How Much Money Should You Spend on Lead Generation?
Because Tarek and I are both real estate professionals with access to the MLA and a lot of experience finding properties, we usually don’t pay for bird-dogging, but that doesn’t mean that we don’t pay anything at all for lead generation for our flip houses. In fact, I think it’s important to find room in your real estate investing business’ budget for lead generation each month. After all, the more leads you have, the more deals you’ll make, and the more houses you can flip. Having a full lead funnel at all times is a great way to improve your profit margins and make more money in a lot less time.
With that in mind, how much money should you be spending on lead generation? And even more importantly, where should you be spending that money? Let’s take a look at your options for lead generation, what they’ll cost you, and what the best options are for you and your markets.
Like I said, Tarek and I usually don’t pay bird dogs, but that doesn’t mean they don’t do valuable work. If you’re going to hire someone to find leads for you (bird-dogging), the best way to do it is to pay them a commission on every lead they find that turns into a successful deal. For every deal that your bird dog brings you that you then buy to fix and flip, you’ll pay them between $250 and $500.
If you go this route, and you don’t pay for any other lead generation, your cost for generating leads each month will be directly linked to how many properties you buy and how much money you make per month. If you flip 10 houses in a month, you can expect to pay between $2500 and $5000 in bird dogging fees each month.
If you have one or more neighborhoods with a lot of potentially profitable flip houses, you might want to skip the bird dogs, as you already know where your leads are. Instead, sending out mass mailers that let homeowners know who you are and what you do could be the way to go.
If you do this, you’ll have the option to do standard class, pre-sorted first class, periodical class, or bound printed material class. Standard class is typically reserved for advertising, solicitations, and newsletters, and it’ll cost about $215 per year. The other options are generally reserved for heavier materials, and costs vary. Typically, I prefer standard class.
Of course, in addition to postage costs, you’ll also have to consider how much you’re paying to have your mailer postcards designed and printed. These can range from $20–$100 per 500 postcards, so your budget will depend a lot on how many mailers you plan on sending out and how often. Typically, you can expect about a 0.05–1% success rate with these, so keep that in mind as you decide how much to spend.
Online Lead Generation
Online lead generation is more about generating leads on motivated sellers. You can do this through PPC (pay-per-click) advertising, and it can get really expensive really fast. Make sure that you manage how much you’re willing to bid on certain keywords and how much you can budget for any given campaign. Some investors spend upwards of $4000 per month on online lead generation, but I’m a bigger fan of keeping that cost low and doing some driving for dollars myself.
Your lead generation budget shouldn’t kill your profits, and it should be directly linked with how many deals you’re getting per month or per quarter. Keep this in mind as you decide whether to pay a bird dog, buy PPC ads, and/or pay for mass mailers.
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