How I ran a direct mail campaign with 20% response rate & 4 sales

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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!

This is an awesome actionable method! One more tip is that if you've got the info in excel you can do a mail merge to get all your letters made in a split second. I believe you can even do it with the photos, although I have not tried that yet. Thanks for sharing this! 

@Lee Ripma

Thanks for pointing that out. I'm not the best with Excel, so I didn't know about this at the time, but I'll have to try it out next time I do this. It will definitely save time when editing the Word template.

Thanks a ton for writing this up, Anton. It's both helpful and motivating. I particularly like the idea of evaluating the price point you're looking for before hand and just writing it directly in the letter.

I actually just mailed out my first batch of direct mail letters, and I didn't bother to do the math before hand. I just got my first response and looking at the numbers after, I'm not sure it makes sense to buy the property anyway! At least, not with the end result I originally had in mind (buy & hold).

If I may ask, did you have experience with cold calling before? I'm super new to this, and somewhat of an introvert, so the idea of talking to strangers on the phone is terrifying. Any tips for building the confidence to just start calling people?

@Mike Arlington

I did call about 5 people directly instead of sending the letters for those I quickly found the phone numbers when running this campaign. So I wouldn't call myself a cold calling expert.

One thing that helped me is essentially using the printed letter as the phone script and working off that. The first few calls may not go as great as you like, but you should get more confident the more you do them.

@Anton Ivanov Congrats on your success! The results of your direct mail campaigns are great ...but the really amazing thing that is sticking out to me is how did you acquire the down payments needed for that many properties so quickly??

Anyone can make full priced offers on properties ...but if your strategy is making full priced offers without any value-add component to the deal AND you are trying to scale quickly, then you must have had a lot of cash already...

The fact that you had that much cash to keep putting down on your rentals is the most impressive thing about your success to me. Maybe I'm missing something but it seems like you were doing quite well prior to investing in real estate?

Congrats again!

@Aaron L.

Just to clarify, I wasn't making full-price offers. They were about 20-25% below market values. The properties also were value-add and needed about $5k in mostly cosmetic rehab to achieve market rents. I'm not doing the rehab work all together - I do it one unit at a time, as they become vacant.

But to answer your question about down payment cash - I have a high income and a high savings rate. My personal savings are the primary driver of my portfolio growth. These were also not my first properties, I've been investing in real estate for a few years.

Here is a link to where I did a longer write-up of my real estate growth if you're interested.

I just saw an app called Deal Machine that does exactly @Anton Ivanov  's method. It's 49/mo and you can drive around, take your own pictures, send out a postcard, and get their email and phone number (some of which is correct, some of which is not). It's a $1 for the postcard and a $1 for their info. I have no affiliation nor do I benefit from recommending it but I'm considering trying it myself! 

@Anton Ivanov Thanks for clarifying. Sounds like you were able to land some great deals, especially in today's market. Would you mind if I sent you a private message? I just added you as a colleague, hoping you can answer a couple more questions :)

@Anton Ivanov

Thanks for linking me to this thread via private message.  I'm really impressed with your bootstrapped way of building out your portfolio. OK, so as @Aaron L. sussed out, you have a nifty war chest to deploy but that's completely beside the point of how you have developed a system and created deals rather than waited for them to come to you.  Well done, congrats on that.

I am in the very early stages of running a similar system, the challenge I'm having is converting the callers to closed sales.   I think one issue is the price I'm offering is a commercial valuation where as most sellers seem to want a retail price.

My workflow has been a bit different from yours though it's relatively similar:

  1. Decide investing area - home market, easy decision
  2. Obtain list of all multifamily properties in target counties via GIS data pull and/or contacting the tax assessors office and asking for the list
  3. Filter list with Excel magic to take out all properties owned by companies, recently sold, and other attributes that disqualify them from my criteria
  4. Consolidate list and google map/streetview each property - type notes in an excel field for future reference. Qualify properties for further consideration and disqualify junk properties
  5. Send targeted direct mail campaign
  6. Receive calls and work to convert leads

I have decided on a six mailer multi-touch campaign.  I'm using Open Letter Marketing with support from @McKinley Carbone.  Good response on my first mailing, about 8 calls and a few leads that could turn into something.

Thanks for posting your process and how you have gotten to the deals you have created.

  • Can you share a bit more about the business case of the investments you have made?  
  • Your purchase price is $195 but what are your rents and what cashflow projections do you have?  
  • Do you underwrite your deals conservatively with a 50% expense ratio or greater?  I have seen where you discount the 50% rule of thumb as misleading but can you share the actual economics and pro forma projections of the deals you are buying?  
  • Are you valuing them on a commercial basis (NOI & CAP rate) or a Comparative Sale (1% type rule) basis?

@Anton Ivanov

Another couple questions:

  1. What was the process from initial call from a seller to getting to the closing table?
    1. What challenges or hurdles did you have to overcome to get to the closing table
  2. How did you manage this remotely without a local agent? 
  3. Did you have any older sellers who were not tech savvy?  A lot of the folks I'm in contact with 'are not computer people' thus getting documentation to/from them remotely is a bit of a challenge.

@Josh Stack

Can you share a bit more about the business case of the investments you have made?

I'm not sure what you mean by this question.

Your purchase price is $195 but what are your rents and what cashflow projections do you have?

