How I ran a direct mail campaign with 20% response rate & 4 sales
I recently shared my story about how I grew my rental portfolio to 35 rental units and $10k+ in monthly cash flow in about 5 years. Here is the link if you haven't see it.
Part of my strategy lately has been doing small scale, very targeted direct mail campaigns to find multi-family deals. There was a lot of interest in how I ran my last one and how I was able to get a 20% response rate, so I wanted to got into some details about how I did it.
Buckle up, because this is going to be long, but my goal was to basically give you step-by-step directions you can follow yourself.
Backstory
Last year I was looking for 4-8 unit multis in Kansas City. It's a fairly "hot" market, so I was having a hard time finding deals, even though I was scanning the MLS almost daily, had 3 agents sending me off-market leads and was on a couple of wholesalers' mailing lists.
I wanted to try something I haven't done before - direct mail marketing. This obviously isn't anything new, but I didn't like how most people go about it. They basically buy/get large mailing lists (thousands or tens of thousands of owners), draft up a very impersonal letter and use some paid, automated service to send them out.
I'm sure you've seen these in your mailbox. I get 2-3 a week and throw them in the trash without even reading them. I'm not saying you can't be successful with this "mass mail" approach, but it's just not something I wanted to do.
Instead, my main focus for this campaign was:
- Maximum Personalization: I wanted to make each letter as personal as I possibly could. I wanted it to feel like I actually took the time to write to the owner and am not just spamming.
- Focus on Very Specific Properties: I had a very specific criteria for which multi-family buildings I was willing to buy. There were only a handful of areas in KC that I liked, and a certain building type I was looking for, so I didn't want to send letters to any properties I wasn't actually prepared to own.
- Low to No Cost: I didn't want to pay for an address list and I didn't want to pay for a service to send the letters out for me. So my goal was to do this myself with minimal expenses.
With that in mind, I went to work.
The Campaign
1. Creating a List of Properties
I don't live in Kansas City, but I know it pretty well from a few visits and many hours of online research. I already had a very specific property/neighborhood criteria before starting this. I think the criteria itself is largely irrelevant for the purpose of this write-up, but the point is you NEED a criteria for your specific market.
I was looking for 4-8 unit multi-family properties. On one of my prior visits to KC, I scouted 2 specific areas where there were large developments of almost identical multi-family buildings all built around the same time. One was for sale back then and I toured it in person. I spend a few hours driving by most of these properties.
So what I did was open up Google Maps and used that to make a spreadsheet/list of every multi-family building with the same type/construction by looking at the areal and street view imagery, combined with my recollection of what was there when I drove by in person.
I ended up with around 85-90 street addresses. A quick tip - if you click on a house in Google Maps, it will show you its address on the bottom. I found this to be very accurate in most cases.
2. Finding Owner Information
After I had a list of properties I was interested in, I needed the owner's contact information.
This was actually very easy - I went on the local county's tax assessor's website, where you can search by address to find property tax bills/information, including the owner's name and mailing address.
Every county in the US has a tax assessor's/collector's website that I am aware of. Do a quick Google search and find a page where you can search by property address.
There were a couple of properties that I couldn't find, probably because I either had the wrong address or there were some clerical errors, but for the most part, I now had the owner's name and mailing address for each property, which I added to my spreadsheet.
3. SHORTCUT - Finding Owner Phone Number
I had this crazy idea at this point to Google search each owner's name + address. Believe it or not, but I actually found 5 phone numbers this way.
This worked because those owners had a local business and listed their work address on the property tax bill. From their website, I was able to get their office phone number.
I may have gotten lucky here, but I think this is worth a try - you never know what you may find online. Remember that speaking with somebody on the phone is ALWAYS better than sending them a letter.
I called these 5 owners directly and gave them the offer for their house verbally. See below for the actual offer terms, which were the same as the letters I sent out.
After some minor negotiating, I got 1 of the 4 sales this way - so it worked!
4. Figuring Out Your Offer Terms
Before you can write an offer letter, you need to know what the offer terms will be, especially the purchase price. Since I was sending offers on very similar buildings and I knew the areas pretty well, the purchase price wasn't difficult to come up with.
I used a combination of a reverse-valuation offer calculator from the software I built, as well as looking at recent sales/comps in the area to come up with a reasonable price. It was definitely below market, but I felt the owners would be likely to accept it, so it wasn't a total low-ball.
I was NOT buying these properties cash, so I felt I needed to add something to make my offers stand out. I added the following:
- No Agents: By not using any agents/brokers, I was going to save the seller a lot on commissions. I was very comfortable writing my own purchase contracts and had a good escrow company to handle all closing docs, so I wasn't worried that I was going to mess something up. I wouldn't recommend this if you lack the experience.
