Direct Mail: The Key To Ensuring Your Success As A Real Estate Investor

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1 REIC Lesson 4 - How to Find Great Leads After the real estate market crashed in 2008, I purchased the majority of the properties my business had flipped through foreclosure auctions. I also developed relationships with the local REO (real estate owned) listing agents to acquire the fixer-upper and bank owned listings from the MLS (multiple listing service). For three years between 2008 and 2011, these techniques secured me many discounted homes that my business could flip because everyone else was still scared to invest. Warren Buffett once said disaster creates buying opportunity. This may sound strange but it is completely true. However, I knew a time was going to come when the economy would recover and the inventory of foreclosed homes would stop being plentiful. What does that mean to you as an investor today? It means that the purchase of foreclosed homes at auctions has become less effective for two basic reasons: 1. Increased competition 2. Limited availability of foreclosed properties On top of this, locating an REO deal through the MLS has become increasingly difficult in many real estate markets. The main challenge is that most investors are looking on the MLS for deals. Direct Mail: The Key To Ensuring Your Success As A Real Estate Investor Does that mean you can t find good buys? Not at all! You can still use the techniques I just described to find deals. You will still pay more money at the auction or MLS than if you purchase them from directly from the seller. Sure, it s true that not all deals are the same, but with direct mail, you can attain a bigger discount on properties. (Cut out the middleman!) Direct Mail vs. Other Techniques To Find Great Leads Okay, so which technique is the most effective? So far we ve got the following: MLS Auctions

2 Direct mail (See additional strategies on your 100 ways to find great leads sheet.) With the MLS, you have many investors looking to make an offer on a good deal. At auctions, low opening bids tend to draw lots of investors as well. By using direct mail to find a deal, it is likely that the majority of local investors are in the dark about the property, making it exclusive to you. This means you can acquire the best deals at rock bottom prices before your competitors learn about it! There is a drawback to marketing via direct mail, however. For a good number of investors, it can be challenging to use and costly. That is why only a few of them will utilize it to produce leads. For those that do, even less of them can actually pull it off effectively. If you re interested in using direct mail to generate bigger profits for yourself, you don t need to look for assistance any longer. This lesson will show you why you need to use direct mail and how it can be done so that you achieve the results you are seeking. Four Parts to Effective Direct Mail Marketing If you re going to use direct mail, there are four things that must work simultaneously so that your business turns a profit. What you first need to understand is who it is your mailing to and what you ll be mailing to them (your message). It s going to be your salesmanship that makes or break you. And, it s the consistency that will be an investor s most challenging issue. 1 List The start of all direct mail campaigns is a list because without a worthwhile list of possible sellers, you re going to have nothing to work with. There are many lists out there that you could mail to, but the most popular one every new direct mail user deals with is the Absentee Owners list. I m not too keen on this list myself! The reason is that everybody chooses it when they first get involved with direct mail. Then, when they don t receive a good response from the list in the first mailing, they decide to give it up. The reason is that possible sellers whatever the market constantly receive mail from

3 investors about buying their home, which makes them immune to this kind of marketing. Any material that suggests We Buy Homes will go right into the garbage or you ll get voic s that let you know they don t want to hear from you again. So what makes a good list? One that everybody doesn t mail to Below are some good lists that should get a great response rate: Code Violations List (can check with local gov t) Entire Target Area (Specific zip codes you choose) High Equity List (Over 60% of mortgage balance is paid off) 65+ Homeowners List (May be prepared to downsize, etc.) Inherited Property and/or Probate List Notice of Default List (pre-foreclosures) Tax Delinquent List Divorcees For my business, these have been the most successful for me. The idea is to think outside the box to come up with lists to mail to. Believe it or not, even the most obscure lists can be great to produce seller leads. Another thing is to think about all the reasons a person would want to sell and come up with a list for people in that situation. The more difficult it is to produce a list, the better the chance for a higher response rate. And, it s because the majority of investors won t work toward getting that list. Remember this and you will be successful. 2 Marketing Piece Once you ve come up with a list you plan to target, it s time to figure out what marketing piece you re going to send with them. Real estate investors have three primary kinds of marketing piece they send: Handwritten letter (also called a Yellow Letter) Printed Letter

