I'd pay 3-4x your asking price for the lead AFTER I closed the wholesale deal. But BEFORE? That's much harder.
It brings up a rhetorical question (I don't need or want an answer, the question and logic of the question answers itself, hence, it's rhetoric): If these leads are so hot, why aren't you partnering with a few wholesalers and sharing the wholesale fee rather than charging a flat fee for each lead?
It must be that you expect to make more selling each lead than you would sharing in the back end (greater) fees with a wholesaler. And, that's OK - after all, if you thought you'd make less selling leads for $1/qualified lead, we'd say you were irrational; but, you are undoubtedly experienced and rational, which is why I can logically infer you set it up to make more on a per lead rather than a back-end share. Incidentally, it also shifts all the risk to the wholesaler: You get your cash upfront without taking on the risk of going 0/100 on the leads. Why would I as a wholesaler take all the risk?
--Craig.
Hi,
I'm putting up a white paper. This white paper tries to capture the research I did yesterday. Basically, my wife and I endured a failed JV. In the JV, we drove-for-dollars and collected 1,000 addresses. The partner failed to actually mail to the owners on the list (he did look up about 500 owner addresses).
So, we're going to mail them ourselves. I expect to commit to five mailings. Our budget is about $2,500. The white paper has references to where the ideas come from (many of the ideas are posts here on Bigger Pockets).
White Paper
Marketing to D4D Leads Via Direct Mail, Including Yellow Letters, Letters, and Postcards
1.0Introduction
We end up here due to a failed joint venture with a wholesaler. We drove the neighborhoods (probably 50 hours, 5 tanks of gas at a cost of ~$200, and some really cranky kids.) We did our part and created a list between March 13 and July 9, 2016 of 1,000 addresses. Currently we have owner’s address and contact information for 500 of the 1,000 addresses. We expect to populate the other 500 addresses with a PropertyRadar.com account. About 10-20 of the homes we found were so distressed they were boarded up.
The purpose of this white paper is to explore the costs of a direct mail marketing campaign to the list, the resources required in time and otherwise.
My initial trepidation remains: Even if we get the leads, how/why would one assume I can close the lead with the success of a skilled wholesaler? Why learn on my own when someone else may already know how to do it and with the right blend may be able to show me how to negotiate a wholesale deal based on leads I provide and a fee I share with him.
And certainly direct mail may only be one of dozens of potential ways to market for wholesale properties.
2.0Mailing Costs
2.1 Cost of Stamps
Incidentally a regular first class large 1 oz piece of mail ships for $0.47/piece and postcards are $0.34. Obviously, the nice thing about this website/service is it is specific to direct mail for real estate (n.b.: It also has a section for professionals, including doctors; while you’re only a psychotherapist, e.g., not a real doctor, it still may be of service to you though).
2.2Physical Items
1,000 envelopes on Amazon.com are $27.88 (free shipping).
1,000 sheets of yellow lined paper cost $6.99 for 600 sheets; so $13.98 for 1,200 sheets.
2.3Phone Costs
If we simply start small and move up, we can point calls to my or your phone. Ultimately, though, it’s certainly cleaner to have a second line. Sees to me we should consider adding another line to our family plan. Apparently, per Dr. Harriman, it is $20 to set-up the line and $13 a month; however, google voice is free. I suppose we should set-up a google voice number ASAP given the lack of cost.
2.4Address Look-Up – PropertyRadar.com
While we could look-up addresses free at the local county office. It’s clear that process is incredibly inconvenient and unworkable for 500 addresses we need to populate. The basic propertyradar.com account is $39/month; their other two price places are $49/month and $59/month. While there is a free three day trial period—I do not believe it is prudent to try to slosh all data-entry into a 72 hour time chunk.
2.5Repetition of Message
Mr. Williams offers a mini-treatise on how he’s used direct mail to his advantage. In essence, he says it’s simple: It’s the KISS principle and hefty repetition of the marketing message.
2.6Consulting Costs
Consulting costs are discussed below. At this juncture, I do not intend to engage in consulting fees as we do our first mailings.
3.0Yellow Letters
3.1Introduction
Yellow letters are personal handwritten notes on yellow legal pads that ask to buy another’s home.
3.2 Bigger Pockets – Yellow Letter Examples
Bigger Pockets has several reviews of proposed yellow letter campaigns. There are also examples of folks who write letters. One provides:
Hey Seller,
My name is blah blah and I am currently looking to buy property in your neighborhood..
