0.40% Response Rate on Yellow Letter - Looking for Suggestions

Paul Felix · 2015-10-06T13:31:52-07:00

I mailed 500 yellow letters to out of state property owners. The mailer should have arrived in mailboxes around 3-4 days ago. So far I have received 2 call from the mailer. I used a standard yellow letter. No modifications were made. You can view the letter here. https://www.yellowletters.com/product/investor-yellow-letter-1.My list came from the central appraisal district. I randomly selected 1000 out of state owners to mail to. 500 mailers went out a week ago and 500 will go out again today. I sent one to myself and it arrived on Friday.Based on other threads here on BP and elsewhere I expected to get at least 2 or 3% response rate and was hoping for something closer to 5%. I may yet get a call or two, but it doesn't look like my response rate will come close to what others get on yellow letters.Any ideas as to what caused the low response rate? Here's my novice analysis of the situation.- The letter itself has numerous people saying that it works well to generate incoming calls. I have to believe that the letter is not the problem. However, I do see that some suggest writing the address on the envelope by hand. Others say this makes a marginal difference.- Maybe more calls will come in over the next few days? I don't know how long it should take to start receiving calls, but I was expecting that the majority of calls would come in shortly after the mail landed in mailboxes.- My list is straight from the local county CAD. I scrubbed the data thoroughly & ran it through google geocode api to get clean addresses. I have not started to receive returned mail (likely will today), but if I assume that 20% of the mail is going to be returned that increases the response rate slightly but nowhere close to what others have reported.- Maybe my target has seen too many yellow letters? I plan to continue to mail to the same list indefinitely every month. Perhaps the response rate will increase as the number of touches increases. Others have reported that the response rate goes down and quality (conversion) goes up. Not sure what to expect really.My goal is to find opportunities to fix & flip. The good news is that the couple calls I did get may generates some marketing fee revenue. What do you think I should do next? Stay the course or make adjustments? Thank you in advance for your feedback.

Jeremy T.

Investor · Pittsburgh, PA · Member since 2014 · 266 posts · 240 votes

10y

Let's say you owned a property in your target market and were starting to feel some motivation to sell your property (i.e., you need the equity, right now). Every day you head to your mailbox and are greeted by a new round of "yellow letters". My guess is that most of these letters (from different people, mind you) say the exact same thing. This is especially true if you are using a carbon copy of a letter offered by a service. Would you call the number on your letter, when your letter looks just like every other letter you have thrown into the garbage?

The food court analogy by @Aaron Mazzrillo is apt. You don't have to reinvent the wheel here, but if you are going to go to the effort of compiling and scrubbing this data, why not develop a marketing piece that is going to make them think twice before throwing it into the garbage (since that is where 95% of your effort is likely going, even on the best campaigns)?

This is purely speculative, but I imagine to generate a reliable pipeline of leads in a market like Austin using only a generic mailer, the amount of mail one would need to send is likely on several orders of magnitude greater than 500.

1 Reply

Curt Smith

Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes

10y

I've spent a few $k on yellow letters to pretty good lists, Kent Clotier's motivatedsellers list, which is 99% vacant homes. You can pull high equity and or out of state owners. A vacant house by definition is absentee owner. Being vacant is a leg up re being motivated but most where not that motivated.

The best list that I've read from a wholesaler is delinquent taxes. GA counties do not make those lists available to the public like FL or some FL counties.

In general, you have to figure out how to reach true motivation WITHOUT compitition from everyone with a laptop and a credit card. Re-read this sentence!

Degrees of reducing competion are:

- be local! IE driving for dollars, tall grass, door knocking is the ultimate in being local. No one from China with a CC and laptop can compete with you door knocking.

- County court house: devorce lists, eviction court landlords, code enforcement, delinquent taxes...

- Bandit signs are local.

