We have our sights set on a neighborhood we feel will start to grow significantly within the next couple of years. Has anyone had success marketing to a neighborhood like this? I would currently classify the city as a C neighborhood. Decent schools, not great. Above average crime, but declining. Bars and upscale restaurants have started moving there.
We'll be using postcards to start. Looking to hold onto the properties for at least 3-5 years.
@Ryan York
You just described a quintessential gentrification play and want validation on your strategy - based on everything you said it sounds good so far as it is a great target. Make sure you also analyze the economy of the region and it's creating jobs and that it's not based on anecdotal evidence of the area being hip. Also note that in C neighborhoods it's harder to attract high quality tenants so project a higher vacancy rate.
Postcards are a good start for you. How many houses are you going to mail to?
Yellow-letters typically have a higher response rates. However, postcards are cheaper.
Pro-tip: Use 1 batch of postcards first and then switch to yellow letters. Why? Postcards will bounce and save you a lot of money from mailing a bad address.
Pro-tip #2: Your campaigns will typically yield a response rate of 0.5-2% (typical but depends on the quality of your campaign). If you're a first mover, it may be higher.
Pro-tip #3: Make sure your market size is big enough (at least 200 targets) and that you can sustain a campaign for at least 4+ mailings. First couple often get thrown away.
Pro-tip #4: How do you improve your response rate? Split tests and tracking your results. There are many things to try from code violations to unpaid taxes. In general, people with more equity (typically older home owners) are more likely to yield deals. But you need to test between all these different types and see what works best for you in your market (driving for dollars/absentee, probate, etc.)
Just some important things to think about. Add me if you want more info on direct mail or just want help in terms of fulfillment that is scalable and price effective.
@Ryan York
You just described a quintessential gentrification play and want validation on your strategy - based on everything you said it sounds good so far as it is a great target. Make sure you also analyze the economy of the region and it's creating jobs and that it's not based on anecdotal evidence of the area being hip. Also note that in C neighborhoods it's harder to attract high quality tenants so project a higher vacancy rate.
Postcards are a good start for you. How many houses are you going to mail to?
Yellow-letters typically have a higher response rates. However, postcards are cheaper.
Pro-tip: Use 1 batch of postcards first and then switch to yellow letters. Why? Postcards will bounce and save you a lot of money from mailing a bad address.
Pro-tip #2: Your campaigns will typically yield a response rate of 0.5-2% (typical but depends on the quality of your campaign). If you're a first mover, it may be higher.
Pro-tip #3: Make sure your market size is big enough (at least 200 targets) and that you can sustain a campaign for at least 4+ mailings. First couple often get thrown away.
Pro-tip #4: How do you improve your response rate? Split tests and tracking your results. There are many things to try from code violations to unpaid taxes. In general, people with more equity (typically older home owners) are more likely to yield deals. But you need to test between all these different types and see what works best for you in your market (driving for dollars/absentee, probate, etc.)
Just some important things to think about. Add me if you want more info on direct mail or just want help in terms of fulfillment that is scalable and price effective.
@Ray Lai Thanks for the response Ray. We've done a lot of marketing in other areas with mostly post cards and some yellow letters. We also do a lot of digital advertising with Adwords.
Your tips are great! Thanks for those.
We've had a lot of success with unpaid taxes and older prospects. I wondered if anyone had any success specifically with an area like this, which hasn't really hit its stride yet, but we believe will soon.
It's an older area in terms of year built, so I think we'll have luck with houses in need of repair. We're looking at about 500 addresses to start with. I'd like to try to narrow that down with code violations.
Nice! It's good you're testing multiple avenues, hope you are tracking $$$ spent and response rates to determine the most efficient deployment of your marketing dollars.
You're very welcome.
I haven't targeted a gentrifying area yet myself, so I hope someone else comments on that. I'm weird in that I like pure cash flow plays and I'm not an appreciation guy (too conservative / risk averse lol)
500 is solid. Do you know how to find code violations in your city/county? Are you doing your campaign in house or using outside fulfillment? Is your marketing process scalable?
@Ryan York I'm marketing to a neighborhood like this in my city; however, I would classify it more as a Class D neighborhood. I've been working this area for about a year and a half and have several suggestions to help you get started. Firstly, most of my deals have been wholesaled to one developer. We've moved about 50 parcels in 16 transactions since late-2015. Their plan is to build on the vacant lots and enter in agreements with the current homeowners who wish to stay in the neighborhood to renovate their homes. If they don't want to give up a significant amount of equity in their homes for the renovation, they at least want to update them on the outside to make the neighborhood more presentable. Their plan is grand and it's wild to think that homes are selling for $15k today but in a couple of years, there will be $200k+ homes. Nobody in my area except for a handful of people know this is happening and it's pretty nice because are buying already knowing that our investment will pay off. There's no speculation or significant risk involved unless we witness another recession on par with 2008.
