Why New Investors Should Avoid Direct Mail Marketing

Direct mail is a usual route for most new investors. It’s easy, it's a popular topic among Bigger Pocket members, and it’s the usual advice given to someone brand new.

But is it a good way to start in your new entrepreneurial venture?

Without enough capital, knowledge, and skill set, can it hurt your newly found business?

Below, I’ll explain why it’s NOT a good strategy to start your new real estate business, and why it can hurt you.

3 Reasons New Investors Shouldn’t Start with Direct Mail

When I got started in real estate investing, I did what most people did… I went online and found biggerpockets.com. After sifting through the plethora of information, it seemed that the “easiest” and most popular method of finding deals was through direct mail.

So, I went to the races.

I implemented almost everything I gathered at BP on direct mail, I did yellow letters, postcards, handwritten type, red ink, black ink, business letter, zip letters, etc. I did equity lists and my own driving-for-dollars list. I did 3-month campaigns and 7-month campaigns. I mailed anywhere from 500 mailers to 3,000 mailers.

After almost 2 years of mailing… the results…

Nada. There were calls, and there were leads, but no deals came out of it.

Be it my young inability to close deals, or my list, or my copy. Whatever the reason for not getting any results… I spent a lot of money and was on the verge of quitting.

Before I go on, some of you might be saying, “I started my career with DM and only $500 a month and I did just fine”. If you’re in a market where there’s hardly any competitors, and we are at the first 2 cycles of the market, then yeah, DM will probably work out.

But for the rest of us in highly populated areas, where there are 5 investors for every 1,000 sellers, and real estate is “hot” ... then my advice for the young entrepreneur is to stay away from DM regardless if the Midwest investor who’s in a population of 100,000 within a 20-mile radius tells you differently.

So here are 3 reasons to avoid direct mail:

1. You Can’t “Out Send” Your Competition

Believe or not, being successful in direct mail in any industry is more about using a good list, giving the prospects what they want, and closing. That’s why giants in the direct mail business (Rodale-Men’s Health, Agora, Bottom Line), spend millions of dollars on lists and copywriters.

So, if you’re brand new in the marketing industry, most likely you don’t know what a good list is, or how to put a unique selling proposition into your advertising, or how to empathize with your market.

I know I might be getting eyes rolled here because the usual advice is to just send out to a mass list with the message of “We buy houses”. If you’re in a low-competitive market, where the prospect is not very aware of that message, then yes without a doubt... it’ll work well.

But if you’re in a moderate to highly competitive area things are different. Prospects are well aware of the “cash offer” ads. And as a market becomes more aware of a service, the common slogans get tuned out easily. However, in the REI industry, the usual “solution” to beating this increased awareness, is to just send more mail with the same-old-message and same-old-tactic. From conversations with high volume investors (and my own lack of results from 3,000 mailings a month) in Southern California, it takes OVER 10,000 mailings a month (for 7 months) to have consistent deal flow. Check out this forum on people’s struggles with DM. (NOTE those results are based on the usual formula for direct mail: send to an equity list with a simple message)

Well, the bad news for the brand newbie is that most likely he/she doesn’t have the money to keep up with 7 months of 10,000 mailings. And, they don’t have the resources to cover all the calls they’ll be getting.

The only other option is to be a little more creative about your mail. But this skill set and knowledge take time; a skill-set that’s mastered in the Direct-Response industry.

You can do that, but you know the saying, “money is attracted to speed”, and the goal of any young entrepreneur is to succeed fast.

2. “Money is attracted to speed”

Direct mail is one of the easiest strategies to get started. All it takes is a couple of calls to a mail-house and a list provider (unless you’re doing it all yourself).

That’s good and bad. Bad, because it means an excuse to sit at home and wait for those phone calls. A new investor will rationalize that sending out mail is “good enough”. “After all, everyone in BP talks about it, so this must be a good strategy”.

Here’s a problem with a newbie relying on mail: The new investor is wasting valuable time sitting there waiting for phone calls while he could be getting out there talking with people in the business and directly with sellers. Getting out there ASAP to find your first deal is a priority. Malcolm Gladwell once said that it takes 10,000 hours of deliberate practice to become world-class in any field. The “10,000 hours” is most likely not accurate, but what is agreed upon by hundreds is “deliberate practice”; DAILY attempts at your craft. Every day you spend relying on direct mail to do the work for you is another day you missed out on being 1% better.

Waiting for opportunities is no way start a business. You need to “fail fast” to succeed, and direct mail can lead new people into that trap thinking they are doing enough.

Immerse yourself in the industry by door knocking, going to REI meetups, meeting agents, cold calling, driving for dollars, talking with contractors/buyers/escrow agents/attorneys, meeting experienced investors, etc.

Don’t get trapped into a mindset of “good enough”, because DM in a competitive market is not good enough. You need to learn to find leads, network, build rapport, and close deals.

3. It’s not the low-hanging fruit

When you’re starting out, direct mail can be a long game of dice. So, it's important to have success early (even small success). The best way to do it is to take the easy road; go after the low-hanging fruit.

When I shifted from single family residence to mobile home investing (a small unpopular nice), it was like night and day. The success came fast and abundantly. Direct mail in highly competitive areas can be the high-hanging fruit that everyone is going after. You don’t know what you don’t know and attempting a difficult and expensive strategy can mean a lot of wasted dollars (difficult meaning it takes creativity and knowledge to perform well in a competitive market).

Instead, try low barrier marketing strategies like door knocking or cold calling. Granted, these two aren’t “low-barrier” when it comes to overcoming the mental barriers behind it. They are “low-barrier” in the sense that they hardly take any money, and very few people are door knocking consistently every day/week.

To Summarize

If a newbie is sitting back at home drinking his/her lemonade waiting for those phone calls to roll in, he/she is going to get a rude awakening.

1. 1. Direct Mail can take a large volume that most people starting out can’t afford.
2. 2. It can take months to have some success with it
3. 3. It’s an expensive way to learn how to close deals

So, for any new investor out there, you need to get out into the market and learn your craft and meet the people who are going to get you to your goal faster, not sit back and wait for opportunities.