- To avoid competition in buying your list you need degrees of motivation: vacant, poor condition, delinquent taxes, devorce, older owner moving to a nursing home (age of the note), under water equity meaning they are stuck: offer long term lease option to sell...

Just mentioning the above because I've not seen anyone mention HOW to set criteria for the list to maximize motivation. Listsource in general can be no better than 'every house" and thus extremely expensive to get a deal.

To buy lead lists from any list seller you need many 'secret sauce" criteria. Mailing just absentee owners is NOT going to be enough today. You need additional culling criteria that only folks like Quarles and his tier can offer. I've heard: age of note, equity, age of seller, date of the note. Another list source is: expired listings. These are mostly over priced homes or extreme repair or ugly. There is a list of >90 day or expired listings. This list as well needs culling down: zip, price range, how long been expired. I don't have experience to offer the high success cull of this list.

My tip that I believe are good tips are above re getting local. If you are wanting to do mailers, do the court house tactics to get those names to mail.

Otherwise startup an email/txt'ing program culling sellers out of craigslist forsale by owner and non-property managed rental ads. Cheaper and at least the sellers have already said they are sellers. Start out by calling everyone via a search "motivated", "cash", "fixer", "must sell"...

3 Reply

James Green

Wholesaler · Waldorf, MD · Member since 2015 · 459 posts · 245 votes

10y

@Paul Felix I'm a numbers guy myself, but it seems like you have "overthought" things.

Warning - I'm not an expert so here goes:

First,why would you think that people have at least 30% equity after only 10 years?? You're making some mighty big assumptions with your amortization schedule. For example 10 years ago what was market like? Did people buy houses in a hot/rising market in your area? If so, did any of those individuals use their house as an ATM machine & pull money out by refinancing? You probably have quite a few underwater sellers on your list. In my humble opinion you need to go further back. You might want to research the age of the type of houses you want to flip, just to get a starting point. For an example you might want to pull a list starting with houses bought after 1970, for what ever reason, etc.

Also the idea of touches is great, but some sellers just aren't motivated AT THE TIME they read your letter. I've had owners call me to say "I get a postcard from you every month, I'm not selling, please take me off your list." The funny thing is the postcard I sent was my first, but they had assumed I was the one sending all of the previous postcards they had received. You will profit off the efforts of others because of timing. The owners call because of timing. Some may keep your letter/postcard until they are ready.

You can't predict when sellers will call. I don't think most people are waiting on a letter/postcard to arrive in their mailbox, so that they can call them as soon as they read it. I myself collect the mail, skim through for anything that is important or needs immediate attention, then I lay it on the counter. At the end of the week, my wife goes through it in detail. In my household a letter like that may not get opened until a week later. It then may lie around until it's tossed or we decide to call - but that could be weeks or months. We get all types of DM from companies & my wife will collect them, do research on the company, and then when we have a need make a call. Again that could be months.

Just my 2 cents. If you send, they will call.

1 Reply

Curt Smith

Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes

10y

@Carl Hunt

I've seen the carrot website folks troll here before. All without the useful "data" on deals per dollar spent. Mike Quarles, the principal at yellowletters.com, who posts a ton here, offers the only marketing metric that maters is how many dollars do you spend to get a dollar from a deal. Then what is your profit ratio: cash at closing / total marketing to get to closing.

These SEO/website posts are always completely hollow!!! There's a few of these guys all touting SEO. Mainly they are website developers. Since they are silent with the only sales metric that maters: "deals per month", "deals per dollar" and my guess that in Oct 2015, here in hot hot market Atlanta, there are virtually NO desperate sellers typing into google "gotta dump my freqing house tomorrow" like there was in 2009-2010 when SEO leads really did work (but there where few buyers LOL).

Show me the numbers SEO / website folks?

I have several websites myself with good domain names... zero leads for me. True I've not spent money to buy link backs and high quality mentions in authoritative blogs etc etc... All to funnel how may possible leads per geography?