If you are interested in selling please give me a call.
I pay cash and can close fast.
Look forward to hearing from you.
-Micah
Another example:
I have gotten really good responses with my standard ...
Dear [name]
I'm interested in purchasing you're property at 123 main st
If you'd like to sell, please call me today at 901-555-xxx
I can buy as-is and close fast
Please let me know Thanks Ben
I actually hand write each one, yellow legal pad and blue pen. Be sure to write the property added and your phone number a little larger than the rest of the letter. I put them on their own line, too, to better stand out.
Good luck!
While Mr. Carey recommends posters, @Jerry Puckett and @Michael Quarles.
3.3Postcards vs. Yellow Letters (Postcards Are Most Financially Efficient)
The Bigger Pockets blog article by Chris Feltus, tackled the age old question of whether Yellow Letters or postcards produced higher quality deals. He began by warnings that because real estate is "a hyper-local industry" it was important to remember that "[w]hat words best for me may not be best for you." Mr. Feltus says letter yellow letters get higher response rates, appear to be intimate communications, but also generate hateful repsonses and less motivated sellers. R. Feltus says given the higher response rate, the best use of the marketing strategy is to have multiple exit strategies, such as a referral to a real estate agent for an MLS listing, or the ability to assume one's mortgage.
Now, on the other side: Mr. Feltus explains after years of split testing (here, mailing the same yellow cards and postcards to the same list of prospects) demonstrates that “postcards tend to outperform yellow letters” because there are fewer “tire kickers” and it makes it more efficient. But, Mr. Feltus also explains the lower response rate for postcards occurs due to beneficial filtering: “People will not generally call you off a postcard unless they are looking for more information” and consequentl “. . . the leads you tend to get are. . . much more serious and willing to sell.” Furthermore, Mr. Feltus explains that he seeks “to buy houses at a discount, with cash, no repairs needed.” Finally, Mr. Feltus expresses his desire to measure the success of a direct mail campaign by the overall result (cash in) rather than the number of responses to a marketing method.
Mr. Feltus also explained that “Postcards are substantially cheaper than yellow letters” and therefore postcards allow one to “cast a wider net with” one’s “marketing budget.” Indeed, this method allows one to make multiple contacts (he says his conversion rate rises significantly between the fourth and fifth contact). He suggests the use of a solid lead list is a critical factor in one’s success.
3.4Mr. Quarles and yellowletters.com
Mr. Quarles’s website provides “Yellow Letters, [a]s low as 77¢. I reviewed Mr. Quarles’s page. He also provides direct mail services, including postcards, yellow-letter-postcards, yellow letters, and printed mail. The cost of 1,000 pre-made postcards was $289.97 ($0.29/postcard) or $569.97 (postage cost is $280 or $0.28 per postcard. The US Post Office is $0.34.)
3.5Jerry Puckett’s Take On Yellow Letter
Apparently Mr. Puckett worked as a Naval Reserve SAE Bee (Construction Crews). He has a large web presence and enjoys a positive reputation on Bigger Pockets (BP). He views marketing as a monthly budget and says one must “decide how much [one] can spend each month for 6 months without regard to getting a deal. . .” because this is the baseline and one “should do as much as they can” within that budget. He preaches that the “key to any kind of meaningful success with direct mail is consistent and persistent mailings.” One ust send “multiple letters over time” in order to create “a machine that will consistently spit out deals.”
Here’s a sample of one of his handwritten yellow letters:
Dear Gabriel,
I’m looking to a buy a house in the Plains area. Your property at 3408 Bennett Drive caught my attention, and I’d like to know more. Please let me know if you’re interested in selling your home or not.
I can buy as is, pay all cash, and close in less than 30 days. What do you think? Give me a call at 472-xxx-xyxy. I’d really like to talk about it with you.
Sincerely,
Jerry.
972-xxx-xxyy
As far as the cost, Jerry pitches this:
My service consists of writing yoru letter copy to appeal to the target and generating the letters and envelopes. For this I charge .55 cents [which technically equates to $0.055, but I think he means $0.55] per name, and ship the letters and envelopes to you to stuff and stamp for mailing. Or for .75 [technically this equates to ¾ of a cent; but he surely means $0.75] cents per name plus postage, I will stuff, stamp and either mail them out for you, or ship to you to drop in the mail locally.