Regarding the marketing; our first deal came by accident. Most investors avoided this area, but we were new to REI at the time so we unknowingly marketed to all of the bad zip codes. Once we noticed there was interest among a few investors in this area, we developed a comprehensive plan to acquire every vacant lot and home in the area. My first step was to pull a list from List Source of the entire neighborhood. There were roughly 600 parcels and 450 unique property owners. After this, I saturated the area with yellow letters. They worked really well and the older folks liked them. I also suggest skip tracing any returned letters and tracking down the property owners. Our first deal in the neighborhood was a 26-lot deal and all of my letters were returned because the mailing address went to a vacant lot, not the owner's house. So I found the owner's correct address and resent my letter. Also, I suggest using red handwritten font. @Ray Lai can help you out with the direct mail and give you a great rate on yellow letters. It was interesting because this seller stated in the voicemail that he "knew we meant business because red means hot." That was the first time I truly realized the importance in the nuances and psychology of marketing. It may seem small, but just that one detail likely got him to pick up the phone and call us.
My other suggestion is to present yourself as a small-time investor. The reason why we had success and the company wanted to leverage us is because my business partner and I weren't part of a huge corporation. The property owners just viewed us a couple of young men trying to get into real estate. However, they didn't realize we had huge funding partners. You don't want to present yourself as if you're doing a "land grab" and trying to gentrify, even if this is your end-goal. Word will quickly spread and the residents will not do business with you.
Overtime, you may also may want to create a comprehensive database of all the homeowners and the status of their property. For instance, I have a spreadsheet that indicates which properties were bought as a tax deed and which ones need to go through probate. I also have the condition and status of every home in my spreadsheet. This allows me to quickly sort through the workable deals. If you find that you're running into issues where there are a lot of deceased homeowners or tax deeded properties, I highly suggest doing this. It will take some time to create, but it will also allow you to narrow your marketing. When I did this, it removed about a quarter of the properties, and this freed up a quarter of my marketing budget. At this point, I was able to increase my mailings to bi-weekly instead of monthly mailings.
What you're doing takes consistency but you will benefit greatly if you stick with this and acquire the properties at the right price. Please let me know if you'd like for me to clarify anything I stated!
@Cornelius Garland Man, what an excellent strategy and great tips. Most people don't even bother testing with different colored fonts to see how their markets like it. One day you should write a book, I like reading about your deals on the forums, they are very savvy and you really understand psychology and how seller's think/react.
That spreadsheet/database idea and being able to target all the properties in the right way is also super on point.
I don't think @Ryan York could've asked for a more in-depth, example of what he's trying to do.
@Ray Lai I'm still learning, but I do think I can provide value by writing a book or blog post on BP. Great idea, and I may do that soon. We spent a good portion of the money from our deals back into marketing and just experimenting. A lot of what I do is unconventional and if I have an idea that I may think will work, I try it. Now, this hasn't always worked out well. I've bombed several times.lol. I may need to write a blog post on the time I sent out 5,000 letters to a mortgage-late list that had no equity filters and didn't get a single deal...that was an expensive lesson.
But I've made up for these "failures" by learning from them and making my next campaign better. I hope what I provided to Ryan will help him out because I've literally done what he's attempting to do. Except, I think he's closing on the properties himself; I'm flipping the contracts. The marketing process is the same, though.
@Ryan York Definitely here to help, and I hope that I provided some value to you. The developer hasn't gotten to the phase of renovating and developing the properties yet. They're attempting to get up to 100 parcels before they break ground. However, I think the way they're going to structure the deals are to get a percentage of ownership of the properties. If the homeowners don't want to give up any equity, I believe they're going to give them a stipend for repairs in hopes that they'll use it to make the homes presentable. This area is in shambles, but it's pretty much a blank canvas due to the large amount of lots. There hasn't always been this many lots. The children of the original owners didn't want to sell the properties but they also didn't be want to pay high taxes on houses. So what a lot of the owners did was demolish the houses to reduce the taxable value. You can check out 1990 Delaware Ave North Charleston, SC 29405. This was one of the first properties we moved back there. You can use Google Maps to scope out the area to get an idea of what I'm dealing with.
Ray Lai thanks again Ray. I do. We've tried code violations, evictions, probate, tax delinquent and just old fashioned absentee owners.
We track all mailings including response rate and more importantly conversion rate, all the way down to $/call. It's all kept in a spreadsheet with all leads and notes going to podio. We also track everything from headlines, to text, to color, to free offerings like ebooks on our site. We've been trying to filter a lot more to our site with free give aways as we've found a lot of people will enter an email before they call. It also gives us a better idea of how many people actually read our mailer without taking action via an estimate on google analytics. A big spike would indicate potential visitors from mailers. Something you can't see when only considering phone calls. Obviously not 100% accurate but helpful.
We're in the process of automating any new leads entered on our site to go straight to a mailed post card via Zapier and Click2mail integrations with follow up mailings.
That's a smart strategy. Do you know what the cost would be to use the integrations? Are you currently doing your mailings in house? Reason why I'm asking is because I want to see if you're overpaying or getting a deal :)
@Ray Lai We're already using them. It's not much per month. Most of it is already included with our Podio subscription and Zapier is dirt cheap.
We use Click2mail to produce and mail the postcards but I do the designs. It depends on how many we send out at a time, but we usually pay anywhere from .18 to .22 cents per postcard for production, and stamps are stamps. I think it's 27 cents each. We don't do many yellow letters, but those are about .90-$1 each if I remember correctly.