1 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

10y

@Paul Felix I look at Austin and Portland OR. as kind of sister cities.. price points are basically the same.. UBER competitive for inventory.. Plenty of money and liquidity.

So when I was active in my business of buying distressed assets.. I honed my list down to NOD as I thought these the most motivated sellers. And then we just skipped the whole mail routine the money I would spend on mailers I used to hire door knockers to tee up appointments for me and my staff...

Cant tell you how many deals I closed and the owner had a stack of letters of all sorts from folks.. average I would say was at a least 100 being received by them through the 5 month foreclosure process. And when a number of them were the exact same color and fake phont and said the exact same thing it did not take a brain surgeon to realize that these were not the personalized letters that they were attempting to look like... And it was really amazing how many people who lost it all were now in the business of helping these poor folks LOL...

So if I was in your market I would target and drive and knock doors. you can send out the mailers as its cheap enough but if you get a deal fine but I would not rest my success on this unless you as others have said start sejnding them out in the thousands upon thousands and increase your odds.

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Cody Alexander

Real Estate Professional · Bakersfield, CA · Member since 2014 · 205 posts · 87 votes

10y

Originally posted by @Jay Hinrichs:

@Cody Alexander can you share how many mailers went out to produce 58 buys in one month for buyer quarles? this will give those who want to 10X their business a reality check into how much marketing capital one would need up front to create that kind of pipe line

Michael is sending an average of 220,000 pieces of mail per month.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

10y

@Cody Alexander thanks Cody so at say 50 cents your cost that's 110k a month in fixed marketing over head... 58 deals a month and say he flips those for 10k each is 580k in income figure another 100k a month in fixed over head and he is netting 300k a month for his efforts.. Not bad ,, not to mention all the income from selling the yellow letters.. Love it that's what its all about.

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Vincent Crane

Realtor · Atlanta, GA · Member since 2015 · 693 posts · 357 votes

10y

You can try finding the list of addresses that filed for an eviction in the last 6 months to find motivated sellers, or houses that are going into foreclosure

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John Hixon

Investor · The Colony, TX · Member since 2013 · 283 posts · 205 votes

10y

@Jay Hinrichs I remember is one of the podcasts he said that he makes $50,000 per home he sells and nets $25,000 per home. So, ya, he is doing alright for himself. hahaha.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

10y

@John Hixon then I want a ride on his Jet !!! he needs the write off...

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Rick H.

Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes

10y

@Paul Felix I'm impressed with your commitment to metrics and attempts to abstract better data to your response rates.

Thanking the big picture view, you still don't know if the problem is the list, the mailer, the message, the timing or any combination thereof.

I suggest you enter the direct repose marketing work of Dan Kennedy, Perry Marshall and others now that it appears you wish to be a serious marketer.

I just returned from hosting my invitation only mastermind group in Santa Barbara where one of my members has been pulling several million names per month, covering all 3,043 US counties and reselling the data (it's a very big enterprise). Ultimately, your testing will require tiring other messages and multi-sequence mailings with different messages.

My gut tells me your list could be better, then work triggers, then the message and the mail mail piece, in that order.

2 Reply

Paul Felix

OP

Austin, TX · Member since 2015 · 31 posts · 13 votes

10y

@Cody Alexander Please verify my logic...

220K mailers results in 53 deals

1 deal per 4150 mailers

Assume that 1 in 10 responses result in a deal (10% conversion)

4150 mailers generated 10 responses

Response rate = 0.24%

Does that mean that my 0.40% response rate is higher than Michael's?

I realize that the 220K mailers that were mailed this month did not likely generate the 53 deals this month, but if 220K mailers are going out each month and 53 deals are coming in each month then I think my logic is sound.

1 Reply

Paul Felix

OP

Austin, TX · Member since 2015 · 31 posts · 13 votes

10y

Here's a recap of some of the posts on this thread. Hopefully I summarized the points made here fairly accurately.

