All Forum Posts by: Paul Felix

Thank you for the super fast reply Bryan & Jeff.  Much appreciated.  I'll reach out to Mervin & Luciana right away.

I'm looking for an architect in South Austin to create plans for a remodel project. I have plans and details, but need an architect to review the plans and create required docs for permitting. Please let me know if you can recommend anyone. I prefer to work with an independent architect.

Thank you,

Paul

Hi @Jay Hinrichs,   I'm looking for flip deals.  My preference would be to buy from wholesalers, but after analyzing a significant number of deal I've resorted to trying to marketing directly.  I don't intend to wholesale.  Becoming a broker isn't really something I've considered, but who knows.  Things are always changing.

A second round of 500 yellow letters went out early last week, and I've compile the results below.

1000 total yellow letters sent

6 unique responses (I missed 1 call that did not leave a voicemail)

0.60% response rate

4 returned letters (may increase slightly)

0.40% returned to sender

After speaking to a few recipients of the yellow letters, I can confirm what others have already stated.  In my market property owners are receiving many of these letters.  Some say they receive the letters daily.

Some have suggested that my list is the main problem.  I agree somewhat.  My list did match the criteria that was suggested with minor discrepancies which do not account for the response rate.  However, in my target market my list was obviously not focused enough. 

A 0.60% response rate could work if the mailer cost is kept under control, a reasonable conversion rate is met, and the deal size was high enough.

0.60% response rate

1:20 conversion rate (requires 3333 mailers per deal)

0.75 cents per mailer average cost ($2500 for 3333 mailers)

10,000 average deal size

8,500 gross profit (10k - 2.5k for mailers)

This type of strategy really needs to be executed in fairly large volumes to make sense which also means that the target market can't be limited to my backyard.  To achieve 1 deal per month 3333 mailers would need to be sent.  However, I'm basing the conversion rate (1:20) on research, not my own findings.

Hopefully this helps another newbie like me get a clearer picture of the effort/investment required to generated leads and ultimately deals.  Of course, your market conditions may change the results significantly.

Thank you all for the suggestions.  I have a batch of mailers that will be landing in owner mailboxes over the next few days.  For those interested in the numbers, I will post the results here.

What did I learn?  Based on all of the feedback, I think the most important lesson is that the Austin area market is very competitive.  Mailers like the Yellow Letter may work well in some markets, but it is going to take a little more creativity to break into a market where sellers are receiving many offers from investors already.  Exactly what that creativity is going to be, is yet to be determined.  Second lesson is that talking about math is the fastest way to end a conversation!

Thank you again for all of the feedback.

@Kyle Corbin I really wish that you were right, but that makes absolutely no sense.  Please see the earlier post where my list is compared to ListSource.  I would happily spend whatever it costs to buy a "good" list.  Money is not the issue.  I'm doing research on my target market.

When I find a formula that works, then I'll scale it up as fast as humanly possible.  Scale is not the problem.  I'll not bore you with the details, but I will say that the tests I'm running are statistically significant; +-5% interval with 99% confidence.

I hate to harp on the math, but it is quite important to this conversation.  @Michael Quarles is one of the most successful investors and @Cody Alexander posted some important numbers related to Michael's marketing performance.  These numbers seem to line up fairly well with my response rate.  However, they do not line up with the response rate that Cody and many other have posted related to specific marketing piece performance.  To recap...

220,000 direct mail pieces mailed monthly

58 deals per month

3793 mailers per 1 deal

1:25 conversion rate (assumption)

25 / 3793 = 0.66% responses rate

I have increased the conversion rate assumption from 1:10 to 1:25 based on Cody's feedback.  We don't know a lot about the type of mailers going out, but if we assume a blended response rate between Postcards at 0.5%, Zip at 1%, and Yellow Letters at 5-8% the I'd expect the response rate to be significantly higher. 

Per Cody, there are 8 people staffed to receive incoming calls.  Based on the above math there should be around 1452 incoming calls per month.  This works out to around 9 calls per employee/hour.  I would imagine (guess) that a lot of incoming calls go to voicemail and are not qualified enough to return.  The staff also needs to make follow up calls.  All considered, these numbers seem to make sense.  If the response rate was something closer to 2%, then the numbers do not makes sense for 8 employees to handle the work load.  I've listened to a number of the DailyDeals podcasts (which I am addicted to) and have a fairly good idea of the time investment made per call.

This marketing model applies very simple math.  If you have any idea where I'm off base, please do let me know.  At this point the math tells me that my expectations are more of a problem than my response rate.

This is all great information.  @Cody Alexander and @Michael Quarles, do you think my response rate of 0.4% is nothing to worry about, and I should persist forward?  If your conversion rate is 1:25 then your response rate is 0.6% as well.  These number seem reasonably similar to my own.  They do not seem similar to 5-8% response rate on yellow letter.  Please help me understand what I'm missing.  Something doesn't add up.

Thank you for sharing @Shawn Connors.  You probably kept many people (like me) from making the same mistakes.

Well, the formatting was completely lost after I posted the above.  Hopefully this image works better.

@James Green  I used a 5 year old deed recording date assuming that this will often equate to 30% equity.  Below are the variables with sample inputs. 

If you project these variable forward to get the future value of the loan, then the below chart show year 5 - 7.

Notice that I am considering am also including 15 dollars per sf as the repair cost. At year 5, 70% of ARV - Repair exceeds the load balance. Of course, I can't know the exact equity situation, but based on an earlier post in this thread we can conservatively assume that 75% of these 5 year old deeds have 30% equity in my market.

Let me know if you want me to send a spreadsheet with all of the formulas worked out.  I'm not saying that this is the best way to determine equity %.  I just chose to take the hit on some wasted mailers instead of losing the opportunity to market to 25% of my target market due to missing properties in ListSource.