Over time, the deals I have purchased with the most equity came from a direct-mail campaign. I could go on and on again here, but instead, let me give you a few quick examples:
Example #1: I once bought a deal for $100 that was worth $85,000. It needed $40,000 in work. With $45,000 in equity and $850/mo in rent, it was a great deal with multiple investing strategies available (could be wholesaled, retailed, or rented). I still have it as a rental.
Example #2: I bought another deal worth $190,000 for $56,000. It needed $63,000 in work. With $71,000 in equity, it made for an amazing deal. I sold it at full market price after I cash flowed it for a few years.
Example #3: I purchased a house for $13,000 that needed $48,000 in work. ARV was $125,000. I cash flowed this property for several years and then sold it for a nice profit.
There are books written on direct mail marketing. Therefore, the purpose of this blog is to illustrate the power of direct-mail campaigns, along with a high-level overview of how they work, and what it takes to have success with them. As you can see from the examples above, direct mail can be an extremely effective tool.
But, it’s important to note, that it’s also a time consuming and expensive method for finding deals. If you decide to execute a campaign, you will need to budget for the cost and make sure you can follow it through to the end. The goal here is to send enough mail, to generate enough call volume, to produce qualified leads that can be contracted.
Direct-Mail Campaigns
As it sounds, a direct-mail campaign involves sending letters and/or postcards in the mail directly to prospective sellers. You might think sending something just to say “We Buy Houses” is a waste of time because no one reads “junk mail,” right? Well, not everyone throws it in the trash. There is something about holding a physical letter or postcard that makes it personal and gets a seller’s attention. Some people do read such cards and will call you, at which point you will need to qualify the opportunity.
Consistency is the Key
Direct mail requires consistency. It cannot be emphasized enough here that without consistency, you will NOT have ongoing success with direct mail. This means having a series of organized mailers intended to drive call volume from qualified sellers where deals can be made. Remember, it’s not a one-time event.
Before you can send any mail, you will need to get your list from a reliable source. Creating lists from tax records, MLS records, or simply buying lists from other service providers, is where you want to start. Once you have the list, you will need to narrow your criteria for what you are targeting (i.e., owned home for 20 years, specific square footage, year built, etc.).
The most effective way to implement a direct-mail campaign is to mail to the same group multiple times (four to five times) with a different message each time. For example, you might take a list of 5,000 (or any manageable number where you can handle the call volume) and set up a letter/postcard to go out every four to six weeks over the course of five to seven months.
Answer the Phone
Once your campaign is underway and mail is out the door, your phone is going to ring. Be sure your phone is charged and you are prepared to take the calls. Failure to be prepared here is going to cost you leads. Have a call sheet available with questions centered on determining the two most important things: The amount of equity in the property and the amount of motivation in the seller. If you have both equity and motivation, that’s a recipe for a great deal.
Conclusion
You will need to determine what your budget will allow in a direct mail campaign, as you will have better results with a larger volume of mailers. If you don’t have several thousand dollars to invest or the time needed to complete a five-month campaign, utilize the other methods such as driving neighborhoods and getting referrals.
Mike Hanna is a real estate investor, mentor, author, and public speaker. He has been an active real estate investor since 2002 in both single family and multi-family properties, and has been in the hard money business since 2005.