HELP Discouraged flipper with dismal direct mail campaign results

Rehabbing & House Flipping
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HELP Discouraged flipper with dismal direct mail campaign results

Matt Turcutto
Developer · Laguna Hills, CA · Member since 2017 · 21 posts · 9 votes

I recently started a house flipping business (although I'm not sure how good of a business it is since I have yet to flip my first house). After researching for I can't tell you how many years and after what seemed like a decade of analysis paralysis, I am finally taking action. 

On 2/15/2017 I sent out the first batch of white, typed letters. I sent 370 letters. Turns out I misspelled my website and screwed up the return label, but did end up getting a few calls. Each week thereafter I sent another batch until the fifth week when I sent the first list again. I eliminated anyone who bought 2016/2017. 

List 1 was simply my neighborhood. I figured if a deal was going to happen in my own immediate neighborhood it should be me that knows about it before anyone else. Like all my lists, I pulled the list of names and addresses from the title office. 

List 2 was a list of Tax Delinquent homes in areas I wanted to buy. 361 names in all.

List 3 was a combined list of probate and homes that had a Notice of Default filed (I live in CA). 93 combine here.

List 4 was a specific neighborhood I wanted to target. It has no HOA, was built in the 1970's, is in the $600-700k starter range (I live in OC), and is a place I feel has long-term value. 272 homes here.

Since I didn't get list one mailer one back, I have no data, but I do know I had a 4.71% return rate (insufficient address and the like) on list 2, 9.68% rate on list 3 and 1.84% rate on list 4 during the first mailing. The next mailing to the same addresses provided 1.36% return rate on list 1, 2.10% on list 2, 4.3% on list 3 and 0% on list 4 (I corrected each mailer as it came back and before I sent out the next batch). This is returned mail rate, not response rate.

As far as response rates, I received most calls during the first mailer (contrary to what I have read). List 1 generated 12 total calls among all the mailers for 3.3% response rate. List 2 got me a 3.4% response rate. List 3 I received zero calls, and list 4 got me one call at 0.4% response rate. 

List 2 was the only one that got me an actual lead. I submitted a verbal offer and was rejected immediately for being too low. Most calls I got back were, "Who are you? Is this a scam? Why would I want to sell? Don't send me anything else? etc." Each letter costs $0.59 each including postage since I printed everything at home ($0.01 for paper, $0.05 for ink, $0.06 for envelopes, $0.01 for labels, $0.47 for postage from Costco).

I wanted to find a way to do more so I bought 5,000 postcards on VistaPrint and sent my first batch out 4/3 (to list 1), 4/7 (to list 2) and will send list 3 & 4 tomorrow (4/12). So far I've not gotten one singe call from the postcard which surprises me. The letter phone calls came mostly 1-2 days directly after mailing. Postcards cost me $0.37 each with postage ($0.03 for the postcard, $0.00 for ink, $0.01 for labels, $0.34 for postage from Costco).

This brings me to today. I am finding a declining response rate with each supplemental letter I send. I'm told after 5-6 letters is when you get most responses, and I'm resolved to complete 5 letters/postcards before I call it quits, but I'm currently feeling very discouraged. The first two mailings were letters, the next two were/are going to be postcards, then I'm going to finish with a letter.

I have already found my next list of people I want to target. I think I've been doing it wrong in the sense of hitting entire neighborhoods. This next list is a list of 2,300 absentee owners in the 4-5 cities I want to buy in with houses below the $8-900k price I want to stay below. 

My problem is two fold. ONE: I am discouraged from the dismal results from the few thousand I already spent. I'm questioning the success of direct mail altogether. Perhaps my Orange County, CA market is too saturated and there are no deals left to be had? TWO: I don't know if I have it in me to commit to the thousands a proper 2,300 absentee owner list will require of me. I'm already kind of all in and although I could cough up the money for this second list, it would pretty much drain my funds that I've earmarked towards this venture rendering my real estate flipping dreams dead. 

Thoughts/Words of Encouragement/Ideas? 

#WhatTheHeckHaveIGottenMyselfInto

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Cornelius Garland
Wholesaler · Charlotte, NC · Member since 2015 · 398 posts · 680 votes
9y

@Matt Turcutto You've received some great suggestions, and I want to offer my input because you're not too far way from achieving success. Your persistence has gotten you this far, and I'd hate to see you quit after you've come this far. I did read a few things in your initial post that should be tweaked immediately. Firstly, I think your main issue are your lists. You're not focused on the right zip codes and prospect group, which is why your message isn't being well-received. I always qualify my target zip codes and check how many cash sales there were in the previous six months. If there are 100 cash sales in one zip code and only four in another, I'm going to go with the zip code that has 100. The reason being is because there is a lot of investor activity in the zip code with 100 cash sales. The prospects are already getting mailed to by investors so they know the benefits of working with you, and these will likely be blue collar areas with a lot of homes with equity. It may take some time to qualify the zip codes at first, but you'll thank yourself later. You want to use List Source to pull all of the cash sales in your target area and choose the zip codes with the most cash sales to market to. 

Secondly, I don't think your number of leads per list is large enough. While you may be targeting over 1,000 individuals per month, you're not focused enough. Rather than doing four separate lists, I would focus on one or two and hit those consistently. The smallest campaign I ever ran was a list of 390 names and that was a very specific neighborhood that had a lot of dilapidated homes. I typically aim for at least 1,000 prospects per campaign. I would suggest discontinuing the first and fourth lists, unless there have been a crazy number of cash sales. Also, if you haven't filtered by equity then your list is essentially worthless as a cash buyer. Not having equity filters on your lists is like shooting in the dark. These homes could be upside down or only have 10-20% equity, and you won't know until the prospect calls you.

