Direct Marketing #3

July 23, 2012 · 16 comments

I just wanted to give an update on the Direct Marketing campaign I mentioned about a month ago

Here are some details:

Target Recipients: Homeowners in my county who were 30/60/90 days late on their mortgage payments.

# of Recipients on List: 2200

Marketing Goals: The goals for this marketing campaign were two-fold:

  1. Short Sale Investments: First and foremost, the goal was to get properties that would serve as investments for our company. These would most likely be short sale purchases that resulted in investments that we were able to rehab and resell to retail buyers (homeowners). Our typical profit on each of these deals would likely be about $20,000 (our average profit for all deals done over the past 4 years).
  2. Short Sale Retail Listings: For any leads on properties where we weren’t interested in the property as an investment (it didn’t fit our criteria or we didn’t think we could get enough of a discount), we have a short sale team that we are working with that will be listing the property as a retail short sale, and will give us 25% of any commission generated via that potential sale. Typical commission to us would likely be about .75% of the sale price, or about $750 for a $100K short sale.

First Mailing Details: The first mailing consisted of a personal letter to all recipients. The letter was hand-signed, with a hand-written note on each, and the envelope was hand-addressed with a first-class stamp. The envelope was a standard white business envelope and the letter was standard 8.5″ x 11″. The first mailing was broken up over two weeks, with 50% of the letters hitting on a Monday/Tuesday and 50% of the letters hitting on a Wednesday/Thursday. 50% of the letters had the handwritten note on the letter and 50% had a handwritten note on a post-it attached to the letter. 50% of each subset of letters had a business card included.

Second Mailing Details: About two week after the first mailing, we did a second mailing to the same list. This mailing was broken up into 2 segments: The first segment (called our “Top Tier List”) was the approximately 150 houses where we were intimately familiar with the subdivision (we’d done other properties in the neighborhood) and where we were 100% sure we wanted to buy the house. The second segment consisted of the other 2000 or so recipients. The Top Tier List received a “Hallmark Card” that was handwritten, along with a hand-addressed envelope. The rest of the recipients received a yellow postcard with black-and-white print.

Third Mailing Details: The third mailing to this list has not gone out yet, but will consist of personalized letters to the 2000 or so recipients remaining on our list (the original list minus those that have already contacted us).

Methodology for Receiving Calls: All calls were forwarded from our Google Voice number directly to my wife, who answered the calls if at all possible. When not possible, the call when to a friendly, non-professional-sounding voicemail message from my wife.

Cost of First Two Mailings: The total cost of the first two mailings — 2200 first letter mailings, approximately 150 Top Tier Hallmark Card mailings and approximately 2000 postcard mailings — was around $3000.

Results of First Two Mailings: The results of the first two mailings were unspectacular — while not horrible, we were hoping for more. Here is tally of the results of the approximately 4000 pieces of mail to 2200 recipients. These numbers are as of today, though calls are still coming in, so I expect these numbers will increase:

  • RETURNED LETTERS: 46 Recipients (2%) — These were the names/addresses where our mailings were returned by the post office undelivered.
  • NOT INTERESTED: 12 Recipients (.5%) — These were calls where the recipient acknowledged that they received a communication but indicated that they weren’t interested in our services (though they didn’t ask to be removed from our mailing list).
  • REMOVE ME: 22 Recipients (1%) — These were calls where the recipient asked to be removed from the list (sometimes not so nicely).
  • FOLLOW-UP: 5 Recipients (.2%) — These were calls where the recipient ultimately wanted my wife to follow-up with them, either because they weren’t the principal in the transaction or they wanted to discuss with someone else.
  • INVESTMENT LEADS: 0 Recipients (0%) — These were calls where the recipient wanted to get the short sale process going and where we considered the property one where we’d make an offer ourselves in hopes of getting the property as our next investment deal.
  • SHORT SALE LEADS: 8 Recipients (.4%) — These were calls where the recipient wanted to get the short sale process going and where we were not interested in the property as an investment — we referred the lead to our short sale team in the hopes they’ll sell it and we’ll get a commission.
  • LISTINGS: 4/2 as of today (.2% / .1%) — These are SHORT SALE LEADS that have actually been listed by our short sale team and also how many of those listings are currently under contract to sell.