Here’s the translation: It costs $0.43 to mail a single letter. For $0.75 he “stuffs, stamp[s]” and mails them or has you put them in your mailbox. Presumably this comes with his copyrwriting. That’s $1.18 per letter. For the 1,000 prospects we have that $1,180 per mailing. We must do five mailings, so that $5,900 in yellow letters over a five month period, using Jerry’s services. I’m not inclined to use Jerry’s services.
3.6Danny Johnson
3.6.1Introduction
To start with, I’ve always been a huge Danny Johnson fan. He’s written several excellent books. He puts up free stuff on the web all the time. He has a great podcast. He started with nothing, and now flies around in his own airplane. Though this is industry is subject to deceit, trickery, and tomfoolery – I believe him. I feel like I have a pretty good BS meter and I just buy what he says. Incidentally, for a while we had his web service for running an internet site to drive leads to it. I don’t want to do that at this juncture – it only over-complicates things in my view.
3.6.2.Danny Johnson and Driving For Dollars
Danny Johnson’s primer on driving for dollars dates back to 2011.
Danny says once the address is collect “send a letter simply stating that you saw their house while driving the neighborhood and are interested in buying it.” Danny also insists one must “mention the benefits” for the owner of the home selling to you. He further points out “ask yourself when writing these marketing pieces, ‘what’s in it for them?’” He explains that “[h]andwritten letters pull much better than printed, and, no matter what you do, hand address the envelope and use a stamp. Metered mail is almost always assumed to be junk mail.” He suggests one should “alternate postcards and letters for example.” He also says when he gets return mail, you must “[b]ecome a detective and hunt down that elusive owner.” If necessary use a “paid service[] like accurint and skip tracers that will usually be able to find them.”
3.6.3.Chris Feltus – and Driving For Dollars Thread on BP
Chris Feltus also provided some worthwhile content on D4D – and the aftermath of generating a mailing list.
Feltus also has an interesting tactic: He imposes an image of vacant properties onto the envelopes he mails to the owners. While we could do that, I don’t want to overcomplicate the first mailing or two.
4.Response Rates
A former poster explained his view that one should mix letters and postcards as it enhances the opening of the mail and the response rates. This poster also explains his six steps for good direct mail marketing:
1. Two-eight touches to a response;
2.Mail three different types of mail;
3.Monday through Friday (no weekends);
4.Don’t back up your mail;
5.Stamps are better than Pitney Bowes metered mail.
6.Start. . .
5.0The Phone / The Purchase
5.1Phone Scripts
There are numerous scrips that demonstrate what to say or do when people call the number on the postcards. Lamar Ferren wrote a post on using scripts for Bigger Pockets as part of their blog series. The pro argument is that “[s]cripts help you weed out the tire kickers and only work with the motivated sellers.” There are podcasts that describe what to say during a phone call about buying another’s home. Interestingly, the guy describes his house as a 6 or 7 out of 10 – but then explains it’s a 25 year old house, with no upgrades, original cabinet, worst landscaping on the block, water damage, and a hole in the garage. The script in this call demonstrates that you can get people to concede damage to the property. Ultimately, in this cherry-picked call, the seller talks himself down from about $110,000 as a theoretically number to $75k to $60k. The group bought the house.
6.0Handwriting Fonts
Here’s an ingenious hack for the rookie who uses a font and even hires an assisting to self-address the envelopes. It does appear we will be well served to figure out a way to automate—at least to some degree—the mailing of 1,000 pieces at a tie. (And we may wan to consider mailing 500 on the 1st and 500 on the 15th). Looks like purchasing a handwriting font is $10.
6.1Cheaper Postcards
It’s also clear we can buy cheaper postcards. For the campaign I bought 5,000 full color postcards from fast color printer, delivered, for $151.25. That is $0.03025 per postcard. Thus the cost for 1,000 postcards is $30.25 (instead of the $280 the other dude is charging). But we have to affix postage on them. . . or hire someone to do it for us.
(the footnotes with references failed to post after multiple attempts. Here's a link to the original for anyone who wants to review the sourcing for the info: https://docs.google.com/document/d/1jsy4uW2_e1GsMJQx7xfN-xNQuYwrjcuorJ3iES3XlO0/edit?usp=sharing.
Just to add a simple comment to the old thread in case someone searches it. It certainly is/can_be unlawful to make _commercial_ calls to those on the do not call registry. This is more thorny than you might imagine, too, because the penalties are worse for calling cell phones--and now marketers have a very difficult time discerining what is a cell number because home numbers are regularly ported to cell phone numbers today. Many states have individual laws, but the federal law is known as the TCPA (Telephone Consumer Protection Act; see, https://en.wikipedia.org/wiki/Telephone_Consumer_P...) and the Telemarketing Sales Rule (see, https://www.ftc.gov/tips-advice/business-center/gu...).
