Investor · Dallas, TX · Member since 2017 · 12 posts · 11 votes
Hello Bigger Pockets Family,
I could use some advice, I am a rookie real estate investor with 2 properties in the North Dallas area and I want to put all my money into becoming a Wholesaler. I have done a ton of research and want to jump in head first. With that being said, I have hit what may be an imaginary wall right out of the gate. I have budget 3 to 5 thousand dollars to get me started with a direct mail campaign, but here is the problem. No matter how much research I have done, I do NOT feel comfortable in my list building skills.
How do the professionals like @Michael Quarles, @Lance Wakefield, and @Brett Snodgrass build their list?
What list company do they use?
What inputs do they look for?
Is % of Equity all that matters when building a List?
What size list should I purchase for round one?
How can I find a local mentor?
How can I convince them to work with me?
I am hyper focused to get started on this campaign, but right before I dove in it hit me. The list is maybe the most important part Wholesaling. Am I walking the thin line of paralysis by analysis? Should I say screw it, jump in and learn from my mistakes or should I look for advice/partnership first?
Lots of great questions here. I might be able to help a bit in regards to your list questions.
Full disclosure: I work for one of Michael's businesses. In fact, I work for his direct mail company. However, in doing so I have pulled many lists and even pulled some for Michael.
More often than not, I use Listsource. There are lots of folks that call in and are confused at what is good criteria and how to pull it. In those cases Michael gives them his recommended criteria, which looks like this:
1-3 Bedrooms
30%-100% Equity
4 yrs. Ownership
SFR
Median Price Range
Absentee
Owner Occupied
No Corp
No Trust
Depending on the amount of leads that are available, you may want to adjust the criteria as needed.
As for the quantity to begin mailing to, I wouldn't go below 1000 leads. Though, like most things, the more the better.
Your budget of $3k-$5k, is that monthly or your total budget? If it is monthly, then you should easily be able to do as many as 3000-4000 without breaking the bank. And with that amount you could split your mailings, let's say, weekly to keep the flow of calls coming in all month.
Keep in mind that direct mail tends to work best when you send a campaign of 5-7 different pieces, 4 weeks apart from each other. Follow ups are key as the average person takes 3-5 touches before picking up the phone to respond.
Lots of great questions here. I might be able to help a bit in regards to your list questions.
Full disclosure: I work for one of Michael's businesses. In fact, I work for his direct mail company. However, in doing so I have pulled many lists and even pulled some for Michael.
More often than not, I use Listsource. There are lots of folks that call in and are confused at what is good criteria and how to pull it. In those cases Michael gives them his recommended criteria, which looks like this:
1-3 Bedrooms
30%-100% Equity
4 yrs. Ownership
SFR
Median Price Range
Absentee
Owner Occupied
No Corp
No Trust
Depending on the amount of leads that are available, you may want to adjust the criteria as needed.
As for the quantity to begin mailing to, I wouldn't go below 1000 leads. Though, like most things, the more the better.
Your budget of $3k-$5k, is that monthly or your total budget? If it is monthly, then you should easily be able to do as many as 3000-4000 without breaking the bank. And with that amount you could split your mailings, let's say, weekly to keep the flow of calls coming in all month.
Keep in mind that direct mail tends to work best when you send a campaign of 5-7 different pieces, 4 weeks apart from each other. Follow ups are key as the average person takes 3-5 touches before picking up the phone to respond.
Thank a ton for the input. I have decided to go with a $3k budget and stretch it over 3 months. I took your advice and used Listsource to purchase a list in my city. The list returned just about 4,000 leads which I then had divided into a partial list of 1,500 and removed the duplicates.
As far as the mail goes, I bought 1,500 sheets of plain white paper and printed 2 different types of messages with 2 different numbers for split testing. The messages are exactly the same but the font is completely different. One font is just plain computer font and the other is my handwriting. I used a cool app called Calligraphr (www.calligraphr.com) to design a font that truly is my handwriting. I then printed off 750 of each and am currently in the process of folding each letter. My plan is to tape each of the tri-folds, place a stamp on them, mail them out, and pray.
@Claire Trammell and Bigger Pockets family, does anyone have any advice on what I should do for postage? The postage part has been extremely difficult for me. Do I just buy 1,500 stamps at .46 cents each? That seems extremely expensive. Is there a better way?
What an awesome plan! Especially in the beginning, it is totally worth your while to do this in house. I like your approach with the same message but different fonts. I'm curious to hear which performs better in your market. Keep me posted.
As for postage, I don't know if another way. Letters are basically First Class only since you are doing them in house. Unfortunately, postage is one of the most expensive pieces of a mailing.. However, if there is anyone out there that knows a cheaper way, then I'd be interested to hear that as well.
Call your local post office about using their bulk mail service. You have to mail a minimum amount, and sort them by zipcode. I am about to do my first mailing and I plan on going the manual route at first.