Income From Campaign: Unfortunately, so far we haven’t gotten any potential investments out of the campaign, so the payoff isn’t going to be overly large. But, from the 4 leads that have been listed, the 4 leads that have been passed to the short sale team that they are working on and any additional leads that come in from the first two mailings, it appears there’s a very good chance that we’ll at least break even on the campaign and hopefully turn a small profit from the commissions we earn. Because short sales can take months to complete, we won’t have final results for a while…but I’ll certainly continue to post updates on our progress.

16 responses to “Direct Marketing #3”

  1. cliff says:

    hey j you ever consider probates? i’ve mailed out only 80 ish letters in the past 4 or 5 months and i’ve gotten probably 8-10 calls all of which were interested sellers. thats 10 percent or better. i’m probably closing on one in the next few weeks. owned free and clear, prob net around 25k. zero “i’m not interested calls” from my letters. probates seem to be a fairly “unfished” pond at least in colorado springs. just a thought….

  2. Shane says:

    This is awesome J. I was really hoping you’d have better luck. Do you have plans to market to equity owners anytime soon, or just stick with the 30/60/90s for awhile? I’m thinking seriously about doing a mailing to my two smaller counties owning equity, or probate. Have to get back from vacation next week and start saving again 🙂

    Also, I love how you broke up the different mailers so you can track it all. So were you using 4 different Google Voice numbers?

  3. Josh says:

    Thanks J this is great info. I had a couple of questions for you since I too am experimenting with direct mail techniques:

    1.) You mentioned in another post you were doing all your mailings yourself. Do you and your wife do everything, ie sign the letters, fold the letters, address the envelopes, stuff and seal and apply the stamp? Or did you hire any parts out or contract with a service for these 5000 mailings? I’ve been doing it all myself with my wife which has gotten incredibly time consuming (can’t imagine 2000 letters, I only do 100 at a time) and I’m thinking about hiring out at least the envelope addressing piece which is most time consuming.

    2.) Looks like you are getting a 2.3% overall response rate not including returned mail? I’m using hand addressed envelopes, typed letters and a real stamp and am seeing about 8-9%. But I’m targeting homeowners with equity (primarily absentee’s but some owner-occupied’s too) so maybe that makes a difference.

  4. J,

    Very interesting article. My wife and I have done some mailings in the past and for the most part our results were similar. Our sample size was about 20% of what you have done here, but we did study a few things in our mailings that seemed to work better than others. The biggest thing we found was that letters written from me were responded to at a rate of about 10% to those written by my wife. Handwritten letters got a much higher response rate. Lastly, short, vague letters received a much higher response rate than lengthy detailed letters.

    Beyond our studies I have spoken with other investors that have told me the number of letters you send is very important. In particular one local investor who I respect very much has shared data with me that shows results very similar to yours after a couple mailings. However, by his 4th or 5th mailing the results are much better, so at this point it may be something for you to keep pursuing. Good luck, and I’m interested to hear how things turn out in the end.


  5. J Scott says:

    Hey Cliff,

    We’re constantly expanding our marketing and acquisition efforts — probates are certainly on our list, we just haven’t gotten there yet!

  6. J Scott says:

    Hey Shane,

    Yeah, we were hoping for better as well, but we haven’t given up, and if we can at least break even on these mailings, I’ll feel like it’s a win! 🙂

    We did absentee owners with equity for our first mailing (see the past DM posts), and I didn’t feel it was very productive. We got LOTS of calls (more than 12% of the list), but very few motivated sellers. It may have just been too small of a sample, but it feels like the distressed sellers (and short sales in general) are a lot easier. We may go back to the equity owners at some point, but we’re going to focus on short sales for the time being.

  7. J Scott says:

    Hey Josh,

    1. The first 1000 mailings were absentee owners with equity, and that was done turn-key by (see my previous post on that campaign). As for the 4000 distressed sale mailings, 2000 were postcards also done turn-key by After that, we started doing them ourselves. My wife did the next 1000 herself, just so she could see what was involved, figure out some techniques for making it more efficient and get a reasonable idea of how long everything should take so that she knew how much to pay to have it done. Then, for the following 1000 (and 2000 more to be mailed this week), she hired it out to some people looking for part-time work. She actually has different people doing different pieces (writing letters, writing envelopes and stamping/sealing envelopes).