Lastly, I want to touch on your marketing piece. You should really do yellow letters, or at least have your typed letter in an invitation envelope with "handwritten" font to increase your open rate. While you may not immediately close on these deals, it will at least initiate the conversation and you can followup with the leads. Every one of my deals, except for one, came from consistent followup.

I think your biggest issue is the lists you are targeting. If they're not solid from the start, your whole campaign will fail. Direct mail can work; however, it requires research and not deviating from what's worked for other investors. I spent about five solid months intensely studying the BP forums back in 2015 before I sent out my first letters, and I'm glad I waited. I was on a very tight budget, and we really only had one shot to get it right. Thankfully, we were able to pull a deal from that campaign, and we haven't looked back since. I know you're discouraged, but if you want to invest in real estate for the long haul, then this will be the first time of many that you spend money and not see an immediate ROI. I was definitely breaking even in my first year because I was learning and spending money experimenting with what works.

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  • Dylan VargasPro Member
    Rental Property Investor · Chico, CA · Member since 2016 · 633 posts · 336 votes
    9y

    @Matt Turcutto Hello Matt! Sorry, but it looks like Bob changed or deleted his post. Or someone did. At any rate I thought it was bob saying to grab a coffee/call and he could tell you the reason in an hour. 

    0Reply
  • Pete Perez
    Engineer/Real Estate Investor · Renton, WA · Member since 2015 · 368 posts · 120 votes
    9y
    Originally posted by @Aaron Mazzrillo:

    Just about finished with The Letter Book, and I was able to grab a copy of System's Business Correspondence Library Vol 1 and 3 (still looking for 2). I'd like to add 1-2 of these older style books to my library. I like how easily they read. Any recommendations? 

    0Reply
  • Aaron Mazzrillo
    Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
    9y

    The Greatest Direct Mail Sales Letters of all Time

    by Richard S. Hodgson

    Ogilvy on Advertising

    by David Ogilvy

    Tested Advertising Methods (5th Edition) (Prentice Hall Business Classics)

    by Caples, Hahn

    My Life in Advertising and Scientific Advertising (Advertising Age Classics Library)

    by Claude Hopkins

    Learn from the $4 Billion Man

    by Jay Abraham

    On Writing Well: The Classic Guide to Writing Nonfiction

    by William Zinsser

    Buy one from any of the above authors and before you check out, look at the suggested books and/or what other people who bought this book bought sections. You'll discover dozens of excellent copy writing handbooks. 

    Personally, I'm a fan of Jay Abraham, Claude Hopkins and David Ogilvy, but there are dozens of great copy writers who publish books of their experience.

    2Reply
  • Ethan Summers
    Austin, TX · Member since 2015 · 223 posts · 185 votes
    9y

    @Matt Turcutto Most real estate investors and realtors fear the hang up or are not able to locate correct phone numbers for the sellers they are looking for. This leads to them paying crazy amounts of money in direct mail just to get a deal. When i first started investing in real estate this was a huge problem dumping money into direct mail and not seeing a great return on my investment. That’s when my business partner and I began skip tracing phone numbers for potential sellers that were on our direct mail list and calling them directly. I then set followup sequences inside of my CRM which notifies me when it's time to give a cold lead a ring again.I've seen my response rate go from a 1-2% to around a 4-7% increase when i added cold calling.The beautiful thing is this entire process is now outsourced and it makes my business more profitable and gives me more time during the day. PM me if you have any questions i'm sure i can help out with some of the marketing issues you are experiencing by sharing what i've done right or wrong in the past.

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  • Matt Turcutto
    OP
    Developer · Laguna Hills, CA · Member since 2017 · 21 posts · 9 votes
    8y

    UPDATE (for anyone that cares):

    I wanted to give an update for everyone that followed along. I did not listen to the few nay-sayers telling me my market is over saturated and no deals were to be had. Instead, I trusted the voice that said keep going. I ended up sending letters/postcards to my list of 1,000 homes 6 different times. The results were that I got two houses out of the deal.

    The first I sold and closed last week. We rehabbed it and I learned a TON I didn't know I didn't know. Quick and dirty: We bought for $490,000, put $30k into it and sold for $647,000. Made a gross profit (after real estate fees, closing costs, and any other possible expense) of $83,000. We put $90,000 of equity into the deal, so I consider that a WIN with a capital "W." Overall, we held the asset 3.5 months. Annualize that return and we made out like bandits. 

    The second we bought four weeks ago and completed rehab this week. Stagers are coming in over the weekend and we'll be ready to list by next week (haven't decided if we're waiting unit Jan 1 to take to market). We bought this for $360,000, put $25,000 into it and are planning on selling for $470,000. Minus expenses and closing costs, we're hoping to make $45,000. We put $100,000 of equity.

    Not as good as the first, but this was a much smaller and quicker rehab. I made the $25k stretch much farther than the $30k of the first flip and the lessons made in the first were implemented in the second. I feel much more at ease with achieving the second's numbers. 

    To anyone thinking about jumping into the business, just do it. Spend $5,000 in marketing and no matter what market you are in or where you want to invest, I can with almost 100% certainty say you will make it back at least tenfold. The number one thing I would do is mail a smaller list 6 times rather than a larger list once. If I learned anything from this post its that one needs to be patient and wait until the fifth or sixth mailing before they can get excited about the inbound calls. 

    Cheers! and happy flipping!!!

    (PS- Big shoutout to the Podcast that actually gave me the courage to get off my @$$ and do something)

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