Originally posted by @Larry Turowski:
@James Danchus I'd have to disagree with @David Dachtera. This is definitely measurable and it has to be in order to build a business. Just search here and listen to the BP podcasts. Lots of investors / wholesalers track this sort of stuff and know exactly what they need to do to get the volume they need. In fact, the limiting factors is often their market size.
But you need to do the measuring based on your area, your marketing piece, your target market (owner occupied, non-owner occupied, etc), your ability to negotiate and close, and your desired profit margin.
I haven't got a ton of experience, and honestly I don't track things at this point, I just know it is working. But I've heard you need to spend about $3k in marketing to get a deal and that seems about right to me. (I've also heard about $1k or even $500 to get a deal.) I don't care about call volume. I care about ultimate return on marketing dollars.
I agree with Larry.
It's measurable.
Here's the answer to your question: It depends. But if you want a quick answer, anywhere from 1 out of 50 to 1 out of 3.
It depends on the following:
1. Your mailing list - how motivated they are and how exclusive the list is. For instance, our mailing campaign recently to out of state landlords have gotten us an 8% response rate. On the other hand, our code violations mailing list has a 35% response rate. Landlords with code violations are more motivated and very few investors mail to them. Out of state landlords - the list is readily available and so you have more competition.
2. How well you talk to people - one of my acquisition folks talked with 50 sellers and did not close a single deal. I talked with 6 and closed 2 sellers, each of them have 2 houses.
3. What are your acquisition and exit strategies. If you only know one way to buy houses - offer you cash by low balling you - and you only know one way to sell or make money with properties (say all you know is rehabbing), then your conversion rate will be pretty low. 1 out of 50 leads sound about right if you are not very creative and if you're new to the game. If you are more experienced, 1 out of 20 or 1 out of 10 is good. But if you're creative AND experienced, you can get to 1 out of 3.
and lastly, 4. Do you have a follow up system? If you follow up, your conversion ratio will also go higher. Honestly, I am not very good at follow up because I guess I get enough leads and turn them into deals but this is something my operations President - @John Matthews is implementing now to see how much higher we can push our conversion numbers up.
