Mailings costs and ROI

[Daniel OKeeffe]

A bit of confusion about the wholesaling model. From what I have been reading from different sources in the forums, the mailings seem to only become effective around the 4th or 5th mailing to the same group of people and the numbers thrown around seem to be approximately 5k people you are sending a letter or postcard to every 4 to 6 weeks. If what they are saying is correct, then you need to send out approximately 20k mailings at a cost of at least 10k to get one deal? Does this sound right to people? Does it make sense? Please tell me where I am wrong as this seems like a very high expense to get one wholesale deal under contract where you may only make a profit of 5-10k. I have to be missing something in my calculation.

[Dev Horn]

Hi @Daniel OKeeffe - I'm one of those guys that talks about hitting the "sweet spot" in direct mail around the 5th to 7th mailing. I just did a free video about the marketing concept behind this, called the Rule of 7:

Sharon Vornholt wrote an excellent article here in BP on how this applies to direct mail for RE investors.

Now, having said all that, I and others teaching this don't mean to imply that you can't or won't get deals early on. Or that it takes $10,000 in marketing to get a single wholesale deal.

You might think of it more in terms of what it costs to generate a call or web lead, and just realize that that cost should decrease over time as your marketing becomes more efficient. Early on, it might cost $150 to generate a phone call, and it takes about 20 calls to find a deal. So $150 x 20 = $3,000 in marketing cost for a deal. Later, because you hung in there and developed your brand in your market and have people now referring sellers to you, your cost per call drops to $90. So $90 X 20 calls = $1,800 in marketing costs to get a deal.

Now of course your mileage may vary, depending upon the competition in your area. In LA it can easily cost $250 to generate a motivated seller call. The point is - consistency is the key to success (which is an ON-GOING business that has a FLOW of leads & deals).