4 Postcard From my experience, the highest response rate is going to come with handwritten letters, followed by printed letters and then postcards. After you choose what marketing piece to use, you need to come up with something for it to say. When it comes to real estate investors, many have a hard time with direct mail because the packaging and sales copy is bad. Keep in mind that you only have a person s attention for a split second before they toss anything you send in the garbage. If you re lucky and they open it, you ve got about five seconds before they do something with it. This is why many investors opt for handwritten letters. The envelope will entice a person to open the letter. Inside, they will find a simple sales copy: Good day, My name is Jade Jones, and I was interested in buying your 1428 Stallworth St home. If you re still interested in selling, you can reach me at Sincerely, Jade Jones The best thing you can do is use this same idea with the printed letters and postcards. The idea is to make the letter about the seller, not yourself. No one is going to care how well you re doing in buying and selling homes. They care only about what s happening to them. Therefore, your sales copy needs to cater to their situation and needs. Special Note: Handwritten letters tend to garner the most interest by piquing their curiosity.

5 3 Talk to the Sellers After your phone starts to ring off the hook with motivated sellers, the real work starts. This means managing the calls coming in by filtering out those that are a waste of your time and keeping the qualified leads that meet your specific requirement. Keep in mind that the goal is to avoid wasting time getting leads that are useless. Once you determine your specific criteria (the leads you want to target) and which ones you need to leave alone, it s time to work... It s rare that a seller will call us and tell us they ll give us their property for the amount we want it for. While it does happen, it s not often only the exception. The majority of your quality leads are going to be from you talking to the seller, creating a rapport, justifying the price you plan to offer and then negotiating with them. This is how the good investors are weeded out from the bad investors because a good number of investors are horrible at this point. 1 or 2 people out of 10 might be successful with using this system in their business upon learning about it. The reason is that most people forget about salesmanship. Yes, it s a business about real estate. However, you re dealing with people too. The better you can deal with people, the better off you re going to be and you ll eventually be successful. How can you be successful? It s going to take practice! In the beginning, you re going to be bad, probably really bad that s just the way things are. However, if you continue talking to those sellers, over time, you ll start to get better and better, which will ultimately lead to your success. There are many times we have purchased a property for less money than what the competition offered because the seller didn t want to do business with the competition. It wasn t too long ago that I talked to a seller by phone. He said he had an offer for $7,000 more than what we were offering. However, he chose to do business with us because he liked the way we did business. This is the part that will make or break you. If you don t know how to deal with sellers directly, you re going to find yourself looking for homes through realtors or the MLS. Learn how to do deal with sellers directly, and you re going to be a success (remember, cut out the middle man!).

6 4 Persistence Investors have a real problem with persistence. As an investor, you need to constantly mail to your lists on a regularly scheduled basis not every couple of months or every six months to one or two lists. The majority of investors send out a round of mailers, don t get deals and tell themselves it s a waste of time and money. However, the first mailer I ever sent out cost me $2,000 and I did not get one deal. I didn t give up though. I persevered and kept moving. What I did was change my list and marketing piece. After that, I sent out smaller mail rounds (for a couple hundred bucks) until I attained a worthwhile response rate. (Test your strategy!) Once that happened, I steadily increased the pieces I was sending as well as the lists I sent to, and before I knew it, we were sending thousands of mail pieces every month. What was the greatest part in all of this? The fact that we were making a profit each and every month. This is why you need to be consistent and have some faith not just in yourself but in the strategy that has ensured the success of many real estate investors. Don t you think you deserve to be one? Ok, so now you understand what the four key points are of being a successful direct mail marketer. What you need to do now is put them into action. You might be wondering if the management of a direct mail campaign means more work for your business. Yes, it s going to be more work, which is why very few investors master the process. If this was something simple, everyone you know would making money investing in real estate. As you continue to work the method, it does become easier. Mastering the direct mail method to purchase or wholesale homes will ensure you re not just an average investor who hopes to make six-figures. It will help guarantee that you can eventually turn a seven-figure profit. If a seven-figure profit sounds good to you, it is time for you to start closing deals!