
- big or small postcards.
Here are a few examples of letters and postcards designed for direct mail marketing campaigns. Notice how they use eye-catching colors, the message and text are easy to read, and there's a clear call to action. You know exactly who the sender is, what they offer, and how they can provide a solution to the problem.
Handwritten note example
Two-color postcard example
Frequency of marketing
Reaching your target audience without annoying them is an art. You want to consistently be in the back of their minds so when they're ready to sell, they remember to call, email, or reach out to you.
In direct mail, you should send a piece of mail at least once a month over three to five months -- or longer, if your budget allows. This is just a guideline; your campaign can be personal to you and the audience you're targeting. If you're sending letters to properties in probate, you may want to send letters every two to three weeks so you're one of the first buyers to reach the heirs of the estate when they're most likely to sell.
Create a message that converts
Consistent marketing is only one piece of the puzzle. You also need a well-written message that conveys what you have to offer as a solution to the homeowners’ problem. They may need to sell quickly, get cash now, or not want to deal with the property they just inherited because they live out of state. Whatever it is, make sure you address that pain and offer solutions for it while pointing out why your service is better than your competitors’.
Your marketing piece should be clear about:
- who you are,
- what you do,
- the problem you can help solve (identify the pains and offer a solution or explain how the solution works), and
- what the homeowner should do next (call you, fill out an online form, return a form by mail, or another option).
Think about who your audience is and cater your message to them. Will a professional letter or a more personal handwritten letter be more appealing to the recipient? Marketing to someone who recently inherited a property through probate is very different than marketing to someone who owned an investment property out of state for the past 10 years.
Execute the direct marketing campaign
You have two choices when it comes to executing the direct marketing campaign: Do it yourself or pay a third-party company to do it for you. Doing it yourself often saves money in the long run but is a huge time commitment. You can use Microsoft Excel's mail merge function to automatically print and customize letters, and can even download handwritten fonts, but in the end, you're still responsible for the hard work of executing the campaign.
There are dozens of direct marketing companies specific that will print, stuff, stamp, and mail your direct mail campaign for you. They can even create online direct marketing campaigns as well. Below are a few popular companies in the real estate investing world:
If you use a third-party company, shop around to get the best price possible.
Track results to refine and improve your direct marketing campaign
You've spent the time building and scrubbing a list and have designed a well-thought-out marketing campaign. Now you need to track the results so you can refine and improve the campaign moving forward. It's helpful to keep track of which addresses were deemed "undeliverable" so you don't continuously market to bad addresses.
Also, track the number of leads you receive. This is your response rate. In real estate, it's common to have a response rate of 1% to 5%. If it's a really well-designed campaign, that number could be higher. Anything around 2% or 3% is good. Of those leads, expect 1% to 2% to become sales ("conversions"). So, if you send 1,000 letters with a 2% response rate, you'll have 20 responses. Of those 20 leads, one or two could become possible sales. Because conversion rates typically hover around 1% to 2%, you may need to run a few campaigns before you make a sale.
I've run campaigns that have had terrible results and others with response rates above 2% and several closed deals. Tracking response and closure rates helps you determine what factors might contribute to the success or failure of the campaign.
Did you try a new font? Change your envelope size or color? Use a different message? If you got a better response rate, keep testing to see if the positive results continue in future campaigns. It could have been another factor, like the time of year. Without tracking, there's no way to decipher the cause and effect.
Stick with a budget for your direct marketing campaign
Set a budget for your direct marketing campaign and stick to it. Direct marketing campaigns can be expensive, especially if you're trying to consistently market to and reach a large audience.
Professional wholesalers and real estate investors spend tens of thousands of dollars each year on marketing. Prepare to spend $500 to $2,000 per campaign, depending on how many times you contact the audience and the type of marketing.
The first campaign I sent cost me around $1,500. I purchased a list of 3,000 leads and sent a three-letter series to 822 people. I ended up closing two deals out of the campaign that netted me $20,000.
You don't have to break the bank -- determine what you can afford and how far that will go in terms of a direct marketing campaign. Use any profits you earned from deals closed through your direct marketing campaign to fuel future campaigns. This ensures you have a constant pipeline of potential investment properties to purchase and the funds to support your marketing efforts.
Direct marketing campaigns can be an incredible source for finding investment properties to purchase. There are endless combinations of design and delivery. Most investors constantly experiment with their campaigns and find new ways to improve their conversion rates.
If you think a direct marketing campaign could be a worthwhile endeavor, determine your budget, find your audience, design your campaign, and start marketing.
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