Investor · Tampa, FL · Member since 2013 · 2k+ posts · 1k+ votes
I have a question I want to put out there to all wholesalers: What dollar value do you put on a person who wants a cash offer to purchase their home? How much would you be willing to pay in either a CPC (cost per click) or other method of advertising to make it worth your while to get in the door and make that person an offer to purchase their home? Please let me know, thanks.
I don't know too many homeowners who won't let someone in the door to make a cash offer on their home. In fact,I'll happily let someone in the door to my house to make me a cash offer on my home. But, that doesn't mean I'm motivated to sell or that I'd sell below market value.
So, to answer your question, I wouldn't pay anything for leads on people who are willing to listen to an offer for their house. I can knock on pretty much any random door and make a cash offer without paying anything in lead generation fee.
I don't know too many homeowners who won't let someone in the door to make a cash offer on their home. In fact,I'll happily let someone in the door to my house to make me a cash offer on my home. But, that doesn't mean I'm motivated to sell or that I'd sell below market value.
So, to answer your question, I wouldn't pay anything for leads on people who are willing to listen to an offer for their house. I can knock on pretty much any random door and make a cash offer without paying anything in lead generation fee.
Perhaps I'm not asking the question the right way. For you to get in the door and make the offer to buy the property it costs money in most cases. Either you do direct mail or a cost per click campaign on Google to drive them to your website, or possibly some other form of advertising to get the lead. That costs money. The question is what cost per lead are you good with? You have a cost per lead and a cost per closed transaction. One would think you'd have a good idea of where you'd want to be on both based upon your conversion rates. Any thoughts?
Any good marketing campaign will target motivated sellers, people that need to sell quickly, and are willing to accept an offer below market in order to do that. By properly targeting such people, the leads generated are fairly pre-screened. Your appear to be asking what an unscreened lead is worth, it is worth a dime a dozen.
Darren Sager Your question is a valid one. However most wholesalers can't answer that. I can't.
As the other posters have said if a bird dog brings me a lead, if it isn't a qualified lead it is worthless. I already have more leads than I can follow up on. If it is a qualified lead it depends on how much work I have to do and how good the deal is.
The question you are asking can only be answered by marketers who are already getting substantial leads. They must know their cost per lead, conversion rate and average profit for conversion. Not a lot of wholesalers are at the level that they know. perhaps some of the marketing Gurus here like Michael Quarles or Jerry Puckett can answer that. - Ned
Until I was sure your leads were more qualified than the ones I already have, I wouldn't pay you anything. If you have proof that 50% of your leads sell their house for 70% of ARV within 10 days of contacting you AND I had an exclusive on them? Well, then you might have something worth real money.
I had to think about it for a bit. My first thoughts were in line with J Scott. Why would I pay for leads to make offers when I can already do that without paying more for the leads. With the right data program, I could generate and send offers to my lists, instead of marketing letters, at pretty much the same cost. So what would I be paying you for exactly?
How are your "leads" more qualified than mine? What are you offering? Every seller says they want a cash offer until they find out that most investors won't pay retail for their 1950s rental with its original kitchen and baths. I don't need anymore of those leads. :) I get those aplenty from my targeted mailings and my advertising.
In my experience, it's not the cash offer that my sellers are looking for. They are looking for ease, problem solving, sometimes speed. They are often looking to "make it go away" or "cross it off their list". The cash offer thing isn't usually the main motivation.
Thank you Tim for answering my question. I'm not here to sell leads. I'm trying to understand what others are actually paying to see if the wholesaling route makes sense for me to try it.
I would think that anyone who is wholesaling would be following their numbers carefully but it seems that's not the case here. There's an inherit cost to doing business and even if you own your own lists and you direct mail to them each time you do it costs you money. If I sent out 2,000 letters at $.50 each and 10 people set an appointment to meet, my cost per lead would be $100 ((2,000*$.5)/10). If my close rate on those appointments was 2 out of the 10 my marketing cost per transaction would be $500 per "sale" outside of my time on the appointment and travel expenses.
So if you go knock on doors there's a cost to that as well: Time and travel (fuel). So what's your time worth? How much time did you spend knocking on doors and getting them slammed in your face? How many doors did it take for a person to say yes to letting you in to look at the property? When you were out knocking on doors did it take you away from another project getting done?
As much as its important to know what your costs are in fixing up a home its equally important to know what your costs are in finding that home as it effects your bottom line. In this business we live and die by the numbers. Knowing them is vital. I'm just trying to get a sense from others what their costs are in wholesaling to see if I want to make that investment.
I'm just trying to get a sense from others what their costs are in wholesaling to see if I want to make that investment.
That's completely different than the question you asked in your original post.
But, in terms of how much a typical deal costs me in terms of time and marketing (when I acquire that deal through direct marketing avenues), the answer is about $800.
J Scott, are you active in direct marketing yourself? For some reason, I didn't think you did that.
For many years, we just focused on REOs (in Atlanta). While REOs are still easy to get in a couple of the markets we're focused on, in Atlanta, they are tremendously competitive and difficult to acquire these days. Since 2012, we have been doing a good bit of direct mail marketing to find deals in the Atlanta suburbs.