@John Chapman - target market is very competitive

@Cody Alexander - problem is the list. letter works.

@Joel Owens - stay the course and all will work out

@Jay Hinrichs - not a large enough sample to predict results. keep mailing. door knock & drive for dollars

@Aaron Mazzrillo - keep mailing. timing is key.

0 Reply

Paul Felix

OP

Austin, TX · Member since 2015 · 31 posts · 13 votes

10y

@James Green I used a 5 year old deed recording date assuming that this will often equate to 30% equity. Below are the variables with sample inputs.

Value	250000
Down Payment	10%
Loan	-225000
Int Rate	5%
Term	30
Pmt	$1,208
Appreciation	7%
Square Foot	2000

If you project these variable forward to get the future value of the loan, then the below chart show year 5 - 7.

Year	5	6	7
ARV	350637.9	375182.6	401445.4
Loan Balance	206614.6	202354.4	197876.3
Rehab /sf	15	16	17
Repair	30000	32000	34000
70 ARV - Rpr	215446.6	230627.8	247011.8
Seller Net	8831.906	28273.37	49135.47
Seller Net - DP	-16168.1	3273.366	24135.47

Notice that I am considering am also including 15 dollars per sf as the repair cost. At year 5, 70% of ARV - Repair exceeds the load balance. Of course, I can't know the exact equity situation, but based on an earlier post in this thread we can conservatively assume that 75% of these 5 year old deeds have 30% equity in my market.

Let me know if you want me to send a spreadsheet with all of the formulas worked out. I'm not saying that this is the best way to determine equity %. I just chose to take the hit on some wasted mailers instead of losing the opportunity to market to 25% of my target market due to missing properties in ListSource.

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Paul Felix

OP

Austin, TX · Member since 2015 · 31 posts · 13 votes

10y

Well, the formatting was completely lost after I posted the above. Hopefully this image works better.

0 Reply

Cody Alexander

Real Estate Professional · Bakersfield, CA · Member since 2014 · 205 posts · 87 votes

10y

Originally posted by @Paul Felix:

@Cody Alexander Please verify my logic...

220K mailers results in 53 deals

1 deal per 4150 mailers

Assume that 1 in 10 responses result in a deal (10% conversion)

4150 mailers generated 10 responses

Response rate = 0.24%

Does that mean that my 0.40% response rate is higher than Michael's?

I realize that the 220K mailers that were mailed this month did not likely generate the 53 deals this month, but if 220K mailers are going out each month and 53 deals are coming in each month then I think my logic is sound.

His conversion is not nearly 10%. Michael's conversion is going to be one of the worst because he never meets a seller. Postcards bring in about .5%, Zip Letters bring in about 1% and yellow letters bring in around 5-8% on average. He has 8 employees answering phones full time monday-friday.

1 Reply

Michael Quarles

Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes

10y

This business is all about marketing and systemization. We never meet a seller and never see the house.

Everything is done via the telephone utilizing temp serve labor who have prior to employment never bought a house.

Currently my average property net number is 31,000.

You can hear actuall calls and deals being contracted at Daily Deals

It's a complex system of campaigns and follow-up.

0 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

10y

@Michael Quarles that's awesome... and I bet working the phones hard helps as well.

with out giving out industry secrets... how many of your clients spend say

10k a month with you 20k a month with you 30k a month with you 40k a month with you 50 k or more ? I would be curious to see how many folks have scaled this up..

As your overhead is substantial your gross income is as well .

Are your homes just wholesaled off or do you have to do rehab to create that kind of spread... I know most folks these days a 30k spread for a rehab is about right.

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Michael Quarles

Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes

10y

We sell as is on the MLS. Every house has a BPO and professional Appraisal prior to purchase to justify our numbers.

Frankly we have several who do a lot of marketing... Its the key... Ever see a Geico Commerical?

