Have you ever wondered why some real estate investors seem to be winning all the deals while others struggle to stay afloat? If so, the answer most likely has to do with how they’re spending their money.
There’s a reason why the saying “you have to spend money to make money” exists. It’s because it holds true more often than not. And when it comes to real estate investing, this is especially valid.
Too often, investors try to cut corners when it comes to marketing in an effort to save money. But they don’t realize that by doing this, they’re actually shooting themselves in the foot and costing themselves potential deals down the road.
This blog post will discuss how spending money on marketing – including the more expensive marketing campaigns like direct mail marketing – can help you win the real estate investing game! We’ll even break down some examples to give you a clear illustration of how spending money to make money pays off in the long run.
So, if you’re ready to learn more about how real estate investors are winning more deals this year, read on!
One of the most common mistakes real estate investors make is thinking they can skimp on marketing and still see success. They’ll often choose the cheapest marketing methods or try and do everything themselves to save a few bucks.
But they don’t realize that by doing this, they’re missing out on potential deals and ultimately hurting their business in the long run.
Investors who win more deals understand that you have to spend money to make money. And while direct mail marketing may not be the cheapest marketing method out there, it’s definitely one of the most effective. In fact, according to a study done by the Digital Marketing Association, direct mail outperforms all other digital channels combined by 600%!
When most investors are looking at marketing campaigns, they tend to focus on the initial cost rather than the return on investment (ROI). But to succeed in real estate investing, you need to start thinking about things differently.
For example, while the upfront cost of direct mail may be higher than other marketing methods like PPC ads, the return on investment for direct mail marketing is definitely worth it in the long run.
Here’s a quick illustration that puts this into numbers:
Let’s say you spend $2,750 monthly on direct mail campaigns that generate an average of 5 high-quality motivated seller leads every month. From those 5 leads, you can close on at least one deal per month, resulting in a profit of $10,000 and a net ROI of $7,250 on your campaign.
Now, let’s compare that to a pay-per-click campaign that costs you $500 a month and generates 25 leads. But, since those leads aren’t highly targeted and many don’t even respond to your emails or interact on your website, you only end up closing a deal every two months. If that deal closes at the same $10,000 profit but spreads across two months, your monthly average is only $5,000. That’s an effective ROI of only $4,500 per month after the cost of your campaign.
This illustration clearly shows how if you had spent a little more upfront on a direct mail campaign, you could have made an additional $2,750 more per month than you would have made on a cheaper PPC campaign. When you look at that number annualized, you can see how going cheap on your advertising could end up costing you $33,000 a year. That’s a lot of money to leave on the table!
Since the proof is in the numbers, it doesn’t take long for most real estate investors to adopt direct mail as their marketing method of choice. However, even after an investor makes the jump and decides to invest in this effective marketing strategy, many still make the mistake of cheaping out on the details.
This often happens when an investor tries to save money on their direct mail marketing campaign by cutting corners in different areas. They might decide to send fewer mailers overall or choose the mailers and lead lists that cost the least. But because they don’t want to spend money on what works best, their overall ROI decreases, and their deal flow slows as a result.
In the book “Killing It With Direct Mail” by Jeff Charlton, REIPrintMail’s founder, he shares this nugget of wisdom from his vast experience working with real estate investors on their campaigns:
“There’s a reason why most REIs go with the cheapest mailer they can find, which is usually a small postcard. It’s because they’re trying to keep their marketing cost low. While it’s good business to control your costs, this thinking can cause you to miss out on the response you could be getting from a higher-quality mailer. You need to mail the most effective mail piece – even if it costs more.
I cannot stress this point enough. You WILL recover the incremental cost of the more expensive but effective mailers many times over with the increased profits that those mailers generate.”
In Jeff’s book, he shared this illustration demonstrating how cheaping out on the details can cause you to lose out on a lot of money – $33,000 to be exact:
Let’s say that your “cheap” mailer costs you $.45 each to mail, and you also go with the cheaper lead list that’s $.10 a lead. You decide to run a 5,000-mailer campaign, which means you’ll be spending $2,250 for the mailers + $500 for your lead list = $2,750 total for the campaign.
Now let’s say your campaign results in a .5% response rate or 25 new leads. And of those new leads, you close 1 new deal at a $10,000 profit. This means your net ROI after your marketing spend is $7,250, which isn’t too shabby.
Now let’s look at the same example, except this time you choose to mail something unique and memorable, but it costs 50% more, and you invest in a better list that also costs 50% more. However, your response rate doubles because the list and mailer are better.
Doing the math on this, here’s how it shakes out:
5,000 leads bought at $.15 each = $750 for your mailing list
5,000 mailers x $.675 each = $3,375 spent on your mailers.
Total Direct Mail Campaign Spend = $4,125 (Compared to $2,750 for the cheaper campaign.)
However, now you achieved 50 new leads instead of 25. If your closing rate is the same as before, 1 in 25, you’ll end up closing 2 deals thanks to this more expensive campaign, making you a total of $20,000. So that makes your net profit $15,875 after the $4,125 mail spend is deducted.
When you look at saving a few dollars and only making $7,250 off your campaign or spending a little more for higher quality mailers and lead lists to make $15,875, it’s a no-brainer.
The cheaper campaign would cause you to miss out on $103,500 a year! That’s way too much money to leave on the table!
If you’re an investor who has been skimping on your direct mail campaigns to save a few bucks, it’s time to rethink your strategy. Investing in quality mailers and lists may cost more upfront, but the return on investment will be well worth it.
As Jeff Charlton so aptly put it, “The investor who spends the most to get a lead wins the game.”
If you want to win the real estate investing game, start by investing in quality direct mail campaigns. It’s a surefire way to increase your deal flow and boost your bottom line.
What are your thoughts on this subject? Have you had success with direct mail in your real estate investing business? We’d love to hear from you in the comments!
If you’re ready to learn more about how REIPrintMail can help you get more deals with direct mail, schedule a call with one of our coaches today!
Also, if you’re an experienced real estate investor ready to put your deal flow on autopilot, our REIComplete subscription could be the perfect fit. With REIComplete, we take care of your lead generation and marketing tasks, including answering incoming calls from prospective sellers and setting appointments for you, as well as follow-up and CRM management. Book a discovery call with us today to see if this is the right fit for you!