For a person looking for a cash offer I would say $500 is a good number because most of those leads are subject to type deals and maybe 1 or 2 is a true wholesale. For CPC I wouldn't pay no more than $1. For CPC I would say it takes almost 100 leads to make 1 deal "Ask me how I know". The lead per deal on that thing sucks but it’s still an effective way to market.
Darren Sager - your question makes perfect sense although you mixed up terms. Its not the Cost Per Click you are worried about it is the Cost Per Conversion - when they pick up the phone and call you or fill out a form on your website. I would pay $50-150 depending on the lead source and message.
Brad Chandler- Thanks Brad. You're right that I'm not concerned with the cost per click or cost per individual piece of mail. I'm just concerned with results. What I'm trying to figure out is what the average cost per lead and cost per actual deal in major markets. I appreciate you letting me know what your average lead cost is. Can you please tell me on average what percentage of those leads you will meet with and convert into a deal? One out of X would be great.
What I'm trying to gauge is if trying this method out if my costs would be above or below average, or pretty much on the mark as everyone else. Thanks very much.
Wayne Woodson - Thanks Wayne. Can you please let me know what you did that you know those numbers so I don't recreate the wheel. Thanks very much.
The only way not to create what I did is to just not do it. Adsence (which is what I assume you mean when talking about CPC programs) has the lowest conversion rate. This is in comparison to direct mail, bandit signs and newspaper. I spent $100 in 2012 in ad's and only got 20 leads, none of them were deals.
Two key considerations:
1) Value of a lead or deal varies greatly by market.
2) There are "clicks" and "leads" and "qualified leads" and "deals" being discussed here - that's apples & oranges (& bananas)
In a super competitive market like LA, people are paying as much $45 per CLICK-THROUGH on some keywords, as much as $200 for a completed form (lead), and an assignable deal is worth thousands (let's say $5,000+).
If anyone sold such a thing as a "qualified lead", I assume they would easily be valued at $600-800 in LA - but no one I know of (in the lead generation business) is pre-qualifying them. If you want the lead, buy and pre-qual it yourself. People are FIGHTING over our PPC leads in some markets, because if they can't buy them, they can list them.
The value of a click, lead, or assignable deal will be dependent upon the dynamics in your local market, and the potential profit in any given deal.
This thread is very interesting to me. I have never once thought about "lead cost". What's the definition of a lead? Seriously, what makes something a lead? I've been generating profits from buying directly from sellers a lot longer than many people on this thread. Should I be doing more math?
I only compare total annual marketing dollars to deal net profits (and excluding overhead). So, I always know both my to-date and annual return on my marketing dollars. But I don't know those numbers per deal, and certainly not per leads.
If anyone sold such a thing as a "qualified lead", I assume they would easily be valued at $600-800 in LA - but no one I know of (in the lead generation business) is pre-qualifying them. If you want the lead, buy and pre-qual it yourself. People are FIGHTING over our PPC leads in some markets, because if they can't buy them, they can list them.
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"Qualified leads" would be worth money. But the variables are so great. Freshness of the lead, equity, type of motivation (if any), type of distress (if any).....it goes on and on. I wouldn't want to pay for them unless they were exclusive to me for a certain number of days. There's a lot of list and lead sources out there that are happy to take your money and that of all your competitors too.
K. Marie Poe In my mind a qualified lead is one that filled out all, not part, of the relative information that I would need to set an appointment with. If they just gave me a name and email I don't think it would be the same as name, address, email, phone number, cell number, and any other relevant additional questions I might want to know.
I think that it would be important to track quality of leads from different sources by determining how many actual appointments you set up from the leads. That would be an important thing I would want to know. And then finally of the appointments I set with the homeowners how many of those did I close the deal on. Some qualified leads may be worth more than others depending upon the source that you got them from because you were able to set more appointments and close a greater percentage of them.
Based me understanding the numbers I would know which avenues produce the best results. However you'd need to track each one monthly to see how the costs change. I think its very important to know all your marketing expenses so you can manage them properly.
Are you defining a lead as someone who has indicated interest in selling and fills out an online form? Someone who calls because they received a marketing letter? Marketing in new test areas or with a new marketing piece can sometimes produce stellar response rates, but no deals. Who cares what the cost per lead is for deals you don't do. I don't need leads, I need deals that close.
I know that some use a "lead conversion" rate. If I had so many people calling or leads to follow that it required a budget to manage the leads, then I can see the usefulness of looking at lead costs.
I guess I skip over the lead cost and go right to how many dollars does it take to profit $ per year. I have no difficulty keeping track of how many marketing dollars I spend, how many deals I close, and the profit from each. It's a no-brainer to compare the effectiveness and cost of my mail marketing to my print advertising and other ad campaigns. Keeping track of cost per lead would be a meaningless number to me.
I guess I skip over the lead cost and go right to how many dollars does it take to profit $ per year. I have no difficulty keeping track of how many marketing dollars I spend, how many deals I close, and the profit from each.
Unfortunately, it's impossible to assign a general value to a lead if you define it like that. You and I could get the exact same phone call, and you could turn that call into $$$ while I might waste 2 hours on the phone and not make a penny.
That said, I agree that the value of a call from a seller is impossible to quantify as well, as there is no way to know exactly how motivated the seller is, nor is it possible to generalize the situation the seller is in (every situation is different). In other words, no two calls are worth the same amount and until you take the call, it's impossible to know which one is more (or less) valuable.