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

10y

@Michael Quarles I don't doubt you have some heavy hitter marketers I think the general BP population would probably get some value out of understanding exactly what it takes to really move up the food chain and be making millions a year in this business. and spending big bucks on marketing is one necessity generally.

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Paul Felix

OP

Austin, TX · Member since 2015 · 31 posts · 13 votes

10y

This is all great information. @Cody Alexander and @Michael Quarles, do you think my response rate of 0.4% is nothing to worry about, and I should persist forward? If your conversion rate is 1:25 then your response rate is 0.6% as well. These number seem reasonably similar to my own. They do not seem similar to 5-8% response rate on yellow letter. Please help me understand what I'm missing. Something doesn't add up.

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Michael Quarles

Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes

10y

I hate the reality of this slogan I'm championing however it is so true.

Live less market more.

If more investors understood what main stream corporate America does they would do what ever it took to increase their level of marketing irrespective of their existing budget.

In 2012 or 13 Warrren Buffit said he would spend more money on marketing Geico if he had more available channels. Keep in mind he spent nearly a billion that year promoting Geico.

2 Reply

Kyle Corbin

Investor · Spartanburg, SC · Member since 2014 · 5 posts · 0 votes

10y

Man, the fact is that your list is bad. You mailed to people who bought their house 5 years or later. I'd say that 80-90% of the people you mailed had no equity.

Fix this and you'll have good results. Spend the $300 or whatever it is if you're serious about this and get a good list.

0 Reply

Paul Felix

OP

Austin, TX · Member since 2015 · 31 posts · 13 votes

10y

@Kyle Corbin I really wish that you were right, but that makes absolutely no sense. Please see the earlier post where my list is compared to ListSource. I would happily spend whatever it costs to buy a "good" list. Money is not the issue. I'm doing research on my target market.

When I find a formula that works, then I'll scale it up as fast as humanly possible. Scale is not the problem. I'll not bore you with the details, but I will say that the tests I'm running are statistically significant; +-5% interval with 99% confidence.

I hate to harp on the math, but it is quite important to this conversation. @Michael Quarles is one of the most successful investors and @Cody Alexander posted some important numbers related to Michael's marketing performance. These numbers seem to line up fairly well with my response rate. However, they do not line up with the response rate that Cody and many other have posted related to specific marketing piece performance. To recap...

220,000 direct mail pieces mailed monthly

58 deals per month

3793 mailers per 1 deal

1:25 conversion rate (assumption)

25 / 3793 = 0.66% responses rate

I have increased the conversion rate assumption from 1:10 to 1:25 based on Cody's feedback. We don't know a lot about the type of mailers going out, but if we assume a blended response rate between Postcards at 0.5%, Zip at 1%, and Yellow Letters at 5-8% the I'd expect the response rate to be significantly higher.

Per Cody, there are 8 people staffed to receive incoming calls. Based on the above math there should be around 1452 incoming calls per month. This works out to around 9 calls per employee/hour. I would imagine (guess) that a lot of incoming calls go to voicemail and are not qualified enough to return. The staff also needs to make follow up calls. All considered, these numbers seem to make sense. If the response rate was something closer to 2%, then the numbers do not makes sense for 8 employees to handle the work load. I've listened to a number of the DailyDeals podcasts (which I am addicted to) and have a fairly good idea of the time investment made per call.

This marketing model applies very simple math. If you have any idea where I'm off base, please do let me know. At this point the math tells me that my expectations are more of a problem than my response rate.

0 Reply

Kyle Corbin

Investor · Spartanburg, SC · Member since 2014 · 5 posts · 0 votes

10y

I would just say that if you're not mailing to the same target as those other guys you're comparing response rate to, then you're not comparing apples to apples and I guarantee you they are targeting equity first and foremost.

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0.40% Response Rate on Yellow Letter - Looking for Suggestions

0.40% Response Rate on Yellow Letter - Looking for Suggestions

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