    2. When we did our first mailing to absentee owners with equity, we actually got a 12%+ response rate — that was MUCH higher than the response rate we got on our distressed seller marketing. But, this was expected, so we’re not too surprised. The conversion rate on the distressed sale leads was obviously higher, which was also expected.

  8. J Scott says:

    Hey Todd,

    Thanks for the info. We’re big on personalizing everything — the letters all have handwritten notes, personal signature and other markings on the letter and the envelopes are all handwritten. As for multiple mailings, this is something we keep hearing — you have to be persistent. We’re sending our third contact to the 2200 targets this week (1100 went out today and 1100 will go out later in the week), and we’ll likely do a 4th contact as well in a couple weeks.

    I’ll definitely post updates!

  9. To my (uneducated) opinion on this topic these results don’t seem to be worth the effort and expense. I can certainly see such a campaign be the way to go in years where deals were hard to come through and REO were a fraction of what they are now.

    Wouldn’t that time and money have been better spent in REO offers and Courthouse research for buying at the steps? Possibly hiring and assistant to help with more offers and auctions?

    Just asking…

  10. J Scott says:

    Hey Luis,

    From an expense perspective, that’s not an issue. We’ll almost certainly recover our marketing costs (and then some) just by referring the retail short sale listings over to our partners. In fact, if we decided to hire an in-house agent (which may be a consideration in the future), and could keep 50-75% of the commission on each sale, we could probably turn this into a 6-figure side business. But, right now, we don’t want to focus on retail sales or being “real” real estate agents. Regardless, we’re not going to lose money, so that’s not an issue.

    From a time perspective, we’ve already hired part-time people to do the work, so our actual time spent should be able to be limited to a couple hours per week (and in the future, hopefully less than that), so while it’s been a major time sink over the past month, moving forward the amount we need to spend should be much, much less.

    So, given that it won’t take much time or effort, and the worst case is that we make a little money, I think it’s worth the effort.

    That said, the upside potential is the we are able to acquire a good number of investment properties this way. The REO market is very competitive these days (I know you’re having the same problems we are), and finding short sales where there is no competition is the best way I can think of to find great deals. We’re still going after the REOs, but we’re adding the short sale marketing to the mix as well.

  11. J Scott says:

    Hey Luis,

    The other point I should have mentioned is that as of right now, I don’t think we’re any good at this marketing stuff. But, our data is indicating that we’re improving over every mailing (and subsequent mailings tend to do better than first mailings to the same recipients), so hopefully after 10-20K mailings, we’ll be much better at the marketing content we’re creating.

    If we can get our response and lead rate to about three times what it is now, we’ll be making LOTS of money even if we never get any investment leads (just from the retail leads). But, we’ll presumably starting getting the investment leads as well.

    We just have a LOT to learn over the next couple months…

  12. Josh says:

    J – You mentioned finding short sales as investments with no competition was a key part of your strategy. I’m confused how you can turn a lead into a short sale with no competition however – don’t the banks require the short sale to be listed before considering an offer, which would invite competition from other investors and retail buyers?

  13. J Scott says:

    Hey Josh,

    In theory, that’s true. In reality though, our listing agent will put the property on the MLS, we’ll make an offer the same day, and if the seller wants to accept our offer (no reason they wouldn’t), it will get sent to the bank that day. So, while the property is listed and there could be competition, generally we’ll move faster to get an offer submitted than any of our competitors will.

    Of course, the seller can choose to wait to see if they get a better offer, but generally speaking, the seller doesn’t care what the offer is, as they’ll be walking away with no cash regardless.

  14. John Wingate says:

    Great campaign.

    I am new in the real estate industry but I have always used postcards and letters to target my clients in insurance. It worked well but I think I will start to do more online marketing in the real estate industry for lower costs.

  15. JB says:

    J – good stuff. Your blog is refreshingly authentic! What system do you use for follow up/track your results – CRM? What do you recommend?

  16. J Scott says:

    JB –

    We use Excel spreadsheets for everything. We’re not doing so much volume yet that we need a CRM system…and probably not anytime soon…

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