There was a rundown of the purchase/cash flow numbers for one of these deals in the other thread on BP that I posted: https://www.biggerpockets.com/forums/223/topics/55...

Do you underwrite your deals conservatively with a 50% expense ratio or greater? I have seen where you discount the 50% rule of thumb as misleading but can you share the actual economics and pro forma projections of the deals you are buying?

I don't use the 50% rule. I make a thorough list of actual operating expenses, vacancy and loan payments I'm going to have on the properties once I'm serious about buying one. Again, see the other thread for the numbers.

Are you valuing them on a commercial basis (NOI & CAP rate) or a Comparative Sale (1% type rule) basis?

Frankly I'm not that sophisticated. I just use reverse-valuation to get me the cash flow per door ($250 min/month), COC (15%+) and IRR (20%+) that I like. If the price needed to meet these numbers isn't too aggressive or lower than what I think it could sell for, I'll send an offer.

What was the process from initial call from a seller to getting to the closing table?

Most calls we just agreed on the sale during the first call, I sent them the official offer contract the next day and we went into escrow within a few days. A couple sellers got back to me in a few days after they talked to their partners, etc. I may have gotten lucky, but there weren't that much negotiation - some price concessions, offer terms, etc. I wrote this in the original post.

How did you manage this remotely without a local agent? 

I wrote the offer contracts myself and send them over via email to the sellers. I had good escrow companies who handled all the actual title/purchase paperwork. My property manager did the inspections and tenant turnovers.

Did you have any older sellers who were not tech savvy? A lot of the folks I'm in contact with 'are not computer people' thus getting documentation to/from them remotely is a bit of a challenge.

Ya I had 1 guy who was pretty difficult to work with. I basically had to call him at every step during the escrow process to get things moving along. I guess something that you just have to deal with.

@Anton Ivanov

Really good stuff, thanks for the thorough answers.  The stories are really inspiring to a lot of folks, so you are definitely making a positive impact by sharing them.  Perhaps a better format would be a blog post though so you can go back and provide updates (as you answer comments and questions) in the original post.  I just scrolled through the 12 pages on the thread about your story just to find your responses and see where you laid bare your cashflow/business case numbers.

Quoting:

Are you valuing them on a commercial basis (NOI & CAP rate) or a Comparative Sale (1% type rule) basis?

Frankly I'm not that sophisticated. I just use reverse-valuation to get me the cash flow per door ($250 min/month), COC(15%+) and IRR (20%+) that I like. If the price needed to meet these numbers isn't too aggressive or lower than what I think it could sell for, I'll send an offer.

</quote>

I see you have an app that helps run calcs quickly and understand you can't self promote it here. Have you detailed your methodology somewhere on how you reverse value back to the cashflow that you want? Also how do you make a 'detailed and thorough' analysis of the actual costs of a property - have you written this process up? I can see how you can get actuals for insurance, taxes, etc and use a Capex spreadsheet to back long run Capex costs into a monthly amount to accrue. How do you handle repairs and other incidental costs that will fluctuate and vary over time?

@Josh Stack

Reverse valuation:

Yes, I use the software I developed to calculate offers via reverse valuation, but it's actually quite simple. You just define a set of criteria you want to meet (for example, $250 cash flow/month, 15% COC, etc.). Then you analyze the property using the current price and see if it meets the criteria. If it doesn't, lower the price by a small amount, for example $5k and re-run the analysis. Keep doing this until you get to a purchase price that satisfies all of your criteria. You can probably do this yourself in Excel if you really want to.

Estimating operating expenses:

I have written a post on Reddit that somewhat goes into this in detail. I can't post it here, but pm me and I'll send you a link. This isn't an exact science though - you just need to know what costs you're going to have and then do you best estimating them based either on actual facts (like taxes, insurance, PM costs are easy to know exactly) or good assumptions based on your knowledge of the area and property type (for things like vacancy, maintenance, cap ex, etc.).

I don't think anybody can predict operating expenses for years to come 100% correct. I feel that your job during the due diligence is to estimate them accurately enough to where you feel comfortable buying property. I also tend to over-estimate things, so I'm least likely to be surprised or disappointed down the road.

@Anton Ivanov Thanks for posting this! This is a very clever and creative strategy to find deals, plus you've clearly explained and made it an easy read! Maybe I missed this but how are you determining # of units and how many bed/bath each unit has in order to estimate market rents? I don't think that level of detail is available from the county tax assessor in the markets I am in, but I will verify.  

As I am thinking about trying this strategy I would need to estimate the total rent so that I could make an offer based on COC, IRR, Cap rate, or whatever I am using.

@Igor Avratiner

In my case, these were developments of basically identical 4-plexes with the same layout, square footage, etc. I've toured some of them in-person before and knew what to expect. 

A lot of times you can also tell by the number of mailboxes and addresses at each property or signs by each door.

@Anton Ivanov

Hi Anton, thank you for sharing your success story with the group.

Of the people who responded to your mailer, what type of sellers were they? i.e. were they investors, elderly, owner occupant with equity/no equity, etc.? 

What a great post! I loved the idea of using Google maps to do some preliminary searching instead of driving for hours without a specify property in mind. Thank you, Ill definitely use this as a guide in the near future. 

I have done this for about 2 years. It works. Almost every time I send out my letters I get a call that month and I'm not sending more than 25-50 letters. 

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