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The house in this video was found from a direct mailing piece that I mailed out to a list of motivated sellers. I mailed out 15,000 postcards on this mailing and purchased 3 houses. So my average was 1 house per 5,000 postcards mailed. My cost of mailing the postcards is 34 cents per postcard so my marketing cost per house acquired was $1,700. This may sound like a lot to you. But consider that I flipped this house for $30,000 and I flipped another house from this mailing for a profit of over $80,000. The third house I am keeping as a rental and it has over 30,000 in equity. So from this one mailing of 15,000 postcards (that cost $5,100) the profit is around $140,000. Now keep in mind that not every mailing that I do is that profitable. What skewed the profits on this one was the huge $80,000 profit from the fix and flip. A more realistic expectation would be a profit of $10,000 to $15,000 per wholesale and a profit of $25,000 to $30,000 per fix and flip. Even if I wholesaled all 3 houses for just $10,000 profit per house that would be a profit of $30,000 on an investment of $5,100. Would you spend $5,100 to make $30,000? It’s really just basic math.
Here is some basic postcard math for you to understand direct mail better:
RESPONSE RATE (LEADS)
You should be able to get at least a 1/2 % response rate on postcards mailed. That is people calling you (leads) based on you mailing them a post card. Note that your response rate largely depends on the list that you are using. If you use a really good list you can get closer to 1% or even higher. Our response rate averages between 1/2% and 3/4%.
APPOINTMENTS
You should be able to EASILY set a 20% appointment ratio. A 20% response rate means that you will go on an appointment for one out of every 5 phone calls (leads) that come in.
HOUSES THAT YOU BUY
You should be able to buy AT LEAST 1 house for every 5 appointments you go on. That’s 20% of appointments should result in a deal.
PROFIT POTENTIAL
This will largely depend on whether you are wholesaling or fixing and flipping. If you source the deal directly from a motivated seller, then you are the ONLY PERSON with that lead.
You should be able to get at least a $15,000 profit on a wholesale deal and at least a $25,000 profit on a fix and flip. I am using an ARV of $190,000 which is our market.
ACTION STEP ONE
Figure out your budget and what you are comfortable spending (you can start out with as little as 250 postcards a week).
It’s basic math. For example let’s say you are just starting out and your budget is $340 a month and you mail out 250 postcards per month.
Give your mail house a list of 2,500 names and tell them you want them to mail out 250 postcards per week for 10 weeks until they have mailed all 2,500 people.
If your response rate is 1% then 2,500 postcards = 25 calls
Those 25 calls (leads) should result in at least 5 appointments (20%)
and those 5 appointments should result in at least 1 house that you buy (20%).
Assuming it cost you 34 cents per postcard, your cost to mail those 2,500 postcards would be $850. If you bought one house and wholesaled it for $15,000 profit then your net profit after accounting for the cost of postage would be $14,150
The problem is most new investors are afraid to spend money mailing postcards. And direct mail is just one way to acquire deals. There are many other ways.