Incidentally, I've been involved in a consumer litigation before. For me, it's a very interesting area of law. Professor Whaley a famous law professor from Ohio State had a great pre-amble to one of his legal tomes. Basically, he explained that few people, and even fewer lawyers had a real command of bottom up consumer law. But, for those few lawyers who understand how pro-consumer the statutes are (often watered down by misguided judges in my humble view in appellate cases), they enjoy a viscous advantage. He went on to explain the checks he collected from the defendant corporations for his legal work on behalf of a mere consumer were the sweetest fees he ever collected. I suppose that's the bad news for the business folks on this list.
But the good news is great: No one knows or understands consumer law. After all, how many of you have brought a small claims suit for a telemarketing for calling you on your cell phone for $1,500 per call despite your being on the do-not-call list? Yea, that's what I thought . . . .
Hi -
Over the past several months, my wife and I created a bird dog list of 1,000 SFRs in the San Fernando Valley. (We did it within a joint venture that unfortunately didn't work. The wholesaler we worked with simply never mailed the postcards out as we had contracted. Consequently, we're sort of back to square one).
We're ready to either mail postcards or yellow letters to those addresses. But, what would be quite helpful to us is having a joint venture with an experienced wholesaler who could help us convert leads into deals. That's been surprisingly elusive so far.
If someone wants to chat about an opportunity on this topic, I'd love to hear from you.
-Craig.
keywords: Los Angeles, LA, The valley, wholesaling, wholesaler, bird dog, birddog, birddogging, rehabber, hard money, fix and flip, flipper, flip, joint venture, partner, deals, whoelsale deals, finder's fee.
Hi,
I've always been comfortable in partnerships. And, since I know I can't do it all myself, I'd love to share the work. But, have had little luck in getting a successful partnership going so far. I started one joint venture - but it looks like we're going to part ways. (Despite the promise of work, effort, and $ to spend, looks like we may end up short on some or all of those categories. . . ).
How have the rest of you found partners? People who can help you learn the ropes to either generate properties that are distressed and can be used as a vehicle for flipping? Or, People who can help you learn the art of marketing to distressed homeowners to generate a wholesale operation. To date, I've had little success despite multiple posts and many calls to those who are placing bandit signs in the community.
I'm happy to hear the common lament, that the harder one works the luckier one gets. But, if there's some tip/trick anyhone cares to share - I'd love to hear that too. (OK, and some war stories, good, bad, indifferent are also fine).
--Craig.
Los Angeles . . . reseda, the valley.
Hi,
Nothing like persistence, right?
My wife and I spend a good chunk of every Saturday driving the neighborhoods. We look for properties that appear distressed from the outside. We've amassed a list of 691 homes.
I found a local wholesaler (via bandit signs). I cut a deal with him. I agreed to provide up to 1,000 distressed addresses in the San Fernando Valley in Los Angeles. In exchange, he agreed to show me how this worked, and provide me with a right of first refusal. We also agreed upon a wholesale fee. And, the fee is reduced by 10% for every 100 addresses; obviously, if we provide 1,000 addresses, the wholesale fee would be free.
In Los Angeles, there is no "online" lookup for the local addresses (at least not that I'm aware of, and at least not with a huge fee to get their entire list). So, if you want to get the list, you must go to the county office and look it up. My partner has looked up about 500 addresses so far - I'm very happy with that.
Unfortunately, there's one minor glitch. Our deal (and yes it's in writing, I am a lawyer after all :-)), provides my partner is to design, implement and pay for the mailings to the group that I provide. But, so far, my partner has only provided the address, but he hasn't spent the money (or time or effort to mail the list). Our deal is that he is to mail no less than 30 days after a group of 100 is delivered (and then 30 days after each successive group). I've let that go though - I'm very happy that I'm getting the addresses. But, soon, I'll need to send a letter saying you must do the mailing or our deal is off (and the contract provides remedies for breach - so that's already set up in advance).
So, I'm very hopeful my wholesale and bird dog (birddog) deal with my partner works out. If it doesn't, maybe there's someone on the board here who can offer something of value, such that we may be able to cut a similar deal.
Love to hear from folks!
--Craig.
Hi,
What business organizations do those of you in California use to organize your business/es? I'm in California. Here are (more or less) my notes on how I expect to organize my enterprise.
