Sourcing real estate to invest in can be one of the most challenging aspects of investing in real estate. While there's typically more than enough inventory to go around on the multiple listing service (MLS), investors require greater discounts than what the market allows, forcing the investor to source off-market. Cold calling and direct mail marketing are common strategies for finding potential sellers and buyers, but in today's technological times, investors may wonder if these strategies for investing in real estate actually work.
How direct mail and cold calling work in real estate
Direct mail marketing is one of the most widely used marketing strategies in the real estate investing space because it can be done consistently and at scale, allowing investors to reach tons of potential sellers for a fairly small up-front investment.
With this strategy, an investor purchases a list of potential sellers from a national data provider. The search results can be narrowed down to a specific market, neighborhood, type of property, property attribute, or seller attribute, such as being an out-of-state owner. The investor then sends the property owners a series of letters or postcards, offering to purchase the property, usually as-is for cash.
Cold calling, on the other hand, means investors are calling potential sellers by phone asking to purchase their property without having established a relationship with them; in other words, the seller is a cold lead. This method is most commonly used with owners who may have their home listed for sale by owner (FSBO) or if the phone number is provided as a part of the data results from the purchased list.
Image source: Getty Images.
How the numbers stack up
These methods may seem antiquated with all of the lead captures, online marketing, and digital ads that can be utilized today, but they can actually be quite effective. The average direct mail campaign in real estate can yield anywhere between a 15%-17% return on investment (ROI).
I personally use direct mail as a part of my marketing strategy and have found it to be very effective in helping me find off-market investments to buy. One deal can more than pay for the cost of marketing, and if you set aside profits from each venture for future marketing, you can create a solid funnel for finding and closing leads.
Direct mail has a way of reaching the target demographic for who would likely sell a property to an investor. Consumers aged 45 to 54 are most likely to respond to direct mail. It's also a good way to reach an older demographic that may not use things like the internet on a regular basis. According to a study conducted by Pitney Bowes and published by the United States Postal Service (USPS), 67% of respondents said they felt mail was more personal than the internet.
The format, design, and text in the letter will vary widely from investor to investor. Most test different types of letters, envelopes, copy, and designs to determine the highest open rate and call-back rate for the marketing efforts, developing their own style and brand. While direct mail marketing has slowed, it's still a great way to reach sellers.
When it comes to cold calling, The Research Center at Keller Center found that cold calls are answered around 28% of the time, with those leads resulting in less than 1% positive result, such as an appointment or referral. So clearly direct mail marketing takes the cake. But it doesn't mean cold calling can't be a great follow-up marketing strategy, calling the seller after they've received several marketing pieces by mail from you.
Image source: Getty Images.
Is it worth it?
Investors can expect to spend around $2 to $5 per mail piece, particularly if you're using a professional service to print, stuff, and mail your letters. Usually, the more letters you send, the cheaper the cost gets, but spending a few thousand dollars for one marketing campaign is quite common. These investing strategies may be time and capital-intensive at first, but based on data, it is worth it. A carefully crafted campaign and cold-calling script with a targeted audience can yield great results and help keep quality sources for investment properties coming your way on a regular basis.
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February 01, 2022 at 07:15PM
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