statistics and cost analysis

6 Replies

So, I just discovered and how detailed you can make your lists of homes to direct mail. Very excited! My goal is to buy rental properties, and I was going to simply use an agent... but I found that the cost of using listsource may be much much cheaper. Here's my cost analysis:

  • Costs:
    • Purchase a list of 3000 names and addresses from listsource: about $500.
    • 3000 envelopes: $114 (Amazon)
    • 3000 stamps ($0.49 each) : $1470
    • Total: $2084 or $0.695 per address

Now let's say that, after you send out letters to all 3000 addresses, 5% of call you back. Then, let's say that you visit the properties of 33% of those callbacks. And let's say that you buy 20% of the properties you see. These numbers are up for debate, but I think they're okay.

  • Breakdown:
    • 5% call you back: 150 callbacks
    • go see 33% of callbacks: 50 properties seen
    • buy 20% of properties seen: 10 purchased properties
    • unit cost: $208.40 per purchased property
    • vs. agent: 3% of purchase price (usually to the seller, but still affects purchase price)

After reviewing these numbers, I am simply floored by how inexpensive it is to do this. If I get my listsource criteria just right by targeting only homeowners in my target market and no one else, then this can be very lucrative.

Has anyone done this specifically to purchase rental properties for themselves? Would love to hear your experience. I might have missed some costs as well.

Your numbers will fluctuate greatly depending on a lot of things, such as the specific list you pull, the mail piece you send as well as your negotiation skills. But even if your actual numbers mean you spend more than $208/deal, direct mail to a motivated list will be a heck of a lot better return than finding properties on the MLS.

@Mike Sumsky  yes I see your point. I also forgot to include costs of ink and paper. And then there's the time spent putting the letters inside the envelopes and addressing them. Even with those costs, I believe it's still a great deal. 

I'm playing around with how I'm going to filter properties now. I'm thinking owner-occupants who are delinquent with at least 50% of principal paid. That way, I can offer to pay off their balance if they're in dire straights.

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A few of thoughts.

1) I think your a bit optimistic with your numbers. 5% call backs is really high. Converting 1 in 15 of your call backs is very high. Do some reading and listening to pod casts of wholesalers. Their numbers are lower. 2-3% response is considered good. 1 deal from 30 calls is considered good for closing for people doing wholesaling. You could, of course, buy more if you are willing to pay market value.

2) Delinquent properties typically have lots of competition. Usually once the notice goes out, the people that follow that list hit them hard. That includes agents wanting to list their properties at market price. Agents are not shy in telling people how much they can get for their properties.

Hey @Andrew LeBaron . How's it going with this list? You've probably touched them a few times by now. Wondering how your response and close rate has been so far.


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