INTRODUCTION
According to the California Secretary of State, the options are:
* Corporations (presumably S Corp. and C Corp);
* Limited Liability Company (aka LLC);
* Limited Partnership;
* General Partnership;
* Limited Liability Partnership (aka LLP);
* Sole Proprietorship(1)
Since I expect to organize my own operation--and I happen to be a lawyer, although I practice criminal law--I'm going to walk through my thought process and lay it out on paper. Of course, none of this should be construed as advice.
PREAMBLE. . .
Before we get started, a few things to note. First, law is incredibly specialized. Indeed, prior to becoming a lawyer, I would ask attorney-friends for advice and they would shrug their shoulders and say things like "I have no idea, I don't practice in that area." At the time, I never believed them. I do now. The reason I believe them is because of just how specialized my own practice is. I can explain to you the law of murder and robbery--no problem. But, if you want to ask me about business organizations, I would explain I didn't have the class in the past 10 years-so, I'll need to look it up and think it through, and even then I might be wrong.
Second, and more importantly I think, is what I came to learn in law school. Legal problems have solutions. And, no matter what endeavor you take on, there will always be risk. Before law school I thought one had to have perfect legal strategies in order to avoid legal problems at all costs. Now my views are much more refined. I won't spend unlimited amounts of money for perfect protection (incidentally, corporate veils can be pierced--and, given what I know about how judges think, the more draconian the injury, the more penniless the plaintiff, and the more wealthy the defendant, the more likely some judge will come up with a creative solution to pierce the veil. Like I said, there are no perfect solutions)
Third, I come at law from a vastly different view than most of the corporate business organization types of lawyers. I try cases for a living. (I've tried more than 60 criminal cases in front of 60 juries. Some of those cases were very serious with several life sentences in the mix). This experience has taught me that merely because a controversy makes it into the legal system, doesn't mean that the plaintiff will prevail. And, the mere threat of getting sued and being involved in litigation, is a risk of business--and a risk that can be managed.
The constant drone of the worry-wart lawyers is that, you're going to get sued and the legal fees are going to be very expensive; therefore, any reasonably human being would set up multiple layers of complex corporate structures--well, I'm not wholly convinced, for several reasons.
First, while legal fees are an issue, there are many hungry lawyers that can do legal work for less rather than more in our current legal practice environment. So, when I'm given the grim news that without proper protection, if someone trips on a board at my house, breaks a fingernail, so that I'm going to be sued for $1 million and they're going to collect -- well, I simply don't buy it. First they have to decide to sue (many won't get to that step). Next they have to find a lawyer willing to take that case (this may be more difficult than a layperson understands. Not only must the case be pretty good, but there must be a good chance of an easy settlement and a pool of cash, otherwise, most lawyers will move on to easier prey). Finally, Juries don't just hand verdicts out, contrary to what popular press reports may tell you (at least that's my experience). (Yes, I will admit that juries get some verdicts wrong; but all in all, juries are pretty good).
So, with all of that as a backdrop, here's my review of the options.
* * *
THE OPTIONS TO LIMIT LIABILITY
A quick web search turned up this article that compares the different types of business (firm) organizations: http://www.colleylaw.com/Articles/Entity-Formation.... Here's another decent article on the costs of LLCs in California: https://www.ftb.ca.gov/businesses/bus_structures/L....
There are apparently two start-up costs: a) $70 for articles of incorporation; and b) $20 for statement of information (see, http://bpd.cdn.sos.ca.gov/pdf/be-fees.pdf). In 2016 the annual fee appears to be $800. So, for $890, I get some asset protection (apparently there are some exceptions, that I haven't reviewed).
The income from the LLC will flow through onto my schedule C of my own tax return (apparently known as a disregarded entity). While it seems a bit expensive to me -- it seems like a necessary expense. Oh, yes, I think there's a hidden cost here, too. One must have a registered agent for service of process. http://www.nolo.com/legal-encyclopedia/california-.... It appears hiring an agent is something like $50 to $100 per year (and apparently they'll file some documents for you with the secretary of state if you agree to let them serve as your registered agent of process). http://www.corpgate.biz/Registered_Agent.html?gcli....
I suspect I will end up organizing as an LLC. It provides personal liability protection for the workings of the business. Happy to hear others thoughts on this - how they organized, and any other hidden costs.
--Craig.
(1) See, http://www.sos.ca.gov/business-programs/business-e...