HELP Discouraged flipper with dismal direct mail campaign results

[Matt Turcutto]

I recently started a house flipping business (although I'm not sure how good of a business it is since I have yet to flip my first house). After researching for I can't tell you how many years and after what seemed like a decade of analysis paralysis, I am finally taking action. 

On 2/15/2017 I sent out the first batch of white, typed letters. I sent 370 letters. Turns out I misspelled my website and screwed up the return label, but did end up getting a few calls. Each week thereafter I sent another batch until the fifth week when I sent the first list again. I eliminated anyone who bought 2016/2017. 

List 1 was simply my neighborhood. I figured if a deal was going to happen in my own immediate neighborhood it should be me that knows about it before anyone else. Like all my lists, I pulled the list of names and addresses from the title office. 

List 2 was a list of Tax Delinquent homes in areas I wanted to buy. 361 names in all.

List 3 was a combined list of probate and homes that had a Notice of Default filed (I live in CA). 93 combine here.

List 4 was a specific neighborhood I wanted to target. It has no HOA, was built in the 1970's, is in the $600-700k starter range (I live in OC), and is a place I feel has long-term value. 272 homes here.

Since I didn't get list one mailer one back, I have no data, but I do know I had a 4.71% return rate (insufficient address and the like) on list 2, 9.68% rate on list 3 and 1.84% rate on list 4 during the first mailing. The next mailing to the same addresses provided 1.36% return rate on list 1, 2.10% on list 2, 4.3% on list 3 and 0% on list 4 (I corrected each mailer as it came back and before I sent out the next batch). This is returned mail rate, not response rate.

As far as response rates, I received most calls during the first mailer (contrary to what I have read). List 1 generated 12 total calls among all the mailers for 3.3% response rate. List 2 got me a 3.4% response rate. List 3 I received zero calls, and list 4 got me one call at 0.4% response rate. 

List 2 was the only one that got me an actual lead. I submitted a verbal offer and was rejected immediately for being too low. Most calls I got back were, "Who are you? Is this a scam? Why would I want to sell? Don't send me anything else? etc." Each letter costs $0.59 each including postage since I printed everything at home ($0.01 for paper, $0.05 for ink, $0.06 for envelopes, $0.01 for labels, $0.47 for postage from Costco).

I wanted to find a way to do more so I bought 5,000 postcards on VistaPrint and sent my first batch out 4/3 (to list 1), 4/7 (to list 2) and will send list 3 & 4 tomorrow (4/12). So far I've not gotten one singe call from the postcard which surprises me. The letter phone calls came mostly 1-2 days directly after mailing. Postcards cost me $0.37 each with postage ($0.03 for the postcard, $0.00 for ink, $0.01 for labels, $0.34 for postage from Costco).

This brings me to today. I am finding a declining response rate with each supplemental letter I send. I'm told after 5-6 letters is when you get most responses, and I'm resolved to complete 5 letters/postcards before I call it quits, but I'm currently feeling very discouraged. The first two mailings were letters, the next two were/are going to be postcards, then I'm going to finish with a letter.

I have already found my next list of people I want to target. I think I've been doing it wrong in the sense of hitting entire neighborhoods. This next list is a list of 2,300 absentee owners in the 4-5 cities I want to buy in with houses below the $8-900k price I want to stay below. 

My problem is two fold. ONE: I am discouraged from the dismal results from the few thousand I already spent. I'm questioning the success of direct mail altogether. Perhaps my Orange County, CA market is too saturated and there are no deals left to be had? TWO: I don't know if I have it in me to commit to the thousands a proper 2,300 absentee owner list will require of me. I'm already kind of all in and although I could cough up the money for this second list, it would pretty much drain my funds that I've earmarked towards this venture rendering my real estate flipping dreams dead. 

Thoughts/Words of Encouragement/Ideas? 

#WhatTheHeckHaveIGottenMyselfInto

[Cornelius Garland]

@Matt Turcutto You've received some great suggestions, and I want to offer my input because you're not too far way from achieving success. Your persistence has gotten you this far, and I'd hate to see you quit after you've come this far. I did read a few things in your initial post that should be tweaked immediately. Firstly, I think your main issue are your lists. You're not focused on the right zip codes and prospect group, which is why your message isn't being well-received. I always qualify my target zip codes and check how many cash sales there were in the previous six months. If there are 100 cash sales in one zip code and only four in another, I'm going to go with the zip code that has 100. The reason being is because there is a lot of investor activity in the zip code with 100 cash sales. The prospects are already getting mailed to by investors so they know the benefits of working with you, and these will likely be blue collar areas with a lot of homes with equity. It may take some time to qualify the zip codes at first, but you'll thank yourself later. You want to use List Source to pull all of the cash sales in your target area and choose the zip codes with the most cash sales to market to. 

Secondly, I don't think your number of leads per list is large enough. While you may be targeting over 1,000 individuals per month, you're not focused enough. Rather than doing four separate lists, I would focus on one or two and hit those consistently. The smallest campaign I ever ran was a list of 390 names and that was a very specific neighborhood that had a lot of dilapidated homes. I typically aim for at least 1,000 prospects per campaign. I would suggest discontinuing the first and fourth lists, unless there have been a crazy number of cash sales. Also, if you haven't filtered by equity then your list is essentially worthless as a cash buyer. Not having equity filters on your lists is like shooting in the dark. These homes could be upside down or only have 10-20% equity, and you won't know until the prospect calls you.

Lastly, I want to touch on your marketing piece. You should really do yellow letters, or at least have your typed letter in an invitation envelope with "handwritten" font to increase your open rate. While you may not immediately close on these deals, it will at least initiate the conversation and you can followup with the leads. Every one of my deals, except for one, came from consistent followup.

I think your biggest issue is the lists you are targeting. If they're not solid from the start, your whole campaign will fail. Direct mail can work; however, it requires research and not deviating from what's worked for other investors. I spent about five solid months intensely studying the BP forums back in 2015 before I sent out my first letters, and I'm glad I waited. I was on a very tight budget, and we really only had one shot to get it right. Thankfully, we were able to pull a deal from that campaign, and we haven't looked back since. I know you're discouraged, but if you want to invest in real estate for the long haul, then this will be the first time of many that you spend money and not see an immediate ROI. I was definitely breaking even in my first year because I was learning and spending money experimenting with what works.