To Buy or Not to Buy Leads...

I’ll be honest, this article is going to be more about my research into this area and less about my experience. Honestly, I’m interested in creating some good dialogue about this topic and hearing from you regarding your experience buying leads. Having talked with other investors about this topic, it seems like I get a wide variety of responses regarding which services are worth the money and which ones are not.

Over the last several years, more and more companies and websites have popped up offering seller leads to investors and real estate agents. For those investors who prefer to avoid MLS listed properties and would rather negotiate a deal directly in an effort to get the best deal possible (rather than buying from a wholesaler) … these types of services can prove to be very helpful. In most cases, the paid service will provide some sort of lead for a motivated seller that the investor can then contact directly in an effort to negotiate a favorable purchase (typically well below market value).

Not having used any of these services for any amount of time myself, I can’t really comment on which types of services seem to provide the best ROI. However, here is a list of the different types of purchased leads that I’ve found in my research as well as some initial observations:

Subscription to a Database That Can Be Marketed To

There are a few services out there where an investor can pay to have access to a nationwide database of potential leads. I say “potential,” because the data provided is really just a starting point – not a true lead.

For example, the service may offer data on people with high equity properties, out of state owners or even owners of vacant properties. These lists are definitely valuable, but require that the investor market to this segment directly and generate their own leads. Depending on how good the data is, this can be a great place to uncover hidden leads, but will definitely require some effort on the part of the investor to draw them out.

Subscription to Motivated Sellers in Particular Counties or Zip Codes

It seems there are a number of services out there that offer subscriptions to specific zip codes or counties.

The investor can pay a flat rate for these particular areas and get some projected number of leads per month that the service generated in those areas. My initial observation to these types of services is that the leads aren’t as good as you might hope and you’re typically competing against other investors and real estate agents who have subscribed to the same areas.

However, even if you spend a few thousand dollars over the course of a year and can snag one or two properties from the service, it can more than pay for itself.

Exclusive Leads in a Particular Geography

There are a handful of services out there that will let you have exclusive rights to a particular geography. In exchange for a hefty monthly subscription, the investor actually receives all of the leads that the service provider generates for that particular territory. While the cost for these leads may be higher, the advantage of owning the lead rather than competing against other subscribers may very well be worth it.

Pay Per Lead

Another interesting service that I’ve found actually lets you pay one price for each lead. Paying for an individual lead may seem expensive, but the question is whether or not it’s cheaper and/or easier than doing the marketing yourself. If you can determine that for every X leads you purchase from this source, you close 1 deal … you can build your model around these metrics.

The bottom line in determining whether or not to buy leads is whether the ROI makes sense. If you’re a seasoned investor and already have proven techniques for marketing and generating motivated seller leads, buying leads may not be of interest to you. However, for those investors that are new to this or simply want to find new ways of acquiring property, looking into new sources of property leads may not be such a bad idea.

We are in the process of exploring all of these different paid lead sources right now in an effort to see if any of them produce as good or better ROI’s than other lead generating marketing that we do. I am hopeful that some of them will prove to be worth the money. I’ll plan on writing a follow-up article in about six months to report back on our findings.

In the meantime, I’d love to hear from some of you regarding your success or lack of success using these different types of paid lead services.

Photo: Refracted Moments™

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.