Building Your Direct Mail Marketing Machine
Building a Marketing Machine...
...is essential to developing a wholesaling business. Pretty common knowledge right? But I'm starting to see a new dynamic. Lately it would seem that the MLS has dried up for deals in certain areas. That means that your average Investor, Rehabber type is having to look elsewhere for deals.
This last year I have partnered with several investors who were foresighted enough to see the wisdom in marketing for their own deals. For a fraction of what it may cost them in terms of Agent commissions or wholesalers fees for just one deal, they can hire me to run a marketing campaign that could net them multiple deals. That means that in the end, a successful campaign will pay for itself and then some.
Great news for the investor, and even better news for me as it allows me to reach out and touch territories all over the map.
The other day as I was writing an email getting ready to initialize another out of state campaign, it occurred to me that what I was writing was pretty good stuff, and may benefit others who would like to build their own machine. So I will post that letter here. Maybe run a series "How to Market Like a Wholesaler"
Lists, Niches, and Casting Your Net...
I'm going to dive right in to my topic of criteria. All of us who do direct mail wish that our letters hit only highly motivated sellers. Then we could save a ton of money and do more deals. Unfortunately, we can only make some educated guesses about folks that might be highly motivated. There are "niche" markets like divorce, job loss, bankruptcy. You could add to that probate, inherited properties, job transfers, mortgage lates, code violators, and tax liens. People in all of these situations are likely to have more motivation than your average joe to sell their homes at a discount.
The reason these are known as niches is because obtaining lists of such people is not easy. All of it is public information, but who is going to aggregate that info in a usable form? I build my probate list manually from the county website. Takes me hours every week. I used to pay a VA to do it for me. When I take her pay and divide by the number of leads she was getting, I was paying something like 4 dollars a lead. That's not too bad in the scheme of things....if you KNOW you're going to get a deal. But shelling out $400 plus postage for 100 letters each week can eat up your working capital quick, and no guarantee of a deal.
It's the same with the other niches, with the possible exception of mortgage lates (also known as 30, 60, 90 day or NOD, notice of default). Some of the standard list brokers sell those. In Texas, the laws are such that the only warning given of foreclosure happens exactly 28 days before auction, which allows no time to effectively work pre-foreclosure lists. It may be different where you're at, you'll have to check.
So what do we do? We either set up systems to mine the data for the niches, or we fall back to more common ground. There are 2 other types of lists that are much easier to get and far less expensive. Equity Owners and Absentee Owners (Out of Area Owners or OOA).
Equity Owners are very simply Owner Occupants who have a lot (50% or more) of equity in their homes. Most have lived in their homes for many years and have paid down their notes. This group of people are a viable list because they have the ability to give a large enough discount that you can wholesale the property. They would be trading you their equity in return for an easy sale, a quick sale, or to avoid deferred maintenance. The majority of the people on this list are best served by, and will go on to list their homes. But if you cast your net out wide enough, you will come across the ones in distress who need a different solution.
Out of Area Owners own a property, but don't live there. For the money, this is far and away the best list to work. A wide enough net here catches frustrated or burnt out land lords, heirs with no use for the (headache) property, and people in trouble paying 2 mortgages. This is the list that gets my phone ringing off the hook, and it's quite easy and inexpensive to obtain through the major list brokers. Usually about .25 cents per name.
If you decide to take this route, don't be half assed about it, or you'll just end up pissing your money away. You have to be persistent and consistent to get the results you want. Start with a quality list. You need to have a decent sized net, but not so big you lose control. Start with 1000 or so. Break the list into either 3 groups of 333, or 2 groups of 500 if you're pretty confident in your phone skills. Mail one group out per week. If 3 groups, mail a group per week for 3 weeks, skip a week, and start over. (obviously if 2 groups wait 2 weeks between cycles). While you will get calls right off the bat, you'll find that you get your best results after multiple mailings. I would stick to a format that goes letter letter postcard postcard, repeat.
One fellow I do marketing for went through 3 cycles over the course of Spring and summer. He spent nearly 3k on the campaign. While he got lots of calls initially, none of them really matured into deals (just a side note here: he learned valuable lessons from all the time he spent on the phone with these people. Really honed his negotiating skills). After the second and third round with no deal, he was getting a little discouraged. But I convinced him to do one more round, and I believe he did it more out of a sense of loyalty to me than belief it would yield fruit.
But guess what? On the verge of quitting, the machine we had built suddenly spit out 3 deals all at once. I've seen that happen many times before, and it seems to always work the same: build the machine, fine tune the machine, build momentum, and eventually the machine does what it's supposed to do. In fact, we finished the campaign in late summer, and he just got 2 more deals: one was a residual (new call from older campaign) and one was a follow up on a call that came in months ago. Their circumstances changed and they became more motivated.
His 3k investment generated nearly 500k (yup, that's right, nearly one half MILLION dollars) gross spread. Had he picked up these same deals through a wholesaler, he'd probably have spent closer to 50k. No chance an Agent could have got them, the properties never hit the MLS. Conversely, had he chosen to wholesale these deals rather than rehab them, he certainly could have earned 50k handily.
If you want to succeed in wholesaling, you'll have to market like a maniac. And that's where I come in. I can help you build and fine tune that machine. From the list, to the letters, to lead capture; from the call to the contract.