What kind of returns do people get from subject to strategies?

3 Replies

@Jerry Puckett  

I am considering working with a marketer who knows subject to deals.  I am considering getting started prospecting for subject to deals. 

It sounds like with the marketing, if you want to do it, you've got to really do it.  That means sending out 1000 letters a month for six months.  The postage alone is $3000, a good mailing list costs money, 6000 stuffed stamped envelopes costs something, and maybe you get some help from someone who does this kind of marketing. Maybe you are at $6000+.

You get X leads from that campaign.  And you close X/10 leads.  How many leads do you need to pay off just the marketing costs?  From some of the reading I've done, people seem to be making just a few hundred dollars per month on a single subject to deal.  To pay off a marketing investment like that, you'd have to close several deals to get a reasonable return. And if you are doing lease options, you end up being a landlord, at least for a while, which is more work and cost.

What does a successful return on investment look like from a $5k investment in a subject to marketing campaign?

>KNC<

returns are hard to really say "you're going to get x deals from y pieces of mail" because so much relies on your knowledge, ability to negotiate, and ability to get the deal done. 

However, I think the biggest factor that seems to be missing in your work up is the down payment. You'll look to collect about a 10% dp on these properties (sometimes more) when you sell, so you can very easily recoup your 6k marketing costs in one or two houses just from the up front money you're receiving. Then you're receiving cash flow of a few hundred dollars a month for 10, 15, 30 years or whatever it is you make your note for. The returns are astronomical at the end of the day. 

That being said, you're right that this is a volume strategy. But for that matter so is a rental. I know plenty of landlords that are only getting $300-$500 a month. In order for you to live off of your rentals you're going to have to have several going for you. The big issue there is having to factor in repairs and vacancies which isn't something you really have to worry about in sub2 and wraps. 

@jerry Puckett does a great job on his marketing campaigns. He's got a knack for figuring out a good list to target and he's got a lot of experience on the marketing end. I've used him personally to pick up properties in the past and am currently working with him to ramp up fairly large campaign of 1,000+ letters a week. I've never not bought a house off of a campaign he put together. 

All that said, there are lots of moving parts to a sub2 transaction. More than pretty much any of the other strategies, so just like with any marketing campaign you should know it's the marketers job to get your phones ringing, and nothing more. If your campaign doesn't turn into closed deals but your phones were ringing be very cognizant of the fact that your marketing manager did their job. 

@Grant Kemp Have to say first Grant that I really enjoyed your podcast. Very informative and open my eyes to a new strategy I didn't really understand until listening to it. Quick question. You said you fully disclose to both your acquisition person and the buyer which I fully agree with. How do overcome a possible objection to the buyer (sale) that its a possibility to the DOS clause could trigger and there could be problems? How do you explain that to them? Also, is your company capable of doing RMLO in New Jersey?

@Grant Kemp  

Thanks.  I did miss the deposit. 

I currently do fix and flips. Comparatively speaking, subject to's are money for nothing even with a 7K marketing investment.  

Looking forward to talking with you as I get into this.

>KNC<