- As-Is Condition: I basically removed the maintenance/inspection contingency from the contract and was willing to buy the property in whatever condition it was in. This was definitely risky, but what helped is viewing one of these buildings in-person, driving by the rest and knowing their construction year/materials/general quality. There was also a built-in safety margin in my asking price, so if something major was found later, I would still probably be ok. Again, I would not recommend this unless you're an experienced investor and have a local team ready to do a rehab if necessary.
5. Writing the Offer Letter
Next came the actual writing of the letter. Again, I wanted to make this as personal as possible, so here is how I went about it:
- The main body of the letter was typed on a regular white piece of paper. However, I hand-signed each one and also hand-wrote the offer price in large font at the top so it stood out
- I included a picture of each owner's house on their letter. I got this from Google Maps street view by just taking a screenshot
- I started the letter with the owner's name
- At the begging of the letter, I introduced myself as a serious investor, who owns several local properties. I wanted them to at least know who I am instead of just saying "Hey, sell me your house!"
- I listed their specific property address I wanted to buy
- I then presented my offer price and the additional terms I described above
- I finished the letter with letting them know I'm ready to buy ASAP and listing my phone/email address
I think a lot of people get hung up on writing these, so I made it simple - I uploaded the exact template I used to the BiggerPockets file library. I wrote it in Word, but if may work in Google Docs too. Here is some tips on customizing it:
- Replace all highlighted parts with your specific information and offer terms
- Feel free to modify any additional text, like who you are and the additional offer terms you're offering
- Right click on the picture at the top, click "Change Picture" and choose the picture of the property
- Delete the hand-written price/signature - those are just for illustration. When you print this out, actually sign it and write the purchase price at the top if you want
Once printed and signed, I put each letter in a regular white envelope, put a stamp on it and hand-wrote the to/from addresses. This took about an hour or so, but I think doing this by hand and not using stickers or something makes it more likely that the person will open it.
By the way - remember how I called 5 of the owners by phone instead of sending them an letter? I used the letter as my "phone script", so to speak, and it worked very well.
6. Negotiating & Closing
The first emails/phone calls started rolling in about 3 weeks after I mailed these out. Overall, I heard from about 15-20 owners, so the response rate was around 20%. I think this is remarkable and I was a little surprised myself. Maybe I got a little lucky, but I think this just shows how much more responsive people are if you personalize the offers.
Besides the 1 deal that I closed on from a phone call, I ended up closing on 3 more multi-family properties as a result of the letters.
There was some negotiation, but not much:
- One person wanted me to raise the price by $10k, we agreed on a $5k rase
- One person was worried that my financing will fall through, so I offered to make my earnest money deposit ($5k) non-refundable. I was very confident about my financing getting approved (it was a commercial lender), so this wasn't a big deal
- One person really didn't want to pay their taxes for the year (this was toward the end of the year), so I offered to pay their entire year's taxes during closing (about $1.5k - again no big deal)
I had a few back and forth's with some other folks, but ultimately couldn't agree on the terms because I was pretty firm on my purchase price and some people wanted a lot more. If I was a lot better at negotiating, I may have been able to convince more people to sell, but it is what it is.
A couple of owners did say they'll get back to me in a few months, so there could be some additional deals that will come from this.
7. What if you had no leads?
This didn't happen to me, but it's worth mentioning that it's possible you won't get any leads from this campaign. There could be several reasons for this.
The most obvious is that your offer was way off and you were low-balling the owners. Like I said earlier, I don't think there is anything wrong with asking below market value, but if you're trying to buy a decent property for 50% of what it would go for on the MLS, it's not likely that you'll get many calls.
But it could be that the people you reached out to just aren't interested in selling right now. This is a small-scale campaign, so this is definitely a possibility.
In either case, if you're still wanting to buy these properties, I would re-send your mailers every 6 months or so. Tweak the letter a bit, let them know you're still very interested and potentially add a little more to the offer price.
Final Thoughts
Overall, I was very happy with the way this went. Did I maybe get lucky with the response rate? Yep, that's possible. But even if it was half of what I got, I still think this was worth the time and the basically $0 cost (just the paper/envelopes/stamps basically).
Do I think this can be done in any market? I don't really see a good reason why not. I think opting to target a much smaller group of owner, but spending more time on personalization can work anywhere. People are more likely to open hand-written envelopes and when they see a picture of their house with an offer price hand-written at the top, it will probably grab their attention.
The biggest thing I'll point out here is that you do need to know the market well for this to work. If you've never visited the city you're targeting, never seen the properties or driven through the neighborhoods, I don't think I can recommend this to you. There is just too much risk, especially is you're buying in as-is condition.
Feel free to ask any questions about anything I may have missed!