I haven't seen too much of a difference in response rates based off postage type. in fact, I have no data on that since it doesn't seem to make a difference either way. However, a cancellation stamp on a piece of Standard Postage mail could be remedy if the response rates are effected by postage in your market.
Really its what the Post Office guarantees with First Class that makes folks spend the extra money: guaranteed return mail and a 3-5 day delivery time.
Standard Postage, on the other hand, can take anywhere between 3-30 days to deliver and you are not guaranteed return mail, BUT the benefit is that it is cheaper per mail piece therefore you can have more mail pieces out.
@Doug Haisten The median price range is the as-is value.
@Spencer Scott Any day ending in Y. Haha! Some folks say in their market it is best to mail on a Monday, and others will say to mail on a Friday. I think it will take some testing on your part, however the important part will be to get the mail out. Personally, I don't worry about the mail out date since I prefer Standard Postage and delivery dates will vary.
At ListSource it is asked the Address Completeness: Mailing Address Complete; Mailing Address and zip+4; Property Address complete; Both Mailing & Property Address complete. I would assume the last selection?
Hi @Spencer Scott! I love that you have a solid plan to get started. I sent my own mail for a while as well. Don't let it burn you out though...it's a lot of work. It will take many hours to stuff that many envelopes, and in my market, I would only expect about 7-8 calls and no deals from the effort (I expect to get a deal out of maybe 20 leads). This can be very disheartening when you have spent so much time. For almost the exact same price, you could send the same number of professional letters through yellowletterHQ.com for $0.55 each. You are already going to spend $0.49 for postage, probably $0.01 for a sheet of paper, and a few more cents for the envelope...so you really aren't saving money. I would let a mailing hosue do it all for you as soon as possible so you can focus on the important stuff.
If you are doing everything else right, your budget is very likely to produce at least one deal. And the good news is, you will know it is working even before you actually have a deal. If your phone is ringing, and you are talking to people who actually have a house to sell, then it's really only a matter of time before you get one, as long as you aren't throwing your leads away by failing to follow up or giving up too soon. Early on, don't try to filter out unmotivated leads, make all the appointments you can, and if nothing else you will get much needed practice talking to sellers.
As for the list, in addition to @Claire Trammell's filters, I would filter out houses less than 20 years old, since they are less likely to be in distress.
Also, @Claire Trammell, I'm curious why you filter out properties held in a trust.
I'm kind of surprised to the suggest of ownership for 4-years+.
First, that would be a massive number of leads. In my experience, there is no way a homeowner will accept a lower price than what they paid four years ago. Perhaps some other people have some magic to ask homeowners to take a $50,000 loss on something that happened four years ago. Particularly if it's owner occupied, the motivation is somewhat limited and it's probably in "somewhat" decent shape. That isn't to say owner occupied can't be deals, but hard for me to see four years ago they bought it, and it's not in such horrible shape they are taking a serious hair cut to wholesale prices.
Now, MAYBE there is a small section of the 80 to 100% equity that are just so fed up they are willing and able to sell at wholesale prices that actually could be a deal at 4 to 6 years out. 30% equity? You aren't just asking the owner to take a cut at this point, you're very likely asking the bank at a wholesale price.
Play the numbers out: purchased house for $300,000 mortgage in 2013. Perhaps that mortgage is 4-years in at $39,000. So they owe around $260,000. Even assuming there has been good appreciation to around $350,000 at the base price. Just apply a basic 70% rule without rehab. $210,000. Now, I know this is some dirty math, but you get the point. 30% equity at 4 years, I just don't see it at all. Now we're talking about wholesale numbers for multiple investors to get their cut?
Also, I mean, have you thought through what wholesaling owner occupied properties means? You prepared to walk strangers through someone's property while they are inside? What exactly are you going to tell them? You could try to not let people see the property, and in some cases that has worked on an AMAZING price, but I tend to think you're not going to pull that off on a mass basis until you have some amazing buyer's list of people that don't inspect property. Now, I Know people have been successful with this. But before entering that zone, just make sure you can handle the heat.
I would go as far as to say I wouldn't even mail in 2005 to 2007, because most of those homeowners bought at such amazingly high prices we still can't cover the debt in many cases. And, psychologically speaking, I have never done a deal in 4 years where the seller agreed to less than what they paid.
You're also has no direct motivation tie. That's fine - I've done well with general lists too. But sending ALOT more than this volume. You will get better results mailing probates, evictions (with regular owners that only own 1 or 2 properties), back-taxes, violations. Combine that with the criteria in your general list - and now you have a good list. Sure, if you are going to mass mail 8,000 then perhaps you can just accidentally hit those hotter leads ; )
Last, your budget is set to 3 months. Even though your wholesaling, which in theory could be a quick deal, most likely it's not. If it's game over in 3 months, my guess is your budget expires before you make money - but that can all vary on your market, luck, negotiation skills. I can just say when I mail something, I'm not expecting profit from it in the next 3 months.