Marketing, am I off base here?

Question

Ok so I am a new wholeseller and I have been studying and talking to other real estate professionals for the last 6 months and I am ready to purchase my first list. I do not know any local wholesellers yet. I am still trying to find one or two in middle TN that I can occasionally get some advice from (so I know the things I am being told will work in my state). Until then here is my question for anyone who can answer.

My prospect list from listsource is around 1800 for a small area around where I live. Now I don't want to start counting chickens before they hatch but would it be reasonable to expect (considering that I am new) that I could predict a .75-1% success rate?

Does this seam like a reasonable number or should I be more conservative in my guess work?

I am trying to prepare a 6 month projection and budget. I have an extremely tight budget and sold some items to get a starting point for marketing. I am just trying to figure out what my performance benchmarks will be.

Thanks everyone!

John Horner · Answer

You had mentioned $0.20/name for the list, I pay roughly $0.08 through listsource.  They give discounts to high volume customers.  Try calling and asking for a discount. If not pm me and we'll work it out.

John Horner · Answer

I mean, you can guess at whatever you want, but I am telling you that especially because you are just starting out, you will not convert 10%.  You don't know this yet because you haven't started, but 75% of the people who call will not be motivated and want retail for their house.  Even if you can get a discount, if your goal is to wholesale then you need a STEEP discount to make it work.  I rehab myself so I don't even need that steep off a discount anymore and I still only close 1 in 25 deals, or 4%.

John Horner · Answer

Depends on what the success rate means?

Are you talking about 1% response rate, or 1% close rate?

I have been mailing for 18 months now, and on postcards I see 2%-3% response and on postcards, and 10% on yellow letters.

Those are LEADS though, not DEALS.

We close about 25-30 deals per lead.  It would probably be even high on YellowLetters because of the tire kickers, that is just an average.

So if you are using postcards, you may get 2 deals, but they are definitely back end weighted, meaning the more times you send the higher response you will get.

Wane Tango · Answer

@Christopher Leon I am not apposed to driving for dollars and cold calling/door knocking. There is time costs and actual costs associated with that. For example, if I did that in my neighborhood it would be another chance to get to know my neighbors a bit better (im still new in my subdivision 2yrs here) but I would have to schedule a babysitter to come watch my son (19 months old) while I door knocked. This would give me a chance to work on my elevator pitch but it seems that I would be better to focus my time cold knocking on doors that made more sense, like with where FSBO signs are posted or distressed/vacant properties. My particular neighborhood probably would yield little results I would imagine. Although I like the angle that you are coming from.  I will try to think outside the box in lead generation.

@John Horner Having more buying options in my tool belt are definitely part of my game plan with leaning more towards contract assignments, or owner financing and sub-to being my main focus with cash purchase as a last option for me to buy. At least just from talking this through with you I have had to really analyze  the numbers and I know what my break even conversion rate needs to be profitable. Im going to look into other areas that I can reduce my marketing expense like cutting mailer costs or going to the tax assessors office to see if I can get the list cheaper or for free.

John Horner · Answer

My numbers are per mailing. So for you I would say 1-2 deals per mailing at the beginning and maybe 2-3 on the last couple.  Try to use as many strategies as you can. Cash offers, seller finance, sub2, etc.

Wane Tango · Answer

Ok so here is what my numbers look like (being conservative).

I will try to keep my math here simple. Each prospect costs .20 to generate from listsource. I plan to mail 6 letters over the course of 6 months to each costing .75 per letter (stationary, stamp, envelope, ect). That is a total cost of $4.70 per prospect over 6 months, I have 1800 prospects and that is a total of $8,460 if I mail all 6 letters to all prospects. Being conservative I will assume that any lead that converts will be on the 6th touch.

If I am converting .25% of the 1800 from prospects to a signed contract I get 4.5 deals. Being conservative I would round down and say 4 signed deals. My break even price on each deal would be $2115.

Now I know I can count on $1500 per deal but was hoping to average $2500 with a best case of making $5000 (again being very conservative).

So my take away on this is that in a worse case deal I loose 615, I average making 385, or best case make 2885 after marketing expenses included. This is me assigning contracts mind you nothing else.

Those numbers seem very grim. This does not include any expenses outside of marketing. At these numbers by the time I added in earned wage taxes, gas, supplies, phone bill, unknown cost, and the time it takes to sort through all of the information, talk to sellers, and closing the deal I think I would still be upside down averaging 4k a deal.

If my numbers are off please correct me.

Wane Tango · Answer

@John Horner

So should I push my projections down to .25-.50% percent to go from prospect to signed contract?

Wane Tango · Answer

@John Horner  Sorry I did not explain myself well enough let me expand.

I was relating the .75-1% to deals.

I would like to think that I would be converting 10% or better from prospects to leads then 1 in 10 (or better) turns to a deal and that lead me to speculate .75-1% success rate.

Success rate to me is converting prospect to singed contract.

I am trying set marketing goals that make sense to my budget. I don't want to spend 90% of my budget on marketing when a speculated return on investment is nearing break even.

Generally I like to be very conservative with my numbers and wanted to make sure that I was in the ball park with these figures as a rookie wholeseller.

Admittedly I only have a 500 dollar budget to get me rolling. I already have 1000 biz cards and my prospect list from listsource is roughly $300. That just leaves me with $200 to do mailers (which I plan on hand writing because I have more time than money). Then mailing them out in batches of 500 per week to help spread cost over time, and to make sure I don't get swamped with more calls than I can handle. My plan is that each prospect will get a min of 6 touches over 6 months before I scrub them from list (or they call back,sell, ect).

With this in mind I am trying to forcast my cost per prospect vs forcast of deals to help set my benchmarks and know how large my budget needs to be to make an educated guess on return on investment per dollar spent.

Hope that makes sense.

I am big on tracking numbers and I know these numbers will change on scale and as I gain personal experiences, I'm just trying to get an idea of what the cost of success is from a Marketing stand point.

Marketing, am I off base here